Why GM Opted Out of Facebook…Should You?

General Motors’ (NYSE:GM) decision to stop advertising on Facebook (NASDAQ:FB), revealed on the eve of the latter’s IPO, may be a simple combination of bad timing and good business sense.

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Whichever, it brought into renewed focus Facebook’s lower growth rate in its mainstay advertising revenues over the past few months. It also put under the lens the perceived superiority of other advertising options, compared to Facebook, measured in terms of the “click through rate” or “clicks per page view.”

GM is the third-largest advertiser in the U.S., and may be counted upon to work its numbers thoroughly. GM had met with Facebook executives over the past few weeks, and according to unnamed sources, these executives had strangely pushed Facebook’s free pages rather than paid advertising.

GM ultimately decided to drop advertising on Facebook because it was simply not enough bang for the buck, according to the sources. Facebook’s advertising impact is about half that of other options, and far behind Google’s (NASDAQ:GOOG) Adsense. According to Larry Kim, founder and chief technology officer of Internet ad consultant Wordstream, “The average targeted ad on the Internet is “clicked” on by a consumer once every 1,000 times it is viewed. Facebook’s rate is half that, while Google’s is 4 in 1,000.”

Given this scenario, and the likely rise in rates after the much-hyped IPO, one really can’t blame GM for opting out. But GM can always change its mind, and according to one source, may simply be sitting out the party, while it maintains a free presence on Facebook pages. “They’re just going to try not doing it for a while and see how it goes; just make content and if it works, it works,” the source said.

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