America’s largest automaker General Motors Co. has pulled its $10 million Facebook advertising campaign due to poor results as the ads failed to attract customers.
"We are reassessing our advertising, but we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers," GM said in a statement to The Register.
Marketing industry analysts say internet marketing is still in its infancy for automakers. Industry leaders who have had great success advertising on television need to learn to adapt their strategies for advertising online, and the challenge lies in finding the right demographic for their online campaigns, which is doesn’t necessarily mean finding someone in the market for a vehicle.
GM has a Facebook fan page for nearly all of its products, and will maintain those free accounts.
Earlier this year, GM said it plans to review its marketing strategies in an effort to save $2 billion over the next five years.
Facebook Ads Fail
Facebook is primarily a social network based on sharing and word of mouth. While small business might benefit from a target ad campaign, large corporations are finding Facebook works best for brand awareness, not converting views into sales.
Still, 86% of Facebook’s revenue comes from advertising, and GM’s $10 million campaign contributed to the overall $3.7 billion Facebook made from advertising in 2011.
According to research conducted by internet marketing firm Wordstream, the effectiveness of Facebook ads does not compare to those in the Google Display Network, with Facebook’s click-through-rate registering 0.005% compared to 0.4% for Google.
Facebook ads are boring and do not grab customer attention, the firm says. Traditional banner ads contain video and flash, while Facebook’s ads do not. Though Facebook is good at finding the right demographic for ads, it fails to find those who are in the market for the advertised products.
Most companies that advertise on Facebook do so to get more likes for the fan pages as opposed to converting clicks into sales. Currently, many companies are using Facebook fan pages for advertising new products and services free of charge.
If more companies pull their ads, analysts say, Facebook may limit what companies can do for free.
Key Statistics – US Online Advertising Market (source: AM MindPower Solutions)
- The largest market for online advertising is the United States, followed by Europe.
- In the US, the internet accounts for approximately 20% of overall media consumption. This allows plenty of room for online advertising players to enter the American market.
- Currently, only around 7.5% of American advertisers’ budgets are invested in online advertising.