Facebook’s initial public offering might need a little body work.
General Motors, the nation’s third-largest advertiser, said yesterday it is ending its paid advertising on the social network — claiming the ads weren’t working.
While the $10 million GM spend will not crater Facebook’s $3.7 billion in revenue, the news could puncture enthusiasm for the IPO scheduled for Friday.
“This news could not come at a worse time for Facebook,” said Steve Goldner, senior director of social media at agency MediaWhiz, which has worked for HSBC and Nielsen.
Goldner, though, defended Facebook, saying “GM does not know how to integrate social media into a winning business strategy. The issue is not Facebook ads.”
That said, even Facebook admits in its IPO documents that “advertisers may view some of our products, such as sponsored stories and ads with social context, as experimental and unproven.”
GM told the Wall Street Journal yesterday that its paid advertising hadn’t worked.
“In terms of Facebook specifically, we are reassessing our advertising, but we remain committed to an aggressive content strategy,” GM said in a statement.
The carmaker added: “[Facebook] continues to be a very effective tool for engaging with our customers.”
Ken Sena of Evercore Partners said that Facebook is still teaching brands the value of its platform, and the social network is still mixing up its ad formula.
The GM news comes on the heels of Facebook’s move to increase the high end of the range it may price shares at, from $35 to $38.
That would value the company at more than $100 billion.
In addition, Bloomberg reported last night that Facebook is boosting the number of shares for sale in its IPO by 25 percent to 421 million, letting it raise as much as $16 billion.
While GM dropped its $10 million in paid ads from Facebook, it continues to expand how it uses the social media network for free.
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