GM, Facebook, and Prospects for the Auto Industry

GM's Facebook fan page

There’s big noise about the fact that General Motors recently pulled $10 million worth of ads off Facebook. Ford made it clear that its advertising would continue, and the two companies are squabbling.

GM says half its Facebook ads never get clicked on; Ford reached millions when it launched the new Explorer. The jury will be out a long time on this one.

While the food fight was going on, more important things were happening. Warren Buffet’s Berkshire Hathaway announced it had bought 10 million GM shares at well below the initial IPO price. That gave the stock a 2.3 percent bump.

Auto sales are on a roll, predicted to top 14 million units this year. Car sales accounted for fully half of the 2.2 percent U.S. economic growth in the first quarter. Take that, Mr. Romney.

Facebook IPO chartAnd, of course, the Facebook IPO is coming. In our bubble-based economy, many are enticed by such things. Yet GM’s withdrawal was good timing for people to consider the effectiveness of Facebook’s heavy reliance on ad revenue ($3.7 billion last year). Other advertisers may well begin to question whether paid ads work (and just how they work) in the buzz of social media. Facebook’s effectiveness for advertising is particularly being questioned.

The $10-billion IPO is causing a frenzy, and, says Jim Cramer, “this deal is going to be fraught with everything that is wrong with the IPO process.” If the insiders are getting special prices to sell their stock, as reported, a lot of people will be “shocked.” And Internet IPOs have a terrible record.

Facebook corporate pages (top of story) seem to be working for the carmakers, GM included. But I’ve always thought this was a weird way to sell cars. There is no question that social media moves opinion. The question is how that translates (or not) into car sales.

One hopes it is time, finally, for the Silicon Valley boys and girls to get serious and put aside their iPhone apps and social media algorithms to “transform the really big things: transportation, energy, electricity, food production, water delivery, health care and education.”

Forbes publisher Rich Karlgaard thinks along those lines and believes Silicon Valley is in fact moving beyond social media to address these issues. I hope he’s right. Maybe GM already got that message. Or maybe it just bungled with its Facebook ads.

The auto industry has always been very conservative. Can it learn to sell its products differently?

—jgoods

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  1. jim redd
    | #1

    Social media is a tool to get a message to the public and, more importantly, gauge the public’s reaction to those messages. There’s really no reason any company should need to pay for social media… which isn’t good news for the future of FB. Perhaps facebook should charge corporations to join while keeping it free for individual users. You’re welcome Zuckerberg, you can have that one for free.

  2. Randy
    | #2

    There seems to be a lot of confusion in this world about corporations. They are NOT people, they should not have civil rights (the basic root of most of the evils in our world today), and there is no reason why GM should sit right next to Gary Moore’s facebook page. In a way, it’s a basic perversion of the purpose for the existence of Facebook in the first place, which is to help PEOPLE connect to each other, not become corporate consumer zombies.

  1. | #1
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