GM pulls Facebook advertising amid growing concerns over social media marketing

GM pulls ads from FacebookTalk about poor timing: the same day that Bloomberg reported that Facebook’s IPO is falling short of investors’ expectations, GM announces it has decided to pull all of its Facebook advertising. And that’s no small account Facebook has lost – it was a $10 million account.

According to the Wall Street Journal, GM decided to nix its Facebook campaign efforts after concluding the paid ads didn’t significantly impact buyers. While the company says its business page is still a product it intends to invest in, it will no longer use the Facebook paid advertisement system.

This is bad news for Facebook for a few reasons. Losing an account – especially a big one – hurts, especially when it’s been made this public. But the larger impact is that this fuels the “overvalued” fire that just won’t be extinguished. The skeptics have been crying foul since whispers of the word “billions” starting being thrown around: Facebook is big, sure, but it’s unproven. And a big part of all this caution has been uncertainly about the company’s ad platform.

Facebook is trying to better corner mobile, where ads have been noticeably absent until recently. In fact Facebook recently edited its S-1 filing in order to reflect this change. “Based upon our experience in the second quarter of 2012 to date, the trend we saw in the first quarter of DAUs increasing more rapidly than the increase in number of ads delivered has continued,” an added section of the document reads. “We believe this trend is driven in part by increased usage of Facebook on mobile devices where we have only recently begun showering an immaterial number of sponsored stories in News Feed, and in part due to certain pages having fewer ads per page as a result of product decisions.”

Basically, Facebook user numbers are increasing but ads aren’t – part of this is because of mobile growth, but you’re certainly welcome to wonder if it also means the ratio of users to ad buyers is increasingly at odds.

Facebook isn’t the only social site to raise eyebrows over ad monetization platforms. The stories of Twitter’s revenue struggles are almost as old as the site. Even after launching its self-serve ad platform, not everyone is convinced of its effectiveness as a marketing medium.

But there’s a conflict here: Facebook and Twitter have the users – these numbers are climbing, no doubt about it. And pundits continue to predict that social media ad spending will only increase. At the same time, there seems to be general confusion on making certain these campaigns are working. It doesn’t help that while marketers are trying to adapt to this system, the likes of Facebook and Twitter are reinventing it. Everyone’s moving at different paces with different agendas, and considering the fact it’s not surprise that e-advertising has yet to hit its stride with even our most popular social networks.

So will this hurt the Facebook IPO? Don’t get too caught up in the pre-May 18 (probably?) hype. Whether or not Facebook worked for GM, advertisers simply cannot and will not ignore it, but they might have to struggle with it. And because Facebook is Facebook, they will.