GM Says Facebook Ads Don't Work, Pulls $10 Million Account

http://www.forbes.com/sites/joannmuller/2012/05/15/gm-says-facebook-ads-dont-work-pulls-10-billion-account/

by gscott • 14 years ago

308 257 14 years ago

rio517• 14 years ago

I don't think that's the case for everyone.

I work at a online advertising firm in DC specializing in political and non-profit work - mostly email list building, soliciting volunteers, awareness, etc campaign activities. We work with AOL, Yahoo, Google and Facebook, among many others.

I'm not a fan of FB's policies in general, but... We've found FB to be very effective - on a cost per acquisition basis, much more so than search advertising and on par with other vehicles.

Obviously, test to see what's effective for your needs, but I wouldn't rule out Facebook based on GM's experience. Cars are an unusually high involvement purchase, unlike most things people would be advertising.

GFischer• 14 years ago

Facebook is very good for non-profits, I've seen a non-profit animal conservation become the largest in my country thanks to it (Animales Sin Hogar here in Uruguay).

I guess it's because of the demographics (as someone said, facebook moms with free time - and a soft heart).

Anecdotal evidence, but I've heard it's very good for small shops targeted for women, and my girlfriend did buy from a facebook ad.

hkmurakami2• 14 years ago

Perhaps your firm has found Facebook effective because of its altruistic nature. People want to share great things that they are involved in: nonprofit work, political activism, etc. Advocacy for such issues and causes are something FB users probably want to share with their friends.

Meanwhile, I imagine that people don't really share things like "I really like the new model of the Cadillac XYZ!". Maybe they think that their friends will view it as shallow gloating; maybe you don't want to reveal the fact that you bought a new car.

Facebook revolves around "Sharing of information". Brands that have values that users want to share with their friends will do well. Those that can make users think twice about sharing (even if they really do like the brand) may fare worse.

jonknee4• 14 years ago

> GM spends about $40 million a year on Facebook marketing, according to the Wall Street Journal, about $10 million of which is for paid advertisements. It will continue to post relevant content about the company and its brands on GM’s Facebook pages.

The best marketing on Facebook doesn't make Facebook any money.

ticks• 14 years ago

$30 million sounds like a lot for promoting a brand for free on one platform.

jonknee4• 14 years ago

Direct follow up with people is expensive. From the WSJ:

> GM spends about $40 million on its Facebook presence. About $10 million of that is paid to Facebook for advertising, the rest covers content created for the site, agencies that manage the content and daily maintenance of GM's pages, people familiar with the figures said.

ntkachov• 14 years ago

GM kindof has their work cut out for them on facebook. Most of facebook isn't looking for a new car (maybe a used one) and the facebook moms aren't exactly stoked for GM cars.

jonknee4• 14 years ago

Most people are on Facebook, so there are a large number of people looking for new cars. Facebook's big pitch to advertisers is that it can target better than anyone else. Why can't they find people who are looking for a new car?

noodle• 14 years ago

I think a better question is how GM measures the effectiveness of their campaigns on Facebook. Its not like you can track the conversion rate from ad click to car buy.

brd• 14 years ago

I'd imagine that they're doing a form of A/B testing geographically. All other things equal, its easy enough to only do an ad campaign within a certain radius of a dealership and measure the change in that dealership to others in the state.

Wilya• 14 years ago

You can't track the conversion rate from a TV ad either. That doesn't mean you can't notice a positive/negative effect related to the presence/absence of the ad. Especially at the scale of GM.

ssclafani• 14 years ago

Your impression of Facebook's user base is about five years out of date. Facebook is closing in on having ~1,000,000,000 members. I would suspect millions of those members are looking for a new car right this second. Facebook needs to find better a way, like Google did, of matching those members with advertisers.

rmc2• 14 years ago

But are they looking for a car while they're on Facebook?

HeyLaughingBoy2• 14 years ago

Why do you say that? Granted I don't hang out with starving students, but the people I know on Facebook are quite capable of buying new cars. I don't know why you think moms aren't interested in GM cars. Around here GM trucks and cars are selling pretty well.

In any case a lot of people here, as another poster said, are confusing direct advertising with branding. I'm not in the market for a new car, but if I'm on Facebook, it's more than likely because I'm bored. If a car ad that looks good is on the page I'm on, I'm likely to click on it and look at the car. A year or two from now when I might be in the market, that make of car I keep seeing on FB is likely to be on my mind as a possible candidate.

And now that I think of it, I keep seeing brand new GM Yukons on the road and I like the way they look and they look like they are good tow vehicles. If I saw a Yukon ad on facebook, odds are I will click through.

dneb7• 14 years ago

I certainly didn't have a $10MM spend, but I also had dismal results for my B2B campaign. My takeaway is FB is purely a social place where people unwind and don't want to do any 'work' -- whether that is considering a product for their job, or the effort involved in considering a large purchase as rio517 mentions.

mindcrime2• 14 years ago

Any thoughts on better choices for advertising B2B offerings? Has anybody here tried LinkedIn for that, for example?

rmc2• 14 years ago

Google AdWords?

alain940403• 14 years ago

I tried all 3 (Google, Facebook and LinkedIn). For my circumstances, Facebook won by a mile. Google did ok. LinkedIn was a complete disaster.

http://blog.foundrs.com/2011/04/01/sell-your-google-stock-li... (the blog post shows early numbers, the real numbers, after longer experimentation, show the exact same results)

joering26• 14 years ago

I agree with you. Me and anyone that I know that uses Facebook already got used to ignoring the right column by default. Slowly but surely it gets to the point that it doesnt really matter what you advertise. I challenge you, if facebook approves it, to put and add "giving money for free" with landing page and see a click rate. It will be similar to advertising anything else, because users are getting smarter (thats good) nowadays and "sounds too good" offers will steer them away.

edit: for that reason, I think Facebook advertising does not work. Or at least, does not work for the _most_ of advertisers. Its just that Facebook is still new and here and there I hear my friends being exciting about "advertising to millions of customers" and they do give it a shoot with a poor results at the end. The point is you have so many people that havent tried that yet that they still bringing cash to FB. But unless FB does something for the ads to work (change its core product?), the $ numbers will only fall.

TY• 14 years ago

Timing of this announcement is indeed somewhat awkward ...

ajross• 14 years ago

Which is, no doubt, not a mistake. Clearly there's a deeper story here.

recursive• 14 years ago

How so?

Kylekramer• 14 years ago

Facebook has a imminent IPO.

scribblemacher• 14 years ago

Am I the only one that thinks there's a really big advertising/personal data mining bubble that's ripe for popping?

ashray• 14 years ago

No, I sort of agree with you. There seems to be a lot of excitement about how valuable targeted advertising is (once more.. this happened back in the 90s as well..). Social media "managers" popping up in every company, and being paid rather well. (while this should just get filed under PR)

jasondc• 14 years ago

The real value of Facebook will be when they release their ad network to compete with Adsense/Adwords. Facebook is more valuable as a vehicle for collecting user data than displaying ads.

jacquesm• 14 years ago

When you're close to an IPO you are very vulnerable to hard-ball negotiation tactics. This could easily be the endgame of 'reduce our rates or else'.

CamperBob22• 14 years ago

Or "Give us some stock at the opening price, or else."

There is no way for GM to pull this kind of maneuver at this time without looking suspicious.

alan_cx• 14 years ago

They have, and it does?

bradgessler• 14 years ago

... or Facebook ads don't work.

bgilroy262• 14 years ago

Not with timing like this, which would create such bad blood. This news item has an ulterior motive.

Not that that precludes the possibility that Facebook ads don't work.

joelhaasnoot2• 14 years ago

Which is old news, they don't work. You may get lots of placed ads, but very few clicks and few actual leads. But we're B2B, so not best fit as is.

dlytle• 14 years ago

Probably Facebook ads not working.

Two of my friends run a wedding planning business. They gave up on targeted Facebook ads because they got MUCH better results using Adwords.

The ads were targeted to a nice big radius that included Lincoln, NE (a college town) and Omaha, NE (a big city, for NE). They targeted women in a specific age range, and if I remember correctly only women with a status of Engaged or In A Relationship. I think they may have aimed for relevant keywords as well. (I personally don't know the exact details of their ads, so I'm sticking to what I know for sure.)

I can't think of a more ideal targeted advertising scenario, and they got less traction on Facebook than they did via AdWords. That's either a REALLY bad reflection on Facebook's ad platform, or a really good one for AdWords, or both.

(Their business is doing really well, for the record.)

koglerjs• 14 years ago

Which is somewhat tangential to the original point. Hard-ball tactics might _succeed_ because fb ads don't work.

neilk2• 14 years ago

Facebook ads would have to be really, really terrible for their claims to be true. According to another Forbes piece, $40M is not even 1% of GM's ad spend per year.

http://www.forbes.com/sites/rebeccalindland/2012/05/15/gms-f...

And this is where all the young consumers are spending hours per day. And lot of car ads are just about brand awareness; they don't depend on intent, or even clickthroughs. Seems fishy to me.

dotBen• 14 years ago

Or FB's IPO is some kind of threat to GM's stock price/marketcap/etc and they want to do something to try to take the wind out of the IPO.

duxup• 14 years ago

GM's advertising contract is up maybe?

Lower price? Oh hey maybe we will try again!

alain940403• 14 years ago

It really depends on what you are trying to sell. It's pretty obvious that car ads would work better on Google: when you are in the market for a new car, you'll definitely google review sites. A perfect hint to start showing car ads.

I don't think Facebook has the data yet to detect that you are about to buy a car. If you start liking car reviews, maybe, but that's not a typical behavior.

For other products (especially the ones you didn't know you needed), Facebook beats Google hands down. So don't pass judgment one way or another too quickly.

Splines• 14 years ago

> I don't think Facebook has the data yet to detect that you are about to buy a car. If you start liking car reviews, maybe, but that's not a typical behavior.

I think they have the data, but maybe not the means to mine it. I'm guessing that people are interested in buying a new car at important life milestones and when replacing an older vehicle. It's pretty easy to find those milestones ("here's pictures of our new baby", "Grad 2015, whooooo", "Just started at my new job"). Signals for replacing an older vehicle could be looking up vehicle review pages on facebook (does edmunds.com have a facebook page?), like you mentioned.

So I don't think it's impossible (but definitely non-trivial). I have no idea if it's possible to target ads against the sorts of things people post to their wall/photo albums.

286c8cb04bda• 14 years ago

Your description reminds me of the Target/pregnancy story from a February[1]. The evidence there proves it's possible. The question then: Is Facebook's data as good as Target's? For Facebook, certainly. Can they get away with exposing that information to advertisers? I'm not sure.

[1] https://news.ycombinator.com/item?id=3601354

dalore• 14 years ago

You're confusing branding with direct call to action advertising. Two complete different things and priced differently. Big brands aren't going for the people about to buy a car, they are working way before that. By making you see the brand day after day it becomes ingrained so that when you are ready to buy a car you think GM.

jrockway4• 14 years ago

Sure, because with traditional media, that was the best they could possibly hope for. In today's world of online comparison shopping, though, brands can easily close the deal for you with one click. (The fact that you can't buy a car with one click shows how hopelessly behind the industry is.)

It is not necessary to have an image of a brand planted in your mind before a purchase. It only matters that you're guided towards the brand when you are ready to buy. Advertisers were happy with a "brand image" before because it was the best they could do. But these days, it seems almost worthless.

jvanderwal2• 14 years ago

With a click-through rate of about 0.051% on Facebook ads [1], I'm not too surprised by this. They also made some changes over the past month to their ad payments, in particular removing the option to manually set your CPM (which is the only option to pay to promote your fan page - it's CPC for an external site). So put together a poor CTR and losing some control over how much you're spending, and this is what happens.

[1] http://www.kikabink.com/news/facebook-ad-click-through-rates...

ry0ohki• 14 years ago

Comparing click-through rate on a passive site like Facebook (I'm there to socialize and I might happen to see something interesting ad-wise) to an active site Google (I'm there to find a product) seems like a bad comparison. It seems like Facebook ad engagement should be measured my metrics closer to billboards.

kposehn6• 14 years ago

0.051% is actually pretty good. Don't compare with Facebook, compare with other DSP and ad networks for banners - FB and Google are complete opposites.

mpeg2• 14 years ago

Hey,

That's not true, you can do either CPC or CPM for any kind of facebook ad; what they did do is replace the CPM functionality (which btw, is still available if you use a third party ad tool with facebook) with an "optimized CPM" which auto-bids for you according to what results you want to get.

You can still set a manual max bid though :)

jvanderwal2• 14 years ago

Thanks, I'll have to look into the third-party tool option. Mostly I've been running ads with external links and it would only let me do CPC, but I did do it all thru fb's dashboard.

PedroCandeias• 14 years ago

Banner ads are a relic of the 90s. I fully expect facebook to discontinue them eventually.

Because who cares if ads don't work? GM just endorsed sponsored content (to the tune of $30M, no less), a form of advertisement facebook can easily serve to their ever growing mobile user base.

raverbashing2• 14 years ago

Also, I'm not sure GM's marketing dept. is experienced in advertisement for online media

Sure, it's easy to advertise on FB (or Google Ads). It's a whole different story to make it effective.

Take Google AdWords. If you don't optimize your strategy you'll have a high CPC (cost per click), will probably pay for ineffective words. Also, there are changes you can do to your content (being advertised) that affect your CPC.

huggyface2• 14 years ago

GM isn't a mom and pop. They engage marketing agencies who certainly know what they're doing.

snambi2• 14 years ago

Its obvious that Facebook ads don't work. How often you see a relevant Ad in Facebook? Almost never. So, advertisers show interesting images, but when you click on that image, it is some non-sense website. Facebook has some private information about the user, other than that FB has no clue what is my mood or what I am looking for. Its no wonder GM pulled out of Facebook.

waterlesscloud5• 14 years ago

I click on Facebook ads FAR more often than I click on Google ads. Actually, I don't remember the last time I clicked on a Google ad. Whereas Facebook shows me things I'm interested in all the time.

Anecdotal, but that seems to be what we're doing in this thread.

ppod• 14 years ago

This is really not my experience. My facebook ads are so relevant that they almost seem like a useful service at times. It knows a few of the things I'm interested in thanks to who I'm friends with or pages i've liked or whatever - so I see ads for RC planes, chess software, local restaurants... the ads seem both more relevant and less spammy than my google ads.

snambi2• 14 years ago

This is interesting. I only "liked" friend posts or pictures. May if I "like" more direct things like restaurants, brands, facebook may be able to provide me a better "ad" experience. But, its good to know that it works for some people.

natrius3• 14 years ago

Most of my ads are software companies like Asana advertising jobs. Seems well-targeted to me.

mpeg2• 14 years ago

I work in facebook advertising and I'm still often surprised at the quality of some ads: recruiter ads targeted explicitly at my job title, ads from brands that want to drive engagement using facebook questions, etc.

TommyDANGerous• 14 years ago

I hardly notice Facebook ads. However, I think the smaller your company, the larger Facebook ads may have an impact.

10098• 14 years ago

The thing is, they don't. They really don't. I hardly even notice them, like there's some kind of mental block that prevents the brain from perceiving the ads. Same thing applies to Google ads, I completely ignore them. Has anyone else noticed such behavior in themselves?

talmand• 14 years ago

Me too, for the most part I'm almost totally oblivious to them. I don't even bother with an ad blocker. I suppose it's the result of being bombarded with ads all my life, I'm immune to their charms.

andreyf• 14 years ago

https://en.wikipedia.org/wiki/Banner_blindness

mmukhin• 14 years ago

Maybe nobody is interested in GM cars...

excuse-me• 14 years ago

Perhaps Facebook is populated by more intelligent discerning users than I had imagined!

HeyLaughingBoy2• 14 years ago

That would be very odd considering the large number of brand new GM cars and trucks I keep seeing...

EternalFury• 14 years ago

LOL, and rain is wet. The day a start-up comes with a reliable way to measure the true efficacy of online ads, no one will want to invest a penny in them.

davidw• 14 years ago

My limited experience is that Facebook ads, for whatever reason, don't end up costing that much, whereas it's easy to piss tons of money away with Adsense. So I'm happier with the former.

waterlesscloud5• 14 years ago

Facebook excels at advertising things people don't search for (and thus for brand advertising as well).

Google excels at advertising things people do search for.

jonknee4• 14 years ago

Excel is a bit kind, Facebook is still trying to figure out advertising well enough to justify it's current valuation.

patrickgzill2• 14 years ago

The better educated you are, the more likely you won't consider GM to begin with .

(purely a guess based on anecdotal evidence ... the only guy I know with a Cadillac STS was a guy who only has high school and was a well-compensated salesman; but even he is now driving Audis)

waterlesscloud5• 14 years ago

Wow is that ever a gross generalization.

That's based pretty heavily on your personal social circle, I suspect. It doesn't match with mine at all.

micahgoulart• 14 years ago

Who is to say that GM didn't pull ads from Facebook so they could short sell the Facebook stock and earn their $10 million back? Why not?

mrtron• 14 years ago

Risk is why not.

Theres a huge risk that would fail.

beedogs2• 14 years ago

That would be absurd. Anyone who would propose something like this at a GM board meeting would be marched out with all their personal belongings in a cardboard box.

mmaunder• 14 years ago

Facebook's root problem is intent. Users who are googling something and seeing AdWords ads are looking for something and often the thing they're looking for shows up as an ad so they - suprise! - click the ad and often become a conversion once on the site.

With Facebook there is zero helpful intent. The only intent when you're on Facebook is to use Facebook. And if you do click an ad, you're less likely to become a conversion because your intent is still to get back to Facebook as soon as possible and see the rest of Dave's party photos or whatever.

fragsworth• 14 years ago

I wouldn't say Facebook has a huge problem here - users spend much more time on Facebook than on Google (by design) and even if they don't intend to do anything other than "use Facebook", the ads are effective as a result of their high exposure.

That said, however, a very large group of users are there to play social games. With social game companies competing for ad space (for these often highly-profitable users), they're driving up the price of ads and making it less economical for other industries to advertise on Facebook.

wvenable2• 14 years ago

When watching TV the intent is to watch TV, not purchase soap, a car, or a soft drink. It might be that Facebook's ads are simply the wrong type/style for the kind of interaction people use it for. It does seem like Facebook ads feel like Google search ads.

franciscoapinto• 14 years ago

> When watching TV the intent is to watch TV, not purchase soap, a car, or a soft drink.

The difference being that facebook doesn't make you watch a 10 second ad between each one of Dave's party photos.

jrockway4• 14 years ago

Or, TV ads don't actually work very well. Since we can't track conversions, we don't really know. Advertisers are paying for it, so why rain on the parade?

natrius3• 14 years ago

For brand advertisers like GM, intent is supposed to matter less. The lack of intent was always a known factor, but I personally expected big brands to be comfortable with Facebook's lower click through rates. The fact that they're not is a huge red flag.

malandrew7• 14 years ago

True, but my impression is that most Facebook ads feel like performance ads and not display ads. I don't recall seeing GM ads on Facebook, but I would bet that they look and feel like performance ads and not display ads.

waterlesscloud5• 14 years ago

My immediate reaction to this is that "Behemoth old company has not yet learned to optimize its Facebook messaging".

malandrew7• 14 years ago

Intent is huge. I've never been one to click on Google Ads except in real rare instances. Only once I observed my mom using Google did I realize the full value of intent and google ads while searching.

She wanted to watch an episode of The Good Wife that she had missed so she searched in the Safari omnibar for "watch The Good Wife" and the first div under the search bar is an ad to some site that was not CBS that had the Good Wife available to watch via streaming video. To you and I, it's obvious that this "first result" is ad and we would skip over it to the first result. But to my mom, she thinks it's a search result and clicks on it. When she arrives on the site she thinks she's on the CBS site because they naively assumes like many consumers that the site showing the content would be CBS. She doesn't even think twice about the identity. When you are used to TV, you blindly trust that the site/channel showing the content is the correct one.

The only reason I discovered this was because she asked me to pull up The Good Wife to watch on CBS. I, being a savvier internet user, just navigated straight to cbs.com to search there. I got to their Good Wife site and lo and behold, there is no streaming video available on CBS, only teasers and behind the scenes content. I told my mom that "No, CBS doesn't have it on their site" and she was like "Yeah they do. I watch it all the time". I then asked her to show me exactly how she found it on CBS and that was when she showed me that she in fact was clicking on the ad in Google Search between the search box and the search results thinking it was in fact the first result. That's the power of intent and Facebook doesn't have that.

pmorici• 14 years ago

"That's the power of intent and Facebook doesn't have that."

Sure they do...

Status Update from malandrew's mom: "OMG I can't wait to watch the new episode of The Good Wife tonight!"

Facebook ads: "Click here to watch The latest Episode of the Good Wife"

Facebook could has something better than Google intent in that they should be able to predict what you intend to search for before you go looking for it.

tomkarlo4• 14 years ago

It seems to me like even if it was an ad, your mom's usage connected intent with desired result better than yours. Obviously confusion isn't great, but what she said she wanted to do was "watch the Good Wife", not "watch the Good Wife on CBS".

vm• 14 years ago

Facebook has ads that people like your mother will think are from friends. If users can't tell the different between Google Ads and search terms (or between CBS and a random site), they're unlikely to distinguish between newsfeed updates from friends and paid ads.

You're right that that's totally different from intent. But it's valuable for brands which spend billions [1] per year on exposure-focused ads, like product placement.

[1] http://adage.com/article/madisonvine-news/product-placement-...

trotsky• 14 years ago

I'm not really sure if or how this should rewrite your conclusions, but cbs does stream full episodes of the good wife

http://www.cbs.com/shows/the_good_wife/video/

Drbble5• 14 years ago

That's a contributory infringement lawsuit begging to get filed. Google is clearly profiting by driving users to illegal content.

ericax• 14 years ago

So true. Facebook ads and Google Ads are essentially different.

veverkap• 14 years ago

Dave's party was awesome.

This is very true. I only go to Facebook to use Facebook.

hkmurakami2• 14 years ago

>With Facebook there is zero helpful intent. The only intent when you're on Facebook is to use Facebook.

This might be the case right now, but what about in the future? I think that's what Google et al. are scared about. If users spend 90% of their internet time on Facebook, and Facebook figures out how to serve users with "What they are looking for" 5 years down the road, then users will have a very low barrier to trying out the Facebook "look-up" service.

Right now, my use of the internet is (1) sites I already know exist, or (2) Google, in order to find things.

What if this becomes (1.1) Facebook, to look at things served from other sites that I like, and (1.2) Facebook, to find things that I don't know about?

That's scary for companies counting on the status quo. Sites' share of user time is important not for how they are now, but how things might become in the future. It's a huge about of leverage.

kposehn6• 14 years ago

> With Facebook there is zero helpful intent. The only intent when you're on Facebook is to use Facebook.

It isn't about intent - it is about interest.

> And if you do click an ad, you're less likely to become a conversion because your intent is still to get back to Facebook as soon as possible and see the rest of Dave's party photos or whatever.

Not necessarily. I'm working with a customer right now where I have a 24% conversion rate on movie tickets. They routinely shell out $7-$21 a pop with this conversion rate; the catch is, I have to be very careful about who I target.

This kind of trend goes across the entire industry of FB ads - target well, optimize and approach based on interest and the money will follow.

ThomPete2• 14 years ago

Interest is far from enough anymore and I think your example is an exception to prove the rule.

Go watching a movie are such an ingrained part of life for many people and thus we are always "on the look" for a good movie to go watch.

But try and do that with a car brand or any other non-commodity and intent suddently becomes the most important factor.

valisystem• 14 years ago

Well it does not seems to be all about intent or interest, but just two distinct ways to provide insightful advertising.

But still, the intent model of google adwords seems so much more stronger, whereas facebook's interest model just look like a centralized and refined adsense. Google has long given emphasis to the long tail, the specialized interest that bring as much revenue as the mainstream one.

The intent model is clearly stronger here, as searches have an explicitly parameterized specific content, whereas the interest model can only bring up revenue on frequent and common patterns (such as you say, movie tickets), since you cannot anticipate rarely occurring interests.

MartinCron5• 14 years ago

I've actually been interested in a handful of things I've seen as Facebook ads. They are generally things that I didn't know existed, wasn't actively shopping for, and sure as heck wasn't searching for. Example: http://www.mushroomnetworks.com

If anyone is going to get any sort of value out of the wealth of information I've given away about myself, it's going to be the person who opens my eyes to something new and awesome that speaks to my... unique tastes.

GM can't really be new or awesome anymore, and that's OK.

brk• 14 years ago

I agree, and I think that the Facebook ads with the highest potential are for products that fall in the disposable income/non-considered purchase/splurge categories.

I'm not likely to see an ad for a GM product and immediately run out and buy one (and I'm guessing this is true for 99% of Facebook users). But I have seen ads, and posts by friends, for random products in the $10-$500 range related to things I didn't necessarily need (or know existed), that HAVE influenced my purchasing decisions.

Facebook is a new and different advertising channel, much like Google and Internet ads were before it, and companies and agencies need to adapt accordingly to this.

If you've been around long enough, you might remember stories from the late 90's from companies that both swore by, and swore off, Internet advertising...

goodbyehello• 14 years ago

This is huge.

Why?

Because the auto industry was one of the earliest and remains one of the heaviest users on online advertising.

If any industry knows a thing or two about online advertising, and has been willing to experiment, it's the auto industry.

Facebook is in big trouble, as a "business".

devs1010• 14 years ago

The thing I don't understand is how can they say facebook ads don't work and even be sure of this, given that, as others have pointed out, they aren't going for a "conversion" as the purpose of the ads is branding, so that people think of their brand and eventually may buy a car made by them. They do other forms of advertising for branding, including TV ads, radio, billboards, etc so I don't know how its possible to pinpoint one channel of advertising (facebook) and say its not helping them with branding.

My guess is that they have an expectation of having more user feedback and involvement from this form of branding (people clicking the ad, filling out some bullshit form so they can bombard them with marketing material, etc), however the nature of the product may preclude itself from this sort of consumer behavior because people don't buy cars very often they may not feel compelled to engage with the brand, however seeing the ads on facebook could potentially have the same "branding" effectiveness as TV ads yet they really have no way of measuring this.

calbear81• 14 years ago

There is no such thing as a surefire ad so saying Facebook ads don't work as a broad statement is misleading. Facebook ads don't work for GM the way they thought it would to accomplish their goals but they certainly work for many other companies. The problem GM has as well as most marketers is that they are comparing it to their traditional marketing channels and using those metrics to judge Facebook ads.

You also shouldn't use the number of followers as the addressable audience for the brand, the whole point of social is that messages are amplified through the network effect out towards a much larger reach of users. One user who likes one of your posts or comments on it may mean hundreds of friends seeing it show up in their subsequent feeds like "YCombinator reader just liked GM's Blah Blah".

Everyone's right below that if you're using it as a direct marketing channel, you'll most likely see failure because people want to stay on Facebook. Think of it as a way to stay engaged with your audience and as a one time investment for the ability to message to them again and again in the future. Facebook ads also work much better when you tie them to your Facebook presence vs. trying to send someone off Facebook to your site. GM should have thought of more creative ways to leverage the Facebook app platform to promote on-Facebook activities that drive brand value and help promote their new cars/trucks. For example, how about a contest on Facebook using an interactive car designer to design a GM that also allows you to upload custom patterns for the paint job. If it's two things people like on Facebook it's self-expression and contests.

kposehn6• 14 years ago

That's a $10m account of money wasted by unimaginative people.

You can go nuts with FB ads, you just simply have to get past the notion that it works the same way as every other medium. Unlike AdWords, where you bid on someone searching for "Cadillac SRX" in San Jose, FB is all about inception of interest.

The goal is to create intent in people through innovative ways; the people that spend the millions and keep doing so are the ones who actually, you know, come up with something new.

This is the same story as Google AdWords back in the day.

anon8082• 14 years ago

"This is the same story as Google AdWords back in the day."

Not really, adwords pretty much worked from day one, bid for placement was inspired by the goto.com paid search engine model which was minting money back in the 00s if I remember correctly.

kposehn6• 14 years ago

It worked, but people still panned it. FB is the same way :-/

philmcc• 14 years ago

I wasn't under the impression that advertising (for a company like GM) was supposed to "work" in any easily measurable way. Especially not $10million of a budget which, though undefined, is clearly large if they are trying to cut $2 billion from it.

I think that to measure the efficacy of a GM ad based on the same measurable activity that you'd measure an ad for (say) a T shirt company is probably a bit misinformed. No one is checking to see if anyone clicked on GM and subsequently bought a Cadillac.

A lot of the comments on the original article seem similarly misguided. ("I NEVER CLICK ON THE ADS I HARDLY EVER NOTICE THEM.") The McDonalds logo on the back fence of a baseball field isn't to convince you to walk over to it and do something. It's so that later when you drive by McDonalds you "decide" to stop.

elorant• 14 years ago

I'm surprised as to why Facebook isn't looking in other sources of income instead of ads. Like e-commerce for example. Providing a platform for the gazillions of small to medium companies that already have an account would be IMHO a more wise decision. Or build an analytics platform and combine it with real time demographics and blow the competition away. I'm sure there are dozens of ideas as to what they could build and still we don't see anything innovating.

But then again perhaps their problem is intense scaling. With 800M users even the simplest idea becomes cumbersome in developing.

pg• 14 years ago

Interesting side point: the WSJ article was on HN first (http://news.ycombinator.com/item?id=3978537) but Forbes's rewrite of it got all the upvotes because the WSJ article is behind a paywall.

zackzackzack• 14 years ago

Probably part of the business plan for Forbes. "Watch WSJ, anytime they have a hidden gem, rewrite it and send it out." Forbes did it with the target targeting parents to be article with the New York Times: http://www.forbes.com/sites/kashmirhill/2012/02/16/how-targe...

dexen• 14 years ago

However you slice it, paywall is bothersome -- one more click to go through, with no added benefit. Let's hope the `netizens' will vote with their feet more often.

cletus• 14 years ago

I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have noted is a big part of the story but it's not the only story.

Search can broadly be broken up into at least two categories:

1. Navigational eg typing "b and h" into the browser; and

2. Informational eg "cheap flights to jamaica".

I don't know what the make up is of (1) vs (2) but I expect for normal users (1) is pretty huge. I would guess that ads are have lower clickthroughs for (1) than (2).

(2) is where you have the intent. The user obviously wants something. They may find it with an ad. They may find it with organic search results. Either way, the goal with search is to get the user the best result.

With Facebook you tend to be just looking at friends' updates, posting your own updates, posting photos and the like. You don't go to Facebook to find things. So it doesn't really matter how much targeting information Facebook has if you don't have that intent.

Many will say "but what if you do start going to Facebook to find things". That's a massive "what if". What if the Sun expands tomorrow and swallows the Earth?

Facebook has (IMHO) a number of strategic problems:

1. It has no control over mobile. Both Google and Apple have mobile OSs;

2. It has no search engine (which is how it could monetize its user information); and

3. Users of community-driven sites are notoriously fickle. There is nothing preventing Facebook from being the next Myspace when something newer, cooler and hipper comes along and the users move on.

Early founders, employees and investors have obviously done spectacularly well and there's a lot that Facebook has done right (all the more surprising considering the length of time and the age of Zuckerberg). It's also created an engineering environment that attracts and maintains top talent (although we'll see if that last once the stock plateaus, which is simply a matter of time). But would I be buying in the IPO? Not a chance in hell.

This isn't about predicting imminent doom. Facebook will be around for years to come. It's about the upside reward vs the downside risk. Facebook somehow is still considered a "growth" company and values as such (with extraordinary P/Es). This will at some point change (as it did for Google some ~5 years ago).

untog2• 14 years ago

"There is nothing preventing Facebook from being the next Myspace when something newer, cooler and hipper comes along and the users move on."

I would argue that things like the massive photo collections people have made provide a large level of lock-in. I also suspect that Timeline is the first play in a "all your history, here" move that would make moving to another service very difficult.

BrandonBT• 14 years ago

If something new comes along that is worthy of competing with Facebook, I would imagine that it would be fairly trivial for them to have an "Import Your Photos from Facebook!" button that you'd click to simply move all of that data over.

slipperyp• 14 years ago

Facebook also has tremendously greater adoption, especially among the non-tech savvy, than MySpace ever had. Don't get me wrong, I don't think there is unalterable inertia here, but at its peak MySpace was constantly broken, had far less adoption, and had far less interesting and integrated ways to collaborate than Facebook has established today. Anyone could have looked at MySpace and said "a smart, driven undergrad could build a system that could beat this on one power-weekend with a bunch of redbull"

joering26• 14 years ago

I don't see a problem here. Most of folks here, including myself, over the span of one weekend could write a downloadable version of a Visual Basic application with a built-in Internet Explorer Window where you login to your facebook and then the app scrap (download) all data you ever had, all messages, photos, etc, everything within a couple of minutes, elegantly packet into zip, xml or whatever format you wish to have it!

Zuck could do shit, because that downloadable app would use client local IP, so they would have to block _everyone_ in order to stop the app. Further, it would use built-in IE frame, so all request would look like coming from legitimate Internet Explorer user. You could also implement "wait(rand [sec 1-5])" between downloading requests, so it looks more messy, more like a human that is clicking, rather then robot pulling requests in miliseconds.

Zuck once had hacked into school system. Who knows -- would be crazy to see an App that so easily ported out all your data out of Facebook, and see Zuck trying to stop it :)

angryasian• 14 years ago

as Path, instagram and other photosharing networks are proving your social connections and photos aren't really a compelling enough reason to leave.

D_Alex• 14 years ago

YouTube has an unrivalled collection of videos. I used to listen to most of my music on YouTube, and built many hours of playlists.

But I don't use YouTube any more. The level of advertising got to beyond tolerable.

And that is the problem these sites have. I might spend four hours on the weekend with music videos on, but I just could not increase that, there is not enough hours in the day. To grow, the site has to increase the proportion of ads, and then it starts to lose users based on their level of tolerance for crappy, repetitive advertising.

So anyone buying Facebook and suchlike for growth potential should also consider that there really is a practical upper limit to the revenue it can pull in before it becomes annoying and starts losing users. IMHO, YouTube is beyond that limit now, Google is pretty close, Facebook has a little room, but not that much.

webwright• 14 years ago

"I've said this repeatedly: Facebook is a high-risk proposition, particularly as an investment (disclaimer: I work for Google). "Intent" as other commenters have noted is a big part of the story but it's not the only story."

As a Google employee, what do you think of Google as an investment? If you look forward 5+ years, everyone is doing much of their internetting via their phone (certainly some or all of that will be web vs. apps-- who knows?). Google gains some extra data with searches, like location. So "pizza" searches get a LOT more targeted. But many searches do not.

The rub is that Google has near-zero ad inventory on mobile. You can't show 6 adwords ads, you can show 1. Additionally, consumer's bar for tapping an ad is MUCH higher (given the relative speeds of mobile browsing). As searching moves mobile, how does Google's revenue shake out?

jrockway4• 14 years ago

I don't think that any Google employee is going to reply to your comment with advice. "As a Google employee, I say invest!" is not going to get you on the good side of the lawyercats.

What I think is interesting about Google is how much voting power the founders retain. Things like a campus of solar panels, space elevators, and self driving cars (not to mention Chrome and Android) make a lot more sense when you realize it's not "the shareholders" that want those, it's the founders that want those. Google is a company where two successful guys and several thousand of their closest friends (we like to think) can do whatever they want. Is that a good investment? I'll let you decide.

(Disclaimer: Google employee. And if anyone takes that quote at the top out of context... well, let's just say laywercat suggests that I don't put it in writing.)

larrys3• 14 years ago

"If you look forward 5+ years, everyone is doing much of their internetting via their phone"

Not true. People spend a significant amount of time in front of a computer "at work". Those people are still going to be sitting in front of a "desktop" in 5 years and still have the same behavior. There will be more mobile, but there will always (especially in only 5 years) be people "at the office" doing their job looking for information.

jerf• 14 years ago

"If you look forward 5+ years, everyone is doing much of their internetting via their phone"

Sure, but a nontrivial portion of that internetting will be with your phone in either a laptop or desktop dock station. Laptops and desktops are dying... laptop and desktop form-factor interaction with computer isn't.

One of the larger of the several reasons I'm grumpy about the way that cell phones has evolved with all their heavy vendor lockdown is that I should be able to use a cell phone as a full netbook with only a bit of effort. It's a f'ing computer, stop pretending it's not, let me in! Instead, hacky half-assed bullshit is barely in hardware beta from a select group of off-brand manufacturers, even as "a Linux desktop" is a solved problem. If I didn't have to invest in both a laptop and a cell phone I could justify a much nicer cell phone to myself.

nikcub3• 14 years ago

> If you look forward 5+ years, everyone is doing much of their internetting via their phone

A lot more time is being spent on mobile, but it isn't at the cost of desktop computing. Rather, the entire pie of how much time is spent online and how many people are online is growing as a whole.

This is why the online ad market is going ganbusters with growth (see my comment above) at the cost of the traditional ad markets (print, radio, etc.)

JPKab• 14 years ago

"Additionally, consumer's bar for tapping an ad is MUCH higher (given the relative speeds of mobile browsing). As searching moves mobile, how does Google's revenue shake out?" combined with "If you look forward 5+ years, everyone is doing much of their internetting via their phone "

This makes no sense. Do you truly believe that in 5 years mobile phones browsing speeds won't be much more comparable to desktops? LTE phones already have faster connections than many people's broadband.

Thinking about Google's ad revenue in 5 years time, based on the idea that people's only encounters with internet connected devices will be their phones and PC's is a horribly myopic view of future tech trends. In 5 years time, there will be cars sold with Heads Up Displays featuring Google Navigation. Facebook will certainly be integrated in here too, but at the moment I don't see Facebook preparing themselves for this.

jusben1369• 14 years ago

Is the problem with GM's ads or FB's platform? Ie - What's Ford, Toyota or Hyundai doing with their ad spend on FB? We might be jumping to conclusions a little too quickly here.

pork• 14 years ago

Forbes just reported that Ford and Chrysler are keeping their ad spend on facebook and are very happy with the ads.

nextparadigms• 14 years ago

I agree with that you've said, which is why I think Google should stop listening to "expert bloggers" that Facebook and social will kill their business, and have a more thoughtful approach about social in their search engine - if they even have to use it at all.

adventureful• 14 years ago

The terrible misfortune of web / mobile based display advertising is that you can actually track it. If you could intimately track the performance of television ads, it'd be a disaster for that segment (ditto radio).

randomStuff• 14 years ago

that is why Orkut and Google+ have changed the world and have movies about them. There were social media sites before Facebook and so far they have found an effective formula, this could easily change.

abhaga• 14 years ago

I think you have left out the brand advertising, advertising that needs to hit the customer much before he is looking for something and do so repeatedly. That is the segment where Facebook seems to have a clear edge.

Google can get into action when the intention finally surfaces in form of a search. Facebook can help you to create the association between a brand and that intent in the stage before that manifestation. For example, when you are thinking of buying a smart phone, you will search for the "cheap smart phone" and restrict yourself to 4-5 top brands in your head. Or how when looking for "cheap flights", I have preference for certain airlines. Brand Advertising can help you get into that top group in people's head.

If that pie of the advertising is big enough, I have no idea.

steve89183• 14 years ago

You make it sound like search is the be all and end all reason why people use the Internet. It's not.

It's obvious that a Google employee would believe this, and believe me, I think Google ads are amazingly effective when used with Google search. I've just started using Adwords and it's great.

But Facebook is entirely different from Google search, and there is no reason why their monetization techniques need to be the same way that Google monetizes their users.

Facebook is more akin to TV in that people use it to browse content based on what their friends are doing. They aren't searching for things, they are browsing, which is different. So Google search and the techniques you use to monetize your users are completely orthogonal to how Facebook should monetize their users.

Facebook is more akin to a TV station, and if I had to make a choice, I would go for things like "sponsoring" of ads or items in the newsfeed. And the way Facebook could analyze the users is completely different. You could probably do an analysis on the types of articles or links that a user it clicking on, and then sponsoring items in the user's newsfeed that they might be interested in. "This news article was brought to you by the Ford Fusion" or "Your friend Janet went to Jamaica, there's a flight leaving for Mexico next Friday for $500 for 4 days, all inclusive, brought to you by Travelocity".

Right now, they are making something like $4/user/year in revenues, based on really terribly performing ads. I know this personally because I tried using it and it was terrible, even worse than Bing ad CTRs. In order to get to GOOG's revenues, they'll need to bring that up to $40/user/year. Depending on the growth rate, that would make FB worth even more than GOOG, so I don't think it's necessarily a bad investment at all. It all depends on how effectively and how quickly they can ramp up the monetization of their users.

fluidcruft• 14 years ago

I'm not sure general brand awareness efforts are as financially valuable as interactions with customers that are in "I'm about to buy something" mode. When someone intends to move money, getting a piece of the action is more valuable and I think search engines are where people go to find reviews, prices etc (this also includes commerce sites that rely on a search interface--Amazon, Ebay, Craigslist).

On the other hand, I would assume that people performing any sort of search to are likely to be more focused and less open to extraneous ads--so I think things like issue/political/awareness ads probably are better suited to facebook. I'm just very skeptical that the amount of revenue facebook could extract routinely from these could top what someone sitting at a search engine can extract (it's easier to skim off an impending financial transaction). Another thing depressing the value of issue/political ads on social networks is the "viral" vector for spreading a message where people freely share things they believe with their communities. I'm more likely to attend to things actually shared with me by my friends than ads thrown in the mix.

So, in the end I'm not startled that GM finds paid ads on facebook aren't too cost effective--cars aren't impulse buys (ad viewers will hit a search engine before they actually make a decision) and there are cheaper (i.e. nearly free) ways to raise brand awareness.

richardw3• 14 years ago

1) GM is exactly the right type of advertiser for Facebook. They don't want you to buy a car right now, they want to get the brand in front of you. They, with all their resources, can't get it to work.

2) Google Adwords-style advertising is the absolute shortest line between a person who has a need and someone willing to fulfil that. To be worth more, Facebook has to either make "brand awareness" advertising bigger than "need fulfilment", or somehow figure out a way to beat Google at need fulfilment before Google heads them off. The thing about need fulfilment is that the user is already motivated to solve their problem, at this exact point in time that they're searching. You just have to fulfil that. That's worth pure gold for a marketer. Currently on Facebook the "need" is to get more cows, or whatever. To be "worth more" than Google, you need to use the social graphy thing to figure out how to get someone to spend money. But see #4.

3) I haven't spent one cent on Facebook, so either find a way to get me to spend one cent, or increase the value of the "whales" somehow.

4) Google knows a lot more about me than FB does. I spend every day telling Google what I'm thinking about, via the searches I do. Facebook, I might click a "like", or post a status. You can be sure that the things I'll "like" are a tiny subset of the things I search about. Google therefore has to hold back in which information they use about me, so they don't look creepy. Zuck would be happy looking creepy, but he's not able to get enough info to even begin to look creepy. [edit: so really, Google could make more by flicking a few "add creepy" switches. If FB desensitises us to that first, Google is still more likely to be able to leverage it.]

So, what would make Facebook worth more? Maybe if they leveraged the asset of having-everyone-on-board in a way to make the specific applications (e.g. search) irrelevant. They've done a reasonable job already, what with integrating it into websites, but that still isn't making them money in any direct way. Indirect ways are not going to beat the direct way.

So, Facebook is still a bit like Google pre-Adwords. We have a great lock, still looking for the key.

[edit: please tell me why I'm wrong. Really - I'd love to hear a way Facebook could win, would be an awesome lesson!]

batista• 14 years ago

>You make it sound like search is the be all and end all reason why people use the Internet. It's not.

No, it's just the be-all end-all reason for people using the internet to find information. You know, the very situation where an ad is more effective.

>Facebook is more akin to a TV station

Yes, and ads on these do not work that good, especially if you can ignore them far more easily than switching channels in a tv program when the ads come in.

throwaway63-902• 14 years ago

Finally a sensible analysis.

Some people are just in a kind of Facebook daze.

"Hey, they had income for 3 years in a row. One billion last year. This is a sure winner."

They refuse to look at what Facebook actually does.

People will probably read your post and think you're biased because you work for Google. But there's a huge difference in what Google Plus can accomplish. You guys have the search engine data (intent) to combine with the social data.

So why doesn't Microsoft let Facebook combine with Bing? Then they would have a search engine. Or are they planning to do that already?

drstrangevibes3• 14 years ago

what facebook does: monitor your shit and send it to the government. They arent going anywhere

billpatrianakos• 14 years ago

Not exactly your main point but I have to agree that there's nothing stopping Facebook from being the next MySpace. Seriously. Not a thing. I think at this point the massive user base and their investment (their friends, photos, life in general) is about the only thing keeping them from switching. But even that can be overcome by others simply by making the switch easier by importing that information (think using Facebook's downloadable data on you as a means to do that). I can see ads getting lots of Likes because others friends like Movie or Brand X but beyond those kinds of ads people on Facebook aren't likely to leave the site. In fact the whole site is designed to keep you there do ads are kind of useless. Likes are meaningless. They don't generate dollars. Brand awareness is about the best thing you can get from Facebook.

You're right. Intent is seriously important. People use Google search as a means to get to another source of information regardless of whether their intent is navigational or informational. People on Facebook simply stay on Facebook until they're ready to either get offline or go search google.

nikcub3• 14 years ago

There seems to be a line of argument in this thread that goes something like this:

1. Google do very well with search advertising because it has intent

2. Facebook advertising is not based on intent

3. Ergo, Facebook advertising sucks

Display advertising is a very, very large part of overall advertising. Display advertising is larger than search advertising online. Further, intent or search based advertising relies on display advertising to generate interest.

95% of every dollar spent on advertising around the world each year is spent on display advertising. It works. It works so well that Google are getting into it to maintain growth (Doubleclick acquisition).

It also scales a lot better since intent inventory can not be easily generated (and funnily depends on display advertising).

It will just take a while for Facebook to figure it out, but i'm sure they will. Too many people spend too much time on Facebook for display advertising there to be ignored. It doesn't have to even be super efficient with the numbers they are hitting.

Bikepump• 14 years ago

Facebook "could" go the way of Myspace, but I'm guessing that their talent is significantly better than what Myspace had. By all accounts their engineering talent is on a similar level to Google. They're almost certainly not as good a buy as the Google IPO in 2004, where the search advertising market was still in its infancy, but look at Apple. All it takes is one amazing product that helps to spawn a brand new market and they can double their market cap. I'd guess that Facebook has as good a chance at doing that as Apple, Google, or anyone else. That said, I agree that until they actually are able to pull that off their stock is overpriced. It will probably also stay overpriced for a few years no matter what happens.

eblackburn• 14 years ago

Of course Facebook could acquire / lease Bing (or build perhaps?) and plumb that into Facebook.

A user searches within Facebook and the platform can display the results, apply highly targeted adverts and offer links to comments / endorsements (likes) by friends, Facebook exclusive material from advertisers. From within that platform Facebook could also leverage some commerce / shopping too?

nikcub3• 14 years ago

Display advertising has actually overtaken search advertising in revenue, and it is continuing to grow at a faster rate. This is why Google bought Doubleclick.

The US online ad market today is $32B. Growing at 8-12% per year (some estimate 25%) this year.

What is happening is old display advertising dollars are moving online, and it is happening a lot quicker than anybody thought it would. Online will overtake print this year (print will continue to shrink 8-10% p.a). TV is worth about $60B per year. Local ad spending is being hurt the most and is also the largest, bringing in around $140-160B per year.

So the trends are old advertising money moving into online. Online making up 20% of all ad spending last year to forecast ~35% next year. Print and local shrinking, and within online advertising display advertising is now larger and growing quicker than search advertising.

Knowing these trends, adapt this back to working out the companies that stand to gain. Facebook currently has the most time spent online for any website. It will be the largest display advertising inventory pool. People are no longer reading magazines, or newspapers or flicking through the Yellow Pages but rather they are spending a lot more time on the web. Spending a lot more time on the web for most average people, at the moment, means spending time on Facebook.

Being bullish on Facebook, i'd much rather that they be in the position of dominating user time and having a shitty ad product, than having a great ad product and losing user time.

Search advertising may be a lot more efficient and profitable, but display advertising is still king. It is a lot easier to create display advertising inventory than it is for search. Google moving into display advertising is all you need to know.

Facebook can fix the ad product and experiment with it over time, finding a way to best adapt those offline dollars to online display advertising. Building a site with a bilion users and a pretty good moat is a lot more difficult.

pwaring• 14 years ago

"There is nothing preventing Facebook from being the next Myspace"

You could make a similar argument about Google becoming the next Yahoo! when someone devises a better search algorithm/interface.

Most technology stocks are high risk propositions, with the exceptions of huge multinationals like IBM (their size and government contracts make them harder to challenge).

sparknlaunch12• 14 years ago

> It has no search engine (which is how it could monetise its user information)

There were rumours Facebook were sitting on very powerful search capabilities they were looking to release post IPO.

Given the personal data held and time users spend on their platform, the potential is quite high.

They may not have much control on mobile but their apps hold your contacts and messaging functionality.

Pressenter• 14 years ago

The only reason I would buy facebook stock is to sell it to fools at a profit. Enron is a better long term investment.

drumdance2• 14 years ago

I think the more relevant data point is that they spend $30 million on their Facebook presence. Facebook appears to have reinvented the AOL keyword.

salimmadjd• 14 years ago

Maybe the problem is with GM and their cars and not Facebook

patrickgzill2• 14 years ago

Bingo.

savories• 14 years ago

Either they're doing it wrong. (likely)

Or their customer is difficult to target on FB.

We (a quickly growing clothing company) see an amazing ROI from FB ads. We also have around 350k Likes. We advertise to friends of friends, and target similar companies, fashion companies etc.

I am betting they simply haven't found the best tactic.

badclient3• 14 years ago

All this will be moot when Facebook launches its search engine in couple years.

hackinthebochs• 14 years ago

Exactly. Its amazing to see so many people avoid making this connection in their heads. It's so painfully obvious. I just wish they had IPO'd a few years earlier...

AznHisoka2• 14 years ago

It takes time to actually build a search engine - you just can't get up and say you're gonna build one. Even if you somehow bring in a partner like Bing. Google has been fighting spammers, scrapers, black-hatters, and thinking about all kinds of search problems for over a decade.

badclient3• 14 years ago

Google has been fighting spammers, scrapers, black-hatters, and thinking about all kinds of search problems for over a decade.

Same could have been said of Yahoo and other search engines before Google.

tferris• 14 years ago

overworkedasian• 14 years ago

what did GM hope it would accomplish by advertising on facebook? Unless they are offering a discount coupon for 50% off their next GM car, facebook users wouldnt care. did they hope facebook users would be more inclined to buy GM vs a foreign car? if that is the case...i have bridge i would like to sell you.

huggyface2• 14 years ago

did they hope facebook users would be more inclined to buy GM vs a foreign car?

Is there something particularly unique about Facebook users? Is it some niche group?

Of course not. It's a cross-section of demographics.

And among normal people, yeah most do choose to buy a GM car. I have a nice GM SUV -- fantastic vehicle. I see a lot of people are cludging out the dated "durr GM bad" nonsense from the 90s.

coffeemug• 14 years ago

This might have much more to do with GM than it does with Facebook. It doesn't matter how much money you plunge into ads, which ad platforms you use, and how targeted the ads are if nobody wants your product.

tmuir• 14 years ago

General Motors was the number one selling auto company in the world in 2011 with 9.025 million units sold, outselling second place by a full million.

I know plenty of people that will never buy a GM, regardless of their advertising. However, advertising is crucially important to GM success.

raheemm• 14 years ago

I'm tempted to wonder why this announcement is made two days before Facebook goes public.

drstrangevibes3• 14 years ago

dump and pump

djt• 14 years ago

The timing might not be significant. Would anyone have cared that GM saved 10 million months ago? Probably not. But its a good story around IPO time.

tomrod• 14 years ago

Most people I know block ads on Facebook. It's hard to sell a product (eyeballs) when the eyeballs circumvent the tech!

b3b0p• 14 years ago

I think everyone I know uses, checks, updates, posts to Facebook using their mobile phone or iPad/Android tablet. Almost no one I know actually visits the website.

It's been a while, but last I checked the clients for these devices don't even have ads in them. If this is the case, I would wager that no one is seeing these advertisements even if it is one of the largest most visited sites in the world.

throwaway63-902• 14 years ago

Imagine you have somethng to sell, I have the ability to place ads in people's homes via their electronic devices and I give you the choice of placing an ad for your product in one of two places.

You can place the ad into everyone's photo albums so that when they are flipping through photos they will see your ad.

Or you can place your ad in everyone's telephone book so when they are looking up the contact information for some source of some product, they will see your ad.

Which one would you choose?

Of course, in the real world, advertisers can choose both. They will advertise both on Google and Facebook.

And sure, it matters what the product is.

But overall which do you think is more valuable?

kingkawn• 14 years ago

If $10mil of the total is on ads, what is the breakdown of the other $30mil in spending on facebook marketing?

mzuvella• 14 years ago

Hey GM, your FB ads don't work because no one wants to buy your cars. $45k for an 'electric' car that goes 15 miles on electricity, nice product.

tkirby• 14 years ago

You wouldn't download a car?

its_so_on• 14 years ago

I bet if GM made more sociable* cars, they would pay a lot MORE to advertise on FB. I'm not saying they should be making sociable cars: I'm just saying GM doesn't necessarily have much overlap with a social experience like facebook. (Neither do loads of other necessary products, like toiletry items, apartments and houses, insurance, etc etc etc.)

Lots of products (and services, experiences like Disneyland or baseball tickets, a local bar, etc) are still very social by their very nature, and a much better match for facebook advertising.

Note: I say this as someone who doesn't know anything.

* http://www.thefreedictionary.com/sociable, definition 2

drstrangevibes3• 14 years ago

Facebook is far to useful to the Government to go anywhere. I bet GM knows this, I suspect a case of "dump and pump"

akrymski• 14 years ago

Saying Facebook advertising doesn't work is like saying display ads don't work. Sure, the closer you are to the transaction the more value you provide:

- Facebook: CPM - bill boards : consumer in the position to buy, but not given it much thought

- Google: CPC - yellow pages : consumer in the position to buy and is actively looking

- Groupon: CPA - re-seller : consumer has decided what to buy and is purchasing

But whilst Groupon can provide more value, the pool of potential consumers it can reach is smaller. Same with Google (informational queries only). Facebook reaches the consumer in the very early stages of the purchase-funnel, before there is clear "intent". Same as bill-boards, display ads will always have value - after all advertising is about making us want something we haven't already planned to buy, otherwise its wasted cash (think groupon vouchers sold to existing customers). And whilst the conversation rate (clicks) on Facebook ads will naturally be lower, there are many more customers at the pre-intent stage (everyone in the world).

Sure a display ad for a Ford may not have great immediate conversion rate (clicks). What about a bill-board or a magazine ad? Yet do they have no value? If I would be considering purchasing a car within the next year, but not actively searching for one, then an image of some appealing product would actually get stuck in my head, and when I come to search for a car on some price comparison site - it just might be a Ford I saw a few weeks ago.

Each of these models have issues though:

- Groupon - a large number of buyers are already existing customers. GroupOn is only necessary because there isn't a platform for merchants to issue their own vouchers. If there was, they could advertise those vouchers on Facebook/Google and not pay groupon their brokering fee.

- Google - provide a free yellow-pages service. Instead of an alphabetical listing they aim to provide the "best" results first, so the only way to make money is to display ads next to those results for companies that haven't made it to the top. Why would anyone select those companies? The only reason I can think of is if these companies offer temporary aggressive discounts like on Groupon. If G displayed "sponsored ads" as banner ads so people wouldn't get fooled into thinking it's a result - would anyone still click on them?

- Facebook - unlike a magazine which has associated readership with a particular set of interests (eg car enthusiasts) - everyone is on Facebook. A niche social network for car enthusiasts would get a better ROI for GM then blasting their cars at everyone in the world. Need more single girls from NYC in the age group of 20-25 to join your dating site? Facebook will probably deliver great ROI there cause it can target ads by all these attributes.

Facebook has to expand its targeting capabilities, and that means gathering more data: my interests, my income, estimated net worth, what car I drive, where I live, who I have my mobile contract with, etc. If FB knows that I just graduated and got a job that pays enough to lease a Ford, and my commute time to work is over an hour - GM would probably get a decent ROI. If I visit enough car-related websites with the "Like" button on there, Facebook should know I'm interested in cars.

As Facebook builds a more detailed profile of me - it will deliver ads that predict my purchase intent, and in theory, that's a great position to be in.

In practice, I think people prefer to "pull" ads rather than having them pushed at us. The old broadcasting model of advertising was necessary when people couldn't poll the world for "whats the best car in my price range". As more information becomes available, people won't need companies telling them which products to buy. Think of Amazon - you don't purchase based on ads, but based on reviews and ratings from other people. Humans have become much more connected and knowledgable when making purchasing decisions, so ads matter less and less. I don't remember the last time I bought anything because of an ad, instead I read reviews left by other people. The advertising-intermediary is no longer necessary, businesses simply need to create great products. And Facebook is a great product - for sharing photos, keeping track of friends and killing some time. I wish they'd concentrate on making that product better, and I'd happily pay $1 per month to use it. Even at $1 per year - they would make as much as they currently do from 1 billion people. What will make me leave Facebook is the ads in my newsfeed, not the 1 buck a month I'd have to pay. My time is more valuable than $1 / hour, so if I decide to waste several hours on Facebook a week - then I can certainly afford to pay $1 / month.

BoxFullOCat• 14 years ago

I can't help but recall all these Anti-Baldness treatment ads I get on my facebook all the time - I truly believe the only thing that triggers them is my being a 31-yo male (note - I will probably never need these treatments, ).

My suspicion is that either the GM advertisers are complete muppets, or Facebook's offering in self-service targeted advertising simply isn't sufficiently good at catering to this specific market's needs.

brudgers• 14 years ago

One day later, Berkshire Hathaway announced that it has been buying 10 million shares of GM stock over several months.

http://www.mlive.com/auto/index.ssf/2012/05/warren_buffetts_...

BaseBandLabs• 14 years ago

GM Says Facebook Ads Don't Work, For A Car Company....

GM Says Facebook Ads Don't Work, Pulls $10 Million Account

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