GM Justified Pulling Facebook Advertising

According to Dave Williams at Ad Age Digital, companies like GM need to relearn their digital advertising strategies. After all, it’s not about selling cars it’s about building a brand that might lead to future sales…

Henry Ford is often credited with saying that if he had asked consumers what they wanted, they would have asked for a faster horse. Whether he actually said that or not, it’s a great reminder that successful businesses look to the future. It’s ironic that GM, one of Ford Motor Company’s biggest competitors, demonstrated its eye on the past by pulling approximately $10 million worth of Facebook ad spend. The timing of this move is suspect, given its proximity to Facebook’s IPO and GM’s history of working over its publishers.

This move has brought GM more attention than it’s had in a while, but rather than raising doubts as to the value of Facebook, the move really brings into focus GM’s inability to amplify brand and consumer advocacy of its products on the world’s largest social networking platform.

With this move, one of the world’s largest advertisers is trying to say that Facebook advertising doesn’t work. The truth is that Facebook isn’t broken; GM is. And the automaker’s movement of ad dollars to other media channels offers a short-term solution to a long-term business problem.

Putting its $10 million into more traditional online advertising channels such as search and display ads will probably pay short-term dividends for GM, which will only obscure the automaker’s failure to recognize the best way to utilize Facebook. Rather than focus on selling cars on Facebook, the brand should have looked at how to connect with its best advocates to influence purchase behavior across the social graph. Facebook’s true value lies in the power to build loyal fans and then message them as well as their friends to build consumer relationships, with the ultimate goal of rebuilding the brand as well as selling cars. GM’s strategy clearly missed that step.

GM will reportedly continue to invest nearly $30 million to maintain a Facebook presence and develop applications, which may turn some of the brand’s 3.9 million fans into brand advocates. That’s an expensive investment, though, for such a small and disengaged fan base. GM’s chief competitor, Ford, has 10.2 million fans. If Ford consistently messages and engages with these fans and their friends through paid advertising that demonstrates the benefit of a Ford, it will continue to build brand advocates, of a kind that no amount of GM advertising can sway. When it comes time for a new car, rather than research new brands, those brand loyalists will go straight to their Ford dealership; GM won’t even be in their consideration set.

If GM were to take a more progressive approach, it would move social to the very beginning of its sales and product planning strategy, investing in using the platform for consumer research, using paid ads to engage and acquire more fans, and then engaging with those fans and their friends to turn them into genuine advocates. While the automaker complained of its inability to attribute success, we’ve seen consistent data showing that Facebook is best at using online behavior to drive offline behavior, and that Facebook fans influence others and minimize comparison price shoppers, as seen commonly through search and other comparison shopping sites. According to Forrester Research’s “The Facebook Factor” report, fans are also very likely to recommend a brand to friends. By leveraging Facebook advertising, brands can actually connect with fans over time to build loyalty and long-term sales — not only with the single buyer, but also with families of consumers and their friends.

GM’s consumer loyalty problems certainly didn’t begin with Facebook. GM ranked 12th out of 13 automotive brands in Consumer Reports’ latest automotive scorecard, and recalled 50,000 vehicles as recently as April. If the brand was losing ground to competitors on social, it was probably wise to look for a new battleground. It may be smart to abandon Facebook altogether for now, and reinvest its money in making a car that actually appeals to consumers.

Rather than ask what Facebook has done to help GM, GM should have looked at what it was doing to engage its fans. Diverting money into other online channels may sell cars in the short term, but will fail in the longer term, as consumers spend more and more of their time on social platforms like Facebook. Don’t forget that brands used to raise their eyebrows at the idea of search advertising, too. Brands that are investing heavily in Facebook now — such as Starbucks, Coke, Kraft, Zynga and Groupon — will reap long-term rewards.

Facebook’s value comes from its ability to help brands build long-term loyalty, and $10 million is a tiny fraction of GM’s $3 billion annual ad budget. If GM isn’t investing in building brand loyalists, then the automaker and its dealers will miss the value of Facebook, and will ultimately lose resonance with consumers.

Mr. Williams fails to distinguish expectations from results.

The goal is to sell cars via the most cost-effective methods available. Anyone supporting their family from commission sales knows that results equals a paycheck. Dealers must move the merch and don’t have time nor the resources to waste on endless online blather.

That’s not to say Facebook isn’t loaded with eager car consumers. On the contrary, with 900M users and counting, a healthy percentage are already scouring Edmunds for new car buyer guides, eBay Motors for parts and accessories, and AutoTrader for used minivans while posting graduation photos and sharing recipes on whatever slippery social media site of choice. And that’s the conundrum. Facebook is a place to chat and share the daily grind, reminisce, show off, get connected. Amazon and eBay is where you shop. Yahoo is, hmmm, haven’t a clue. Purchasing + Facebook = alien experience.

Facebook’s highly documented revenue challenges are just coming to light, and today’s tech start up trends only exacerbate the flawed strategy of building user bases without pre qualification with an eye on the revenue ball. Newbies like Pinterest and Instagram seek rapid user growth believing revenue will follow. Big mistake. Yet I concede that’s what Wall Street and Silicone Valley VC’s want, but for every FB there’s several thousand that are not IPO material. Yet bountiful returns exist for the “smaller” player exiting via acquisition showing real profits serving real and sustainable customers. A large user base is not the glitter of gold one might expect. Members weened on free stuff and sites void of advertising are a costly proposition to convert to real consumers

Lesson learned from direct response marketing… the only readers worth a damn are ones that support advertisers and generate healthy conversion and renewal rates. Everyone else is a drag on operations. I ascribe new tech’s obsession with mega user growth to consumer mags leveraging the false sense of security from newsstand and cheapo sub offers.

Show me the yield!

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