Ahead of the much ballyhooed Facebook IPO, General Motors pulled $10 million from its Facebook marketing budget. Since GM spends about $40 million, the ad buying represents only a quarter of the total budget but this is indeed an interesting play. Is it simply the reported lack of response to the Facebook ads? Does this reflect negatively on Facebook's advertising strategy?
Or could GM's move be, as some insiders are theorizing, a result of Google recognizing the advertising competition with Facebook and luring companies away, perhaps with the promise of free ads? Either way, it's a significant loss for Facebook. But is it really about just Facebook ads and GM?
Facebook posted earnings of $3.7 billion last year. Google posted earnings of $37.9 billion dollars. While literally making one tenth of the revenue that Google does, Facebook earned its money the same way that Google did - from advertisements. Does Google view Facebook as that serious of a competitor that it would make a play for Facebook's ad revenue? Facebook is already partnered with Bing for its search results. Google launched Google+ as a direct social media competitor to Facebook. How much of a threat is Facebook to Google? Or rather the issue is how much of a threat does Google feel Facebook is?
So could Google be a silent player in the recent GM maneuver? It is entirely possible. It's impossible to believe that Google hasn't been watching Facebook under a microscope to see what the new kid is going to do next. Since both companies make their money from advertising revenue, Google might not appreciate the little puppy nipping at its heels. Little puppies, with the right care and feeding, can grow up to be great big dogs, capable of much damage.
My personal thought on it is this: GM spends $10 million on Facebook ads which don't convert into sales. It's but a drop in the bucket of their nearly $2 billion worldwide ad campaign. They've spent $30 million to develop content for a Facebook page that, at its core, is free. But if Google came along and promised them $10 million worth of free Google ad placement, GM would be pretty foolish not to accept the free offer. Granted, it's only $10 million dollars but that is money that could be better spent elsewhere. Research and development perhaps, working on a new driveshaft or some new alloy for a stronger frame.
Either way, I'm most interested to see how this all plays out. I doubt Mark Zuckerberg will comment publicly about this, ahead of the May 18th Facebook IPO launch but there's no doubt that this will mar the occasion. Black eye or permanent disability, GM's issue is sure to make other companies look more closely at their own ROI and make some hard decisions in the coming months.
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Eileen is an SEO specialist at fishbat, an online marketing company.