GM Unfriends Facebook

GENERAL MOTORS HAS pulled the plug on Facebook advertising, with marketing execs attributing the move to the fact that GM’s Facebook adverts appeared to have little to no effect on customers. That this is happening only days away from Facebook’s IPO (Initial Public Offering) is ominous and could potentially impact on the value of Facebook shares (which are expected to be valued at around US$38 each, translating into a net worth for Facebook of up to US$100 billion).

GM has played down dumping Facebook advertising, citing their exit from the social media platform as part of ongoing and regular analysis to determine where advertising dollars are spent and how effectively that advertising is working. The announcement fuels already heated debate, with many saying that Facebook, amongst other popular tech sites, may be grossly overvalued. Speculation that the online advertising bubble could be deflating is also spreading.

This is further backed up by a recent survey of Facebook marketing conducted by Associated Press and CNBC, which showed that over 50 per cent of Facebook users say they never click on sponsored ads, and that only 12 per cent say they are comfortable making purchases over Facebook. Critics argue that this calls Facebook’s ability to generate money into question.

Generating a workable and sustainable revenue from its 900 million users represents a sizeable challenge for Facebook. That said, the tech sector has a long history of tech sites managing massive IPOs, even if details on how they plan make money are somewhat sketchy. PAT PILCHER

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