The bullish case for Facebook, whose offering could raise almost $16 billion, rests on the belief that the company can hit a mother-lode of ad dollars by finding new advertising formats in the same way that, say, Google has minted money from text ads placed alongside search results. But some companies are clearly not convinced by the social network’s efforts so far. On May 15th a report in the Wall Street Journal revealed that General Motors (GM), one of the biggest advertisers in America, had decided to stop advertising with the service because the advertisements the car maker had run were having insufficient impact on consumers.
Interestingly, GM intends to keep promoting itself via its own pages on Facebook, which it does not pay for. Some advertising-industry insiders say this is a common trend. Firms buy some ads on the social network to promote their presence there, but once they have convinced enough people to become “fans” of their pages through such activity, they shut off the ad spigot and concentrate their efforts on creating content for their existing fan-base.
The GM news, which could not have come at a worse time for Facebook, follows on the heels of a study which shows that click-through rates on Facebook's display ads are still way below those run on Google. Worse, according to a new poll commissioned by AP and CNBC, more than half (57 percent) of Facebook users surveyed said they never click on ads or other sponsored content when they use the site.
I just don't believe in Facebook's business model. No way I'd put money into it.