Havas Media Social Analysis about the announcement of General Motors to stop advertising on Facebook.

General Motors just made a dramatic update to its status on Facebook.

Just days before Facebook’s expected initial public offering, spokesman Tom Henderson said GM is “reassessing” the value of buying ads on the social network site. He wouldn’t provide details, saying “We regularly review our overall media spend and make adjustments as needed.”

Here is the Havas Media Social Analysis about the announcement of General Motors to stop advertising on Facebook.

Context:
Firstly, the article suggests that GM is just planning to stop its investment in paid ads on Facebook – at this stage, the decision has not been finalised yet.
Secondly, GM are re-evaluating only 25% of their total Facebook investment (or 10$M), the rest – $30M – is spent on creating and maintaining content on free brand profile pages.

Havas Media response:
Our collective opinion is that GM’s advertising will struggle without the paid ads, because managing visibility on Facebook without paid ads will require a lot of work. The work is essentially Facebook SEO: content creation and management to ensure relevance, visibility and freshness. We know SEO cannot replace SEM in Search, because they must work well together. The same is true within the Facebook ecosystem.

Facebook statistics show that any piece of content (post) will only appear in 16% of your fans’ news feeds. This is because there is so much new content being published and depending on a fan’s recency and frequency of logging in, he/ she may or may not see certain pieces of content. Paid (either Reach Generator or Standard / Premium Ads) gets extra mileage and provides added visibility, by continually resurfacing content reaching more than 16% of your fans’ screens.

The frequency of ‘natural appearance’ of content depends on the Edgerank paramater; the higher a Brand’s Edgerank is, the more eyes the Brand’s content naturally reaches on Facebook. So unless GM is particularly advanced with their Edgerank optimisation (Facebook SEO) – which is highly unlikely – GM will need the help of paid Facebook ads to get into their fans’ feeds.

In addition, this is a slightly misleading article as it mentions that in GMs opinion Facebook paid ads have little impact on Car Sales.
Sales numbers should not be a KPI for a social media channel – especially with high price-point items like cars. For the FMCG industry this could work; for example (according to Facebook) Ben and Jerry’s ice cream are getting back $3 for every $1 spent on Facebook. But that is because their fans wouldn’t think much before clicking on a coupon for 50% off on an ice cream.

For the Automotive Industry – Social Media plays a completely different role. Commerce within social media is not a common behaviour amongst social audiences – to buy straight from these sorts of communities would be unusual with cars. It does – however – have a significant impact on brand value and awareness with its audience. The large spend that GM have already placed on social media to grow their communities gives them a base to work from to communicate with their audience for free – something we would recommend to any client.
For example, the Chevy Sonic Facebook Page has 424,000 Likes already. It may be that they have reached critical mass with this community and are focusing less on fan acquisition and more on engagement ; or maybe they are flagging this community through other integrated activities/channels.
But then again, it is difficult to say where the threshold of a critical mass is. If you take a look at some of the stats on the public Like info here (Chevy Sonic) – there has been a serious dip in both talkability and acquisition – probably due to reduction in paid ads: https://www.facebook.com/chevysonic/likes

And a final point, there has been a great, exaggerated hype just before the Facebook IPO (announced for 18 May) that many of these articles might be intended to simply use the opportunity for extra PR. In Brazil, among other markets, there have been hourly news on Facebook IPO price ranges, fluctuations and Warren Buffett’s forecasts.

To sum things up: the alleged GM move away from paid advertising on Facebook, should not alarm us and should not influence the social media strategy that we are currently following.

GM Says Facebook Ads Don’t Pay Off – WSJ.com

GM Says Facebook Ads Don’t Pay Off – WSJ.com.

A quelques heures de l’IPO ….

General Motors plans to stop advertising on Facebook after the company’s marketing executives determined their paid ads had little impact on consumers. Sharon Terlep has details on The News Hub. Photo: Getty Images.

General Motors Co. GM -0.97% plans to stop advertising with Facebook Inc. after deciding that paid ads on the site have little impact on consumers’ car purchases, according to a GM official.

The move by GM, one of the largest advertisers in the U.S., puts a spotlight on an issue that many marketers have been raising: whether ads on Facebook help them sell more products. On Friday, Facebook is expected to sell shares in an initial public offering that could put a market value on the company of as much as $104 billion.

Executives have spent the last two weeks trying to convince investors that its advertising business makes it worthy of a sky-high valuation.

GM’s decision raises questions about the ability of Facebook to sustain the 88% revenue growth achieved in 2011. Facebook said last month its first-quarter ad revenue was down 7.5% from the previous three months. Facebook blamed “seasonal trends” for the decline, as well as a greater number of users from outside the U.S., where ad rates are lower.

GM will continue to promote its products on Facebook, but without paying the social-media company, the GM official and other people familiar with the matter said. Many companies maintain free Facebook pages.

GM spent only about $10 million last year to advertise on Facebook, according to people familiar with the matter. That is a fraction of GM’s total 2011 U.S. ad spending of $1.8 billion, according to Kantar Media. It is also a tiny share of Facebook’s total 2011 revenue of $3.7 billion, most of which was advertising sales.

GM is the third-biggest advertiser across all media in the U.S. after Procter & GambleCo. PNG 0.00% and AT&TT -0.54% according to Kantar.

The auto maker’s marketing chief, Joel Ewanick, said the company “is definitely reassessing our advertising on Facebook, although the content is effective and important.” Mr. Ewanick has spent the last year restructuring the Detroit company’s marketing operations in an effort to cut billions of dollars in costs.

pages, people familiar with the figures said.

GM started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads, the people said.

Mr. Ewanick and other GM marketing executives met with Facebook managers earlier this year to discuss their concerns. But the auto executives left unconvinced that advertising on the website made sense, according to people familiar with GM’s thinking.

At the meeting, Facebook criticized GM’s approach of having multiple firms managing its advertising for the site, according to another person familiar with the matter. GM has been revamping its marketing, hiring a new ad firm to buy its media.

Many ad executives believe Facebook’s global audience of 900 million registered users makes the site too big to ignore.

Earlier this month, a top marketing executive from the U.S. division of Kia Motors Corp. questioned the value of Facebook ads, saying it was unclear how paid ads help sell cars. However, the South Korean auto maker said it still planned on increasing its ad spending on Facebook this year.

“Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget—a shocking fact given the site’s dominance among users,” said Nate Elliott, an analyst at market research firm Forrester, in a company blog post on Monday.

Other auto makers are more confident about Facebook’s value as an ad outlet. “We have committed to Facebook for more than $5 million [in ad spending] this year and if the return on investment is there we will spend more next year,” said Dean Evans, chief marketing officer of Subaru of America. “Half the U.S. population is on Facebook, you have to work it to learn it,” he added. Mr. Evans said he has been happy with the return his ads have had so far.

Keeping auto manufacturers engaged is critical for Facebook. The auto industry is the largest pool of U.S. advertising dollars and often can make or break a marketplace. Automotive companies and car dealers shelled out $13.89 billion on U.S. ads across all media last year, according to Kantar.

Rex Briggs, CEO of marketing analytics firm Marketing Evolution Inc., said auto makers like GM are used to marketing campaigns that feature splashy TV ads or give big discounts on cars to bring people into stores. Mr. Briggs, who has worked for GM in the past and now works with other auto makers including Honda Motor Co. HMC -2.26% on determining their return on social media campaigns, said auto makers can’t afford to ignore tools that can help improve people’s feelings toward a brand.

“As long as Facebook is the bedrock of consumer engagement, advertisers can’t ignore it,” said Craig Atkinson, chief digital officer of PHD, a media buying firm owned byOmnicom Group Inc. OMC 0.00% He noted, however, that Facebook has to prove “they can convert that fan engagement into a business outcome for marketers… It’s about giving the finance people, who are cutting the checks, proof that its ad products work.”

Marketers have been enamored with the size of Facebook’s audience. Many have spent millions of dollars on hiring digital ad firms and creating content for their Facebook pages in order to stimulate buzz, which advertisers liken to word-of-mouth marketing campaigns.

[GMFBOOK]

Still, a lot of the activity in the early days didn’t involve paying Facebook for ads. Now, however, many advertisers also pay Facebook, which has introduced several ad products in an effort to generate revenue.

One service, called “sponsored stories,” lets advertisers pay to republish positive Facebook messages that people had posted about their brand.

Facebook has long argued to marketers that unpaid content—like brand pages and building a base of online fans who like a brand—is successful when coupled with paid advertisements like display ads and its “sponsored stories.” Without the additional paid ads, Facebook executives have said, it’s hard for users to learn about the unpaid content.

Facebook said in March, for example, that only 16% of a brand’s fans will see a post about the brand without paying. If the brand pays Facebook a fee per ad, Facebook will use technology to ensure that the ad is seen by 75% of those who click a company’s “like” button on its website.

Rick Summer, an analyst at equity researcher Morningstar Inc., said that GM’s decision only proves that advertising on Facebook is still in its early stages, which should be a lesson to investors hoping to get in on the company’s IPO.

Mr. Summer, who has rated Facebook at a “hold” at $32 a share with a $96 billion valuation, said that it will take Facebook a very long time to build up its advertising business in a way that can justify its lofty valuation. Facebook Monday set a price range for its IPO of $34-$38 per share.

Write to Sharon Terlep at sharon.terlep@wsj.com, Suzanne Vranica atsuzanne.vranica@wsj.com and Shayndi Raice at shayndi.raice@wsj.com