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GENERAL MOTORS’ DECISION to cancel the entirety of its $10 million Facebook ad budget is, arguably, the second blow to hit the company in this regard.
Back in January Procter and Gamble CEO Bob McDonald told Wall Street he was scaling back his company’s $10 billion annual ad budget (mostly in traditional media) to take advantage of free impressions offered by Facebook in the form of Likes and status updates.
That’s two out of America’s top three biggest advertisers.
The two decisions were made for different reasons – GM wasn’t convinced Facebook ads are effective; P&G is simply looking for free media efficiencies – but they’re linked.
It appears to be dawning on clients who control the major ad budgets in the US that if your marketing content is interesting enough you don’t need to advertise on Facebook. Advertising on Facebook is free, if you can create something compelling enough to go viral without a major media spend behind it.
This is Facebook’s worst nightmare: If P&G and GM both question why they should pay to be on Facebook, how long before Facebook’s other big advertisersm – American Express, AT&T, Disney, Verizon—suddenly ask: “Hey, where’s the return on investment?”.
Here’s how that scenario could play out, assuming Facebook fumbles the ball (which it probably won’t):
In this scenario, with GM, P&G, Kia and WPP gone, it’s not hard to imagine a full-scale turn away from Facebook by advertisers, as they head toward more effective, more measurable media.
Will this happen? Almost certainly not. Facebook ad sales chief Carolyn Everson has proven herself a master of client relations, especially with the new(ish) Facebook Studio, which shows advertisers what they should be doing on the site.
And even if it did happen, Facebook could start charging brands subscription rates for their Brand Pages, a service they currently get for free.
But there’s no natural law of social media that says Facebook must always stay in business, just because it’s Facebook.
GM just proved that.
- Jim Edwards
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Well that must be the world record for the fastest bubble to burst.
Facebook is an interactive media, especially with family and friends.
I can’t image why i would interact with any of the mentioned companies.
I feel myself Ads online on any website just don’t work. They’re to small and if they were any bigger i don’t think i would use the website. If Facebook wants to make money for their share holders and the only way of doing that is by increasing Ads and the Ads space on our pages, i can’t see a bright future for Facebook i’m afraid.
Google’s revenues would suggest you are mistaken :-)
Can you tell me does every company have to pay google when its details come up in a search result. Let’s just say I want to book a ticket with Irish rail. Do Irish rail have to pay a fee when I click on the website in the google search results?
I agree with the commenter above. I take little to no notice of small ads that come up along the sides. Obviously what comes up in the search results gets attention.
I see some companies have sponsored links at the top of searches but sometimes I find myself avoiding them as it’s clear they are sponsored and are going to be pushed to the top of the queue.
Companies pay to have their links appear in the sponsored section at the top of the Google search results. The main results are generated “organically” by Google’s algorithm.
But places in the sponsored section don’t just go to the higher bidder, Google uses another algorithm that takes click through rate, and (I think) quality of your site into account to determine the exposure your ad gets.
Google’s sponsored results are nothing to be afraid of, I actually find them useful and relevant a lot of the time. And no, I don’t work for Google!
Procter & Gamble 10 billion annual AD budget. Are we not talking 10 million?
Hi Sean, from the link attached P&G were spending in the region on $10Bn (9-10% of sales) on advertising before they figured out that the main features of Facebook could be exploited for free.
Nope, scary isn’t it?
P+G probably spend more than 10m annually in Britain !!
Facebook went IPO so those who already invested could cash out at the expense of the dogs on the street.
More transfer of wealth up the chain.
Got it on one.
I can’t believe people still fall for the old routine: “you too can be an investor, and let your money work for you, just like those fat cats on Wall Street”.
Everyone wants to be a carpetbagger, but if you’re not in the game, then it’s already too late by the time you get your chance to invest – you’re one of the herd. I once spent an hour and a half, talking a man I worked with out of getting a credit union loan to buy eircom shares. The public needs to learn that they are the greater fool, and the rules of investment do not change for new paradigms with unproven revenue stream.
Sure, some people will make some money on the upticks, but those are the institutional investors who know when to get out, or at least when to cut their losses.
What ads? I thought everyone used Adblock by now….
People need to follow the logic of that approach. If everyone blocks all the ads on the sites you visit and that site generates its income from ads then it will close. There is a sort of myth out there that the Internet is a magical place where bills don’t need to be paid and designers, developers and writers don’t need to be paid. No ads on Google means no Google. Same goes for The Journal and all the others…..
No ads on google means no google? awwww, poor google. Adblock
But aren’t some Adblocks developed by Google Chrome?
Can you spread bet on Facebook going to the wall? Might be a better way to make a quid or ten….
Its called short selling, you get a lend of the stock from a broker who will charge interest on the loan, you then immediately sell the stock and then buy it back at a cheaper price and pocket the difference between the selling price and the repurchase price before giving back to the lender, basically the more the price falls the more you make but if the stock falls by less than the interest rate or even rises you lose.
The people who push Facebook as
commercially necessary to be featured
on, remind me of the pre-millennium days when the techie fascists said
you must be Y2K compliant or else!
Another complete con job and money
making exercise for the few!
Try duckduckgo.com for searching the way Google used to be.
I’d suggest that it’s a complete fallacy to say that anything commercial, no matter how compelling it is, can “go viral” without a major media spend behind it, or without a major production spend in the first place. If you review any major ‘commercially successful’ (whatever that may be defined as) piece of online content that has gone viral and seen huge shares etc., you will see them all kicked off by an advertising burst. While I don’t disagree that there is a place for socially orientated content in every marketing plan, as there very definitely is, it is ludicrous to suggest that it can completely replace advertising.
To predetermine the channel to use (i.e. picking social content over advertising placements) before a creative idea is even conceived is naive and shortsighted. The scope and reach of social at the correct point of the purchase cycle will never always be right. There’s a reason that ‘integrated marketing’ exists – a good channel mix is required to effectively target your customers with the correct messaging at the correct point in the purchase cycle.
While I agree with Sorrell regarding the concern that Facebook Advertising interrupts personal conversations with impersonal branding – this is simply a case of questioning what messaging you are pushing through Facebook. No doubt the message needs to sync with the frame of mind of those seeing it but this can be done through creative execution and targeting.
I think the question is not whether Facebook Advertising as a whole is good or bad, but rather are advertisers effectively using the channel and do they understand how to effectively communicate with their customers within a social context.
OMG, best use of Facebook for advertising ever… we’re not using them… BOOM lots of free air time. Don would be very happy with this move.
I guess Facebook could still change around its advertising to make more cash. For example when you scroll down through your wall/new posts, they could post ads between people’s posts. Companies who regularly debut ads on TV could switch to Facebook and others, especially when you consider many people spend more time online than watching TV. We all see how popular youtube videos take off. A popular coke ad could go viral on Facebook very quickly. Also companies could run competitions through Facebook. This would entice people to click on the link and spend even more time than a TV ad engaged with the product.
I guess one of the big things for Facebook is whether they can hold onto their subscribers or at least make it difficult for them to move to some new concept.
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