General Motors has decided to defriend Facebook. The world’s biggest automaker decided to pull its ad campaigns from Facebook because their ads had little effect on consumers. The Wall Street Journal is reporting on the subject and quoting “people familiar with the matter”.
The advertising suspension comes just days before a Facebook IPO. The company is expected to go public this Friday with shares valued around $38 dollars each. This will make the company valuation around $100 billion dollars.
GM spokesman Pat Morrissey said that they are reassessing their Facebook ad campaigns but it is not because of any specific issue but an internal review they do on all their ad campaigns to determine which resonate best with their consumers.
“We look at this with all media outlets, we look at the effectiveness. We move money around to various outlets.”
GM’s announcement adds credibility to those who say that Facebook and other tech giants are overvalued. More than 50 percent of Facebook users say they never click on Facebook’s sponsored ads, according to a recent Associated Press-CNBC poll. Also, only 12% of users say they would feel comfortable buying something over Facebook leading critics to question how the site can be monetized.
Facebook is way behind Google on ad penetration. Google ads have seven times the clickthrough rate of Facebook’s.
Facebook has struggled with a plan on how to turn their 900 million users into a steady long term cash cow. Many tech stocks blast into the market without proper plans on how to turn their platforms into revenue.