The Five Dumbest Things on Wall Street This Week: May 18
The recently bankrupt -- and still government-backed -- automaker announced on Tuesday its plan to cease advertising on Facebook because it deemed the social network's ads to be less than effective in selling cars. Of course, this is a big deal since GM reportedly spent $1.8 billion per year in ads in 2011, making it the third largest advertiser in the U.S. after AT&T and P&G.
"In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers," said GM.
Talk about irony. GM is breaking up with Facebook by essentially using the old 'Let's be friends' line!
Not to be left out in the Facebook fun, Ford(F) used the occasion to tweak its competitor by tweeting, "It's all about the execution. Our Facebook ads are effective when strategically combined with engaging content & innovation."
Snap! Sounds like Ford is using a variation on another tried and true break-up line, 'It's not you Facebook, it's you GM.'
Frankly, Facebook won't be losing much on its bottom line even if GM 'unfriends' the company, because it's not like GM was shelling out too much for its services anyway. The car and truck maker spends about $40 million on its Facebook presence, according to the Wall Street Journal, which broke the story, but only about $10 million of that is paid to Facebook for advertising, the rest goes to developing its fan pages.
That said, Facebook eventually needs a bigger piece of the automaker's massive ad budget, so the company can't entirely sneeze off GM's slight. And while Mark Zuckerberg could theoretically show GM his market might by purchasing the whole of GM for $35 billion after Friday's $100 plus billion IPO, this certainly would not be the smartest option either. (Although it would be a hoot, wouldn't it? And like we saw from his Instagram purchase, he wouldn't even have to tell his board to do it.)
Therefore, Zuck will have to suck it up for the time being, and hope that GM changes its mind sometime down the road.
--Written by Gregg Greenberg in New York.