General Motors Co. reportedly plans to pull its advertising dollars from Facebook, claiming that the paid advertisements have virtually no effect on the company's sales. The company, however, feels its free presence on the social networking site is more effective. What will this mean for the future of Facebook since most of the website's profit comes from paid advertising?
If the free fan pages of individual GM models, such as that of the Chevrolet Camaro, have a broader reach than sidebar advertisements, other companies may soon re-evaluate their marketing strategies. This could mean serious trouble for the social networking site.
According to marketing analyst Debra Aho Williamson, it is unlikely, however, that Facebook will allow companies to utilize its web presence for profit without doling out its rightful share. "Part of me thinks that over time, Facebook is going to make it a lot more challenging for companies to do that because they're in the business of getting advertising and they can control the way those messages get delivered," she says. "I think eventually Facebook is going to demand that these companies pay up."
Although General Motors may have the right idea for the present by keeping its money in its proverbial pocket, Facebook simply can't afford to let that idea catch on.