Photo: TheGiantVermin via Flickr
General Motors’ decision yesterday to pull its $10 million Facebook ad budget set of a firestorm reaction ahead of the social network’s IPO, expected Friday. Many have taken the move as a sign that Facebook’s ad offering may not be as robust as the company would like it to be.
But in the cold light of Wednesday morning, some are pointing out that this may say more about GM than Facebook. One person, for instance, told us that GM’s Facebook strategy was “mental.”
This article is based on conversations with several sources familiar with Facebook’s ad business. Because these executives do not want to ruin their relationships with Facebook management, and because Facebook is in a pre-IPO silent period which restricts what it can say about its finances, we can’t identify some of our sources.
Facebook has said nothing publicly. Most employees probably shrugged at the news—the company takes in $1 billion per quarter in ads, after all, so GM’s money isn’t material to the company’s finances. But we understand that some executives on the ad sales side of the company are furious that GM decided to air its dirty laundry in public right in front of the IPO, especially at a time when Facebook itself is restricted from telling its side of the story. (GM denied to Forbes that it planned the timing of the story’s release.)
There is also frustration that the Wall Street Journal failed to mention in its story that General Motors chief marketing officer Joel Ewanick has overseen a dramatic overhaul of all GM’s advertising and marketing services agencies, with an eye to saving money. He recently consolidated $5 billion in global spending at Goodby, Silverstein & Partners, McCann Erickson and Carat.
In that context, cutting back on Facebook looks less like a rejection and more like part of a process that’s been going on across the board at GM for a while.
The New Guy In Town
Then, of course, there’s Joel Ewanick himself (pictured), who frequently talks to the media.
For instance, when he was trying to figure out who should get GM’s global ad business last year, and who should be fired, he told Ad Age, “I went to bed last night, and changed my mind“—a remark that belied the seriousness of the sums of money at stake.
Although Ewanick was quoted in the Journal story, the killer sentence—that “Mr. Ewanick, met with Facebook managers to address concerns about the site’s effectiveness and left unconvinced advertising on the website made sense”—was attributed only to “people familiar with GM’s thinking.”Who could that be? (GM declined to make Ewanick available for comment.)
‘That is mental!’
And then there’s the whole question of GM’s Facebook strategy itself. GM was spending $30 million on creative and asset creation, and $10 million paying for media on Facebook. In other words, the vast majority of GM’s Facebook money was “non-working spend,” industry jargon for money spent on stuff consumers don’t see.
“That is mental!” one source says. “We recommend 15 – 25 per cent on content, not 75 per cent.”
Usually, sources say, advertisers start by keeping it simple on Facebook. Create a Brand Page. Gather some Likes and Fans. Interact with your core consumer base. All these things can be done for free. Only after that, when a marketer has gotten their basic social media skills down, should companies start spending money for greater exposure.
The $30 million budget implies that GM was attempting to execute that process backwards—spending heavily on fancy bells and whistles from the get-go—and thus it is not surprising it didn’t work as planned.
What GM is doing wrong on Facebook
Jan Rezab, CEO of social media marketing measurement agency Social Bakers, analysed GM’s Facebook page and concluded that the car company was in fact going about it all wrong. He said:
“You are creating posts during the work week—understandably so, but guess what? The majority of your fans are liking your page (become new fans) on Sunday. … For the past month, 4/14 – 5/14, on just Sundays, 2034 people became fans [of GM]. Contrast that to the number of people becoming fans on a Thursday (smallest number of people becoming fans)—there is a whooping 36% increase on Sundays.
Worse, Rezab says, “GM currently responds to only 27% of questions from fans (based on data from April 14 – May 14). Also the average response time is 4 hr. and 6 mins.”
Lastly, a bunch of people noted that GM’s decision is probably temporary. Facebook has an audience of 800 million-plus users. How long can GM give Ford, Chrysler and Toyota an unopposed ride there? One exec told us he believed GM would be back as soon as it figures out its strategy. “My guess is that GM will dial up ad spend again once they better understand engagement within their page content and what content is relevant to amplify.”
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