General Motors’ recent move to stop advertising on Facebook has come as a surprise to many in the digital industry, globally. Interestingly, General Motors that reportedly spends close to $40 million on Facebook has said that advertising on this site has little impact on consumers. The development comes a few days before Facebook goes public with its much-awaited IPO.
P Balendran, Vice President, General Motors India told exchange4media, “We regularly review our overall media spend and make adjustments as needed. This happens as a regular course of business and it's not unusual for us to move our spending around various media outlets – especially with the growth of multiple social and digital media outlets.”
This could come as a significant setback to the social media giant that competes very closely with digital companies such as Google and Yahoo! in the display advertising business, and is a leader in many markets. The move has offered food for thought to many digital advertisers and digital and social media marketing agencies.
CEO of a leading digital marketing agency, on conditions of anonymity, said, “A reason of such a step is the poor metrics of online measurement. We are yet to evolve methods to understand digital and social media consumptions. Methodologies will evolve gradually, but in short-term there could be confusion about the effectiveness of such medium.”
On a similar line, marketing head of a leading Indian insurance company suggests that serious messages cannot be communicated on social networking websites and hence, it does not help in brand building exercise despite ‘likes’ and discussions about the brand. The careful positioning of General Motors on Facebook also reflects a similar sentiment. Despite presumptions about the timing of General Motors’ withdrawal of ads and its possible connections with the Friday IPO opening, the auto giant has clarified that it will continue to be present on Facebook, but without spending the staggering amount it used to.
“In terms of Facebook specifically, we are reassessing our advertising, but we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers,” adds Balendran. The company said it will still have Facebook pages, which cost nothing to create and for which it pays no fees, to market its vehicles and added that it is not unusual for it to move spending around various media outlets.
The India impact
India is the third largest market for Facebook in terms of number of users, but comparatively a small market in terms of revenue from advertising. Display advertising business for Facebook is growing at a promising rate in India. However, as automobile sector continues to remain the largest advertiser on digital and social media platforms in India since 2009, this development has created buzz in the Indian market too.
GM is the third largest advertiser in the USA and one of the largest advertisers in the world. A relatively new entrant in the Indian market, the company has a very aggressive digital plan in India which, it believes, has over 120 million internet users. However, the brand is relatively inactive on Facebook and there seems insignificant impact of the US decision on India.
Other automobile companies that spend heavily on digital and social media advertising and contribute heavily to the medium’s revenue in India are Volkswagen Passenger Cars, Mahindra & Mahindra, Maruti Suzuki and Ford India.
For the record, GM ranks only behind Procter & Gamble and AT&T in advertising spending. GM reportedly spent close to $1.1 billion on US ads last year. It spent about $271 million on online display and search ads excluding Facebook advertising. The company spends about $40 million on its Facebook presence, but only about $10 million of that is paid to Facebook for advertising, according to the Wall Street Journal.