July 21, 2012 by Jon Slott
In the days leading up to May 18th 2012, it was rumored that U2’s Bono was poised to become the richest rock star in the world. Richer than Springsteen and Madonna put together. Even richer than… (cue the angelic choir)…Sir Paul McCartney.
Like being Bono just isn’t enough.
The rumors were based upon Bono’s partnership role in an investment firm called Elevation Partners, which purchased a 2.3% share of Facebook for $90,000,000 in 2009.
And on the morning of May 18th 2012 the historic Facebook IPO was set to take place, and it would then be possible to buy your very own shares of Facebook from Bono and the other private stakeholders in the company.
It was said that Bono’s company would clock 1.5 billion that day.
The Facebook IPO has been filled with controversy - not only in the weeks before it took place - but in the aftermath as well. Reports of trade disorder and other improprieties have led most to the conclusion that the IPO was gravely mishandled. The shares have since tumbled 31% as of the day this article was written. But, it was the largest Internet company IPO in history and it put 16 billion in Facebook’s piggy bank.
While the Bono rumors were interesting, another thing happened a couple days before the IPO that interested me even more.
General Motors publicly announced they’d no longer be advertising on Facebook.
General Motors called their Facebook ads ‘ineffective’ and pulled their 10 million dollar advertising budget. But they’re still interested in communicating with the Facebook audience; they will keep their brand page and continue to devote 30 million dollars to the creation of content and its daily maintenance.
The 10 million is a drop in the bucket for Facebook, but being shunned by General Motors a couple of days before their IPO is a ginormous PR disaster. More importantly, it causes other advertisers to think about whether they’re getting the penetration they need from Facebook advertising.
Facebook has been criticized for not creating enough innovative marketing solutions for their advertisers, by instead favoring the improvement of their user’s experience and protecting the integrity of the platform. That’s great for generating traffic, which they’ve done brilliantly. But Facebook’s users get to show up to the party for free, and it’s the advertisers who are writing the checks and making the site’s existence possible.
On the flipside, there are many people who say that the ineffectiveness of GM’s advertising is their own fault and ‘they’re just doing it wrong’. They think GM has the wrong idea about how to utilize social networking. That they’re expecting to generate immediate sales with Facebook advertising, when they should be looking at it as a tool to increase the audience’s long-term connection to the brand. And there’s no silver bullet when it comes to utilizing social media to sell products. Rather than hoping the user will be persuaded by the ads alone, the strategy needs to include other ways to ‘amplify’ the messaging.
But what about the 30 million that GM will continue to spend on their brand page ?
Have they found more success using their brand page to reach out and communicate to the Facebook audience in a more organic way ? Are they looking to attract more users who will ‘opt-in’ to the company’s message, rather than just advertise to them ? GM is still spending money on Facebook. But if it’s not going to anything that Facebook itself offers, maybe they’re seeking out other ways to ‘amplify’ their message so the users who press ‘like’ will stay engaged and really keep ‘liking’ them.
Or maybe GM is just trying to save a few bucks.
They sure saved a bundle when they opted out of next year’s Super Bowl.
On the other hand, GM’s Detroit competitor, Ford Motor Company, reports a positive result with their Facebook advertising. They say it’s been very successful when mixed with “engaging content and innovation”. Earlier this year, when Facebook started offering the ability to display a movie and ad on the logout page, Ford took them up on it and displayed a TV spot and ad for the 2013 Mustang. It quickly scored loads of ‘shares’ and ‘likes’.
Facebook is an enigma right now. Nobody quite knows what their ultimate impact will be, whether they’ll sustain their ad revenue and whether brands will see good results.
And in the end, it looks like Paul McCartney’s ‘richest rock star’ crown is safe. Shortly after the rumors started flying, Bono went on TV and denied that he was set to be a gazillionaire.
(Though I‘m sure his cut of the deal didn’t suck.)
Jon Slott is the Executive Producer of music company, BREED. He can be reached for comments at email@example.com.