Just days before Facebook is going public, General Motors Co has confirmed it will stop advertising on the popular social networking site. Facebook's IPO will value the company at as much as $100 billion, rivalling the market value of heavyweight Amazon Inc.
Reuters cited a source close to GM in reporting that the automaker will pull ads from Facebook due to low consumer impact. It will still maintain a presence on Facebook, however.
The Wall Street Journal reported that GM was spending about $40 million per year on Facebook, though only $10 million of that budget went on Facebook ads. The rest went to content creation for the company's Facebook pages, as well as to the numerous advertising agencies involved.
"This does highlight what we are arguing is the riskiness of the overall Facebook business model," said Brian Wieser, Internet and media analyst at Pivotal Research Group.
"It is not a sure thing. It sure looks likely that it will be one of the most important ad-supported media properties, but it's not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle."
Questions about Facebook's long-term ability to generate revenue have been popping up in recent weeks, but have not dented investor interest in Facebook's IPO. It will begin trading on the NASDAQ on Friday.
Written by: James Delahunty @ 15 May 2012 20:35