by Dorota Umeno on May 21, 2012
The big buzz in the digital world last week was about Facebook’s much-anticipated IPO. Taking away some of the gloss was the news that car giant GM was no longer interested in Facebook ads. The author of the Wall Street Journal article (accessible only to paying subscribers) that released the story can’t resist extrapolating the news to questioning Facebook’s business model for its paid ad business and the IPO:
The move by GM, one of the largest advertisers in the U.S., puts a spotlight on an issue that many marketers have been raising: whether ads on Facebook help them sell more products. On Friday, Facebook is expected to sell shares in an initial public offering that could put a market value on the company of as much as $104 billion.
Other analysts and commentators followed suit, with blog chatter suggesting that perhaps an exodus of other companies is to be expected.
While I don’t doubt that much analysis and deep thinking went into prompting this decision, the skeptic in me has to question this sweeping and simplistic interpretation of why GM failed to see a positive ROI on its Facebook ads spend. For one, Facebook simply wouldn’t be here – nor would the many thriving digital agencies specializing in Facebook advertising – if the Facebook ads did not work for the majority of the advertisers.
But the biggest reason for my skepticism is that I’ve seen this same argument before, applied to other channels, be it digital or traditional. And in my experience the channel is rarely the problem. Typically at closer examination we learn that at issue was the strategy, the plan or the execution. We’ve seen this pattern repeat itself with the advent of pretty much every single new technology or the emergence of every new marketing channel. Anyone still remember the dot.com boom and bust of the late 1990s? Seems like ages ago, doesn’t it?
After multiple Internet-based businesses failed with a bang, some analysts hastily concluded that the Internet did not work as a money-making channel. Just a few short years later we all know the truth. We now know that Pets.com failed for reasons related to business strategy, not because the Internet was “broken”. (Fun fact: Pets.com now redirects to MyPetSmart.com, a pet goods business much more successful in their eCommerce endeavor.)
On a more modest level, we regularly face new clients, sometimes coming to us skittish and scarred from a prior bad experience with the digital channel telling us “paid search just doesn’t work for us” or “we tried display ads, that was a disaster” and we have a lot of work to do to get them comfortable with trying again, this time with a strategy that works.
And no, I don’t have the audacity to imply that I could make Facebook ads work for GM (although I’d love the opportunity to try), but I am sure that this is not the end of the story for GM and that channel.
I would love to hear from our readers about your experiences advertising on Facebook, if you have tried it. Did it work for you? Why or why not? Would you try it again, provided the strategy was sound?