From WSJ:
General Motors Co. plans to stop advertising with Facebook Inc. after deciding that paid ads on the site have little impact on consumers' car purchases, according to a GM official.The move by GM, one of the largest advertisers in the U.S., puts a spotlight on an issue that many marketers have been raising: whether ads on Facebook help them sell more products. On Friday, Facebook is expected to sell shares in an initial public offering that could put a market value on the company of as much as $104 billion.
Executives have spent the last two weeks trying to convince investors that its advertising business makes it worthy of a sky-high valuation.
Full article here.
The Facebook IPO has been heavily debated but the article brings into question how effective Facebook ads actually are. How many times do you actually click an ad on Facebook? I know I rarely do. Of course, the big question all of this effects is whether or not Facebook is actually worth a $100BB valuation. Even taking the article into consideration, I say yes. Here's why:
While I have doubts about the effectiveness of its ads, Facebook still has a ton of potential. The fact is that Facebook has the single largest database of human preferences in the world. It has to figure out how to monetize this; and if it does, it will be huge. We're still trying to figure out how to effectively use Big Data - I see this a big focus of tech companies in the coming decade. But once this happens...
I used to be quite against Facebook in terms of its viability as a company but what I see is that is has HUGE potential to utilize what it has to make money but just has to figure out how.
Also, Facebook is a platform - that is, its product can improve without it spending a dime, through third-party applications (Zygna, for example). Lots of room for improvement here. Frankly, I think we'll see a lot of adjustments to Facebook's UI in the next few years as a lot of the functionality and handling is just not up to its potential - I think it's easy to forget this point.
I'm probably staying clear of the actual IPO myself but based on the previous thoughts am willing to bet that Facebook can - and will - become extremely viable, making it very good to invest in in the long run.
What are your thoughts?
Not surprised GM plans to pull their FB ads...
90% of ppl never click on them, and GMs product offering still isnt that darn exciting/enticing to the avg FB using nerdy highschooler.
Good job GM for youre shitty timing though...
This. I haven't seen a single person. As a matter of fact, barely even notice these ads, log in, check notifications/PMs and leave.
I saw this yesterday, and have to agree with GMs decision. It is not even the clickthrough rate. You are just not going to sell cars with banner ads. Maybe it aids brand awareness, maybe not. But nobody logs onto facebook, and then think "Hey, this ad is compelling. I am going to order a car"
They have salesmen for a reason. You are unlikely to buy a car unless you are shopping for one, in which case you are not on facebook.
I wouldn't touch it right now. We will see how the numbers come out 2 or 3 quarters from now. GM pulling the plug on FB is not a good indication. FB needs big advertisement to generate large revenues. Such a high demand for the stock issue makes me even more skeptical on the IPO, a lot of small investors getting in, in my opinion, at the wrong time. It might be a good speculative play but not a value play. I haven't looked at the numbers but it doesn't feel good.
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