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Did GM Cost Facebook Billions of Dollars?
By: Aaron Whitaker
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It’s been two days since Facebook launched their IPO and in that two days they’ve lost billions as their stock went from $38 to around $34 at the end of day two. If you count the fact that they opened to the public at $42, then they’ve lost even more billions in just two days. So what went wrong? Was it GM announcing days before the launch that they were pulling their ad buys on Facebook? Or are people a lot more skeptical of online companies since the .com bubble burst over ten years ago?
It would be understandable to think that GM reducing their $10 million dollar Facebook ad buy budget to zero would cause some stir. GM basically didn’t feel they were getting the results they expected when compared to other sites like Google. Personally, I can fully understand their disappointment with Facebook PPC ads, as I have heard similar stories from other businesses, albeit much smaller businesses with much smaller ad budgets. Many them saw a drop in clicks when Facebook started to roll out the new Timeline layout. But unlike GM, they haven’t cut their advertising completely on Facebook; they have started to put more money into sites that have more clicks and conversions. So while GM did have some effect on the performance of the Facebook IPO, I think it was just part of the overall picture.
The Catch-22 with Facebook is that most businesses can’t afford to ignore it completely. Sure, marketing dollars won’t go as far on Facebook as they would on Google or Bing or Shopping.com or other sites, but they can’t walk away because Facebook does have 800 million active users. And it’s those 800 million users who are sharing and "liking" each and every day their favorite products and businesses that are on Facebook. While businesses could ignore Facebook PPC ads and just focus on creating content on their pages, Facebook does have its own algorithm, called EdgeRank, which determines how a business’s content is shared with fans of the page. Facebook will basically help businesses who help Facebook by buying ads. So if a business wants to increase the odds of its content being viewed by their fans, they need to invest in PPC ads on Facebook. You scratch Facebook’s back, they’ll scratch yours.
While all of this is understandable, the problem facing Facebook in the next few months is finding a solution for businesses that will bring results but won’t irritate the closing-in-on-a-billion users. It seems Facebook is on the consumers’ side and doesn’t want to create a site that is clogged with ads, resulting in consumers leaving them for the next big social media website. For most of the users on Facebook, this is great. But for the many businesses that will fund Facebook, the future isn’t so clear. Businesses want to see results, and if Facebook figures it out without pissing off their users, then everyone will be happy and the stock should start going back up. Until that happens, I think the stock and businesses are in limbo, waiting patiently.

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About the Author
Aaron Whitaker is a copywriter, blogger, and social media aficionado who likes watching the TV commercials more than the actual shows. He prefers reading the magazine ads over the articles. And you can learn more about him online right here.
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