Brace yourselves Facebook fans for more paid status updates, sponsored stories, App Center, and mobile ads, as the social network tries to prove its worth after getting a black eye from General Motors, one of the largest advertisers in the U.S.
If you haven't heard the news, GM will stop advertising on Facebook after discovering that people don't shop for cars between status updates, pokes, likes, and virtual crop harvests. Given that Facebook's initial public offering is set to take place Friday, the timing for this news couldn't get much worse.
GM will still have a presence on the social network through its Facebook pages, but that activity doesn't contribute to Facebook's bottom line, according to The Wall Street Journal. “We remain committed to an aggressive Facebook content strategy through all of our products and brands moving forward,” GM said on its Facebook page.
But Facebook ads? No más. At least for now.
Facebook's direct financial hit from GM's ad break-up doesn't appear to be that big. The car company contributed about $10 million to Facebook's $3.7 billion in revenue for 2011, according to the Journal. But GM is more than just a blank check for advertising dollars; it's the company responsible for the Corvette, Camaro, Pontiac GTO, and Trans Am. It's an iconic company that makes iconic products and some critics are wondering whether GM's decision might inspire other companies to reassess their Facebook ad spending.
Facebook is closing in on one billion active users (about 14 percent of the world's population), but it seems no one's really sure if those all those eyeballs convert into value for advertisers. Common sense says they should. Budweiser tries to sell you beer during Monday Night Football, so why not try to sell you beer while you talk about Monday Night Football on Facebook?
And yet, as NPR recently reported, few studies have looked at whether Facebook ads work, so nobody knows how effective social advertising really is. That's a problem, since the majority of Facebook's revenue comes from advertising.
With so much at stake for the social network, it's a good bet the company will look to reassure investors that Facebook is the advertising giant many businesses hope it will be. For Facebook users that means we can expect more advertising experiments coming our way through the desktop and mobile versions of Facebook, and maybe even on third-party sites.
Let's just hope the advertising madness doesn't get too far out of control.