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Guest Column: Decoding GM’s Facebook decision

Guest Column: Decoding GM’s Facebook decision

Author | Sanjay Mehta | Friday, May 18,2012 8:12 PM

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Guest Column: Decoding GM’s Facebook decision

So the big news on the street was that big daddy automobile major, General Motors had decided to pull out all of its advertising spend on Facebook. And for once, when I refer to the ‘street’, this advertising related news is of as much interest to Madison Street as it is to the Wall Street! This of course, is on account of Facebook’s upcoming IPO, one of the largest ever, and one which finally gives currency to a full-blown Google vs Facebook war for domination of marketing dollars and clout value.

So what does the GM pullout really mean?

Here are a few different perspectives around this decision of GM…

At the outset, there is the question of the timing of this announcement. That this should come just a few days prior to Facebook’s IPO cannot be a coincidence. Whatever is the motive and whoever may have been some grieved party, seems to have ensured a bit of a last minute speed breaker of sorts, on the path of a successful Facebook IPO.

That there are enough other advertisers still swearing by Facebook, and that GM’s spend is a tiny fraction of Facebook’s income, and that there is already a huge pent up demand for Facebook equity ensures there is no significant impact on the IPO. About the continuing attractiveness of the Facebook stock, post IPO, there will be many factors that will keep impacting this on an ongoing basis. So I would not make this isolated and specific incident to be too significant.

Having said that, we do need to review the reasons given by GM for finding Facebook unattractive for advertising. I believe that this is the status ‘as of now’. I will not be surprised if within less than a year, GM is back on Facebook spending potentially larger budgets.

One thing is clear – GM is only pulling out its advertising spending at this time on Facebook. It will continue to spend enough time and resources on community building and other engagements on Facebook. And in fact, GM has referred to numbers as large as $30 million that it spends on content creation, engagement, community building, etc. on Facebook. This is certainly how it should be. Facebook at its core is a social media platform with a huge opportunity for engaging your consumer through conversations and engagements. It is certainly not just one more content platform to put your ads on. So there should be no doubts at all that Facebook does attract huge consumer mindshare and time, and it would be foolhardy for a brand to ignore that aspect or ignore the platform.

Facebook vs. Google
Let’s examine the advertising challenge that GM apparently saw. And to get clarity, let’s look at advertising on Facebook vs advertising via Google, as the clear choice for GM or for other brands.

Before we proceed on the comparison, I may add the caveat that it is not really a matter of one or the other. An ideal marketing plan will include a prudent mix of the two, and other forms of digital media, as much as it would include traditional media, BTL activities, etc. Just how this mix should pan out depends on the objectives of the advertising.

The heart of Google advertising is keyword contextual. In a pure search scenario, what this means is that, if a person is searching for certain words, and you have chosen to advertise based on those specific keywords, then your advertisement appears on the search results page, and the searcher sees your ad.

As against this approach, the fundamental approach of Facebook advertising is profile contextual. Users of Facebook have a profile page, wherein over time, they have shared details of their interests, education, location, age, etc. So an advertiser on Facebook can reach a person on the basis of these profile based parameters.

These two key aspects spell the crucial difference depending on what point in a consumer’s journey is a brand trying to reach the consumer. So, say GM is launching a new hybrid and is interested to get this fact across to the target audience, irrespective of whether the audience is looking to purchase a new car or not, at that point. If a consumer is NOT looking for a new car, it is unlikely that he goes to Google and searches for ‘what’s new in hybrid cars’ or anything of that sort. On the other hand, that consumer may have mentioned on his Facebook profile, his interest for hybrid vehicles. Then, if GM had to reach all those consumers who have an interest in hybrids, they are certainly better off going the Facebook route at that time.

On the other hand, if GM had a special deal running on SUVs because they wanted to clear their inventory, it is more likely to be of interest to those buyers who at that point are actually looking to purchase an SUV. These buyers are then more likely to go to Google and search for ‘best deals on SUVs’ and if GM advertises on these keywords on Google, they are going to get better results than advertising at that point on Facebook.

So GM’s reaction to pull out ads – if based on generating quicker results or walk-ins to their showrooms – may be justified considering the above behaviour of ads and buyers. On the other hand, there is nothing to discount the fact that brands need to get into user’s consideration phase and shortlist first – which is what Facebook can deliver.

Looking at it from a different point of view, a consumer can have varied interests and declare those interests on his profile but may not necessarily search for content about the same on Google. Alternately, one may not actually declare overtly a particular interest but from lifestyle-based association, a brand may reckon the likely interest of a person. In such situations, the brand has a far better chance of connecting to its target audience via Facebook.

On the other hand, a profile of a person is ‘what he is’ in the long term. As against a search request by a person, is a ‘for the moment’ transactional interest. A brand can usually not go wrong by targeting the right audience (as defined by the target profile) because that is the audience they want to reach, irrespective of anything else. On the other hand, reaching someone around his or her transactional, for-the-moment interest, can spell either a quicker road to conversion or can be waste for the advertiser.

So clearly there are merits in both forms of advertising and I do not see panic of any sort for advertisers based on GM’s decision.

At this point, we have discussed a very simplistic view of Facebook advertising. If we look at it with a little more depth, there are few other aspects to consider which make the case for Facebook even more attractive.

Many use Facebook advertising to build their community on Facebook (get more people to “like” their page). Now, this is an asset creation investment. Once the community is in place, there are ways to keep communicating with them, at low or no additional cost. This is unlike ads, where you need to keep spending each time.

There are ad options that Facebook offers which are subtler. And which are also viral in a sense, e.g. sponsored stories. These generate better appeal because they have a testimonial aspect (from someone you know too) automatically built into the advertising.

And then there are ways to advertise on Facebook to reach your own community better. This is the community that has voluntarily agreed to receive your updates and has liked your page. Now with a little spend, Facebook will allow you to get your message to them, more regularly, more visibly, and the conversion can also be better then.

All in all, there continues to be huge merit in Facebook advertising and GM notwithstanding, almost all other global and Indian brands are increasing marketing budgets for Facebook.

I would not be surprised if by the end of this year GM is back with larger budgets on Facebook!
The author is Joint CEO, Social Wavelength

Reach him at Twitter: @sm63

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