GM Had 1,999 Reasons to Crash Facebook's IPO Party
General Motors (GM) really knows how to time an exit.
The automaker has announced that it will no longer advertise on Facebook, just days before the social networking giant is set to go public.
GM doesn't have a beef with the content on Facebook. It's just not satisfied with the effectiveness of the paid ads that it's been placing on the wildly popular website.
Maybe that's not a surprise: When's the last time you clicked on a Facebook ad?
Search marketing manager WordStream compared the click-through rates at Facebook to Google (GOOG). It discovered that just 0.051% of Facebook ads -- or 1 in every 2,000 impressions -- received clicks for advertisers.
By nature, folks don't like clicking on ads. Even on Google.com, where visitors are there expressly to be taken somewhere else, users prefer the organic search results over the sponsored entries. WordStream found that Google ads generate a click-through rate of 0.4%, or 1 in every 250 impressions.
Is Facebook too good at what it does? Are its more than 900 million active users so addicted to the platform that they don't want to click on an ad that will take them away from what they're doing?
Taking a Free Ride
GM isn't giving up on Facebook as a promotional platform. It will continue to milk the social-viral nature of the website, reaching out to visitors of its official fan pages and those who have GM and its cars in their Facebook news feeds.
It makes sense. Why buy the cow when you can milk it virtually for free? However, Facebook isn't going to look too kindly at this practice if more large corporate customers follow suit.
Facebook will never make individuals pay to use its site, but we may eventually reach a point where the social networking behemoth installs a pay-to-play requirement for corporate accounts. Why should a company be able to set up a fan page, reach an audience whose members choose to follow it, and not pay Facebook for the leads and the perpetual contact?
There's a better solution, of course. Facebook can just improve the monetization of its page views. Improving its ad-targeting technology to make sure that sponsored messages are reaching more receptive audiences is one place to start.
Facebook will also benefit as local advertisers grow to the point where they can muscle out national marketers. Users are more likely to click ads by area venues and service providers that will be more relevant and realistic.
Obviously Facebook is just starting to cash in on its gargantuan traffic. GM may be peeling out in a very public manner -- at a lousy time for Facebook -- but it's the social networking giant that's probably having the last laugh.
After all, in just eight years Facebook has achieved a market valuation that is three times greater than what GM has amassed in more than 100 years.
Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of General Motors and Google.