GM May Be Driving Back to Facebook
The Wall Street Journal reports that the two sides are talking again. The chatter has even escalated to having Facebook COO Sheryl Sandberg and GM CEO Daniel Akerson discuss the conditions for the leading automaker's return as a paying advertiser on the leading social-networking site.
GM and Facebook weren't necessarily big marketing partners before parting ways two months ago. GM reportedly spent just $10 million on Facebook advertising last year, a tiny sliver of both its own $1.8 billion marketing budget last year and Facebook's $3.7 billion in revenue.
However, it was the way that GM broke ties with Facebook -- publicly, just days ahead of the dot-com giant's IPO -- that makes this a matter worth watching.
At the very heart of GM's reason to bolt is its concern about the effectiveness of paying to advertise on Facebook. It wants better tools to gauge campaign effectiveness. Facebook got a welcome assist shortly after GM's public breakup. Ford (NYS: F) announced that its sponsored campaigns have been effective enough to continue advertising on Facebook.
Online advertising works. There's a reason Google's (NAS: GOOG) AdWords platform has become the golden standard of paid search. Companies bid on keywords, pay for the clicks that they receive, and have immediate feedback on their conversion rates. They know their return on Google in most cases. It's harder to measure the effectiveness of the display-advertising campaigns that are popular on Facebook. Then again, the same thing can be said about gauging the success of traditional print, radio, and television commercials.
Everyone seems to remember how GM dissed Facebook just as it was going public. Few seem to recall that GM also announced that it won't be buying ads in the next Super Bowl, the country's most-watched televised event of the year.
Does Facebook need GM? No. However, there's a lot to gain if the American car giant returns. It would be a sign to advertisers big and small that Facebook is effective -- and, by proxy, even more cost-effective than shelling out millions for a Super Bowl spot.
Facebook can't lose here. It doesn't have GM now, and if it does come back, it will be an encouraging sign for the platform's viability to attract greater marketing dollars in the future.
At the time this article was published The Motley Fool owns shares of Ford, Facebook, and Google.Motley Fool newsletter serviceshave recommended buying shares of Ford, Google, and General Motors and creating a synthetic long position in Ford. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns shares of Ford and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.