The most anticipated tech stock to date debuted after weeks of speculation as to where the final numbers of its IPO meter would land. Coming out of the social media sector; Facebook’s decision to become a public company may have been the biggest news of the year. Unfortunately for the advertising giant, disappointing news about one of the largest U.S. advertisers is making a big splash in the media world as well: automaker General Motors has decided to withdraw its $10 million spend on Facebook ads due to subpar results of their click-through metrics and marketing data analysis.
The burning questions all revolve around the single word ‘Why?’ While there has been lots of speculation as to why GM experienced lackluster results from Facebook ads, we wanted to share some of the key points that we feel merit a closer look.
1. Is it Facebook, or did the ads themselves contribute to the sub-par click-through performance?
Although the nature of GM’s ads likely had a part to play in the lack of success, Facebook doesn’t get off scot-free. According to recent studies, nearly 60% of Facebook users say they never click on ads or sponsored content. Eye-tracking research shows a decrease in visitor interest in advertisements that are shown in the Timeline feature rolled out a few months ago.
2. Is click-through the best measure of Facebook ad performance?
Some important details left out of all the media reports is what other, if any, key performance indicators was GM using to measure the success of Facebook ads. Click-through rates can be a bit tricky when it comes to social media; which is a notably different advertising platform than Search. Ad click-through rate needs to be considered alongside other metrics, depending on the marketing objectives. Other valuable metrics may include the number of Facebook fans or engagement rates.
3. Is GM more disappointed with the lack of new ad innovations for Facebook advertisers?
Facebook has been known to place more emphasis on the platform’s user experience over advertising innovations. The social media giant has yet to prove that creating a solid advertising model is high on their list of priorities. In fact, Facebook currently does not even support advertising on smartphones or tablets, one of the fastest growing segments for reaching consumers.
4. Did GM’s multi-agency approach to Facebook advertising play a factor in poor performance?
Facebook claims the lackluster ad performance could be due, in part, to GM’s multiple agency approach. While GM budgeted $10 million to Facebook ads, they spent $30 million on agency costs. Multiple agencies working within a single channel can lead to major inefficiencies and a disconnect in strategy. If we had more behind the scenes details on how GM’s Facebook strategy materialized, I’m relatively certain we’d discover some level of culpability here.
GM’s decision to cut ad expenditures doesn’t appear to be a knock specifically on their confidence in Facebook. The auto giant plans to continue focusing on its free Facebook presence and continue engaging consumers. Perhaps Facebook should be charging for site privileges for companies who do not pay any advertising costs. Maybe we will see new Facebook user categories in the future: free or paid.