After one of the most thoroughly discussed, highly analyzed IPO processes in recent memory, Facebook stock will hit Nasdaq this Friday for public trading. In a week that would seemingly be filled with optimistic anticipation and high hopes for the future of the social media behemoth, a story broke yesterday that changed the tone of the Facebook discussion.
Three days before Facebook officially goes public, the third largest advertiser in the U.S., General Motors (GM) announced that they would be dropping all Facebook ads due to low consumer impact. GM will continue to utilize free Facebook Pages for brands and models but will pull its roughly $10 million on paid Facebook ads. True, $10 million is a small portion of Facebook’s total ad revenue, which in the U.S. alone was $2.2 billion in 2011. However, the true damage to Facebook is in the message General Motors’ announcement sends to the rest of the country – that Facebook advertising does not work.
What makes this story so interesting is the not-so-passive aggressive timing of the announcement by GM. As their stock debuts on Friday, the question of how much they’re actually worth is top of mind this week. Placing significant doubt on the effectiveness of paid Facebook ads, which currently account for over 80% of their overall revenue, in the minds of those making these valuations is the last possible thing Facebook needs this week.
Could this decision by GM have waited until next week and would it have gained such attention? What does GM have to gain by attacking Facebook’s primary revenue generator just before they go public and jeopardizing their valuation? And if you want to take this down the conspiracy theory road, does the fact that the U.S. government still owns a controlling stake in GM only make this more interesting?
I am by no means a conspiracy theorist, I just find the timeline (pun sort of intended) interesting and thought provoking. Talk amongst yourselves, or with us on Twitter and Facebook, and stay tuned for my next piece about Siri becoming self-aware and the Obama Administration spying on you through your iPad.