General Motors has decided to suspend paid advertisements on Facebook. GM was spending $10 million annually. GM is the third largest advertiser worldwide with an ad budget of $3 billion. Facebook has 901 million users, a revenue of $3.7 billion in 2011 and is expected to be valued at $100 billion for the I.P.O. In context, the $10 million GM was spending on Facebook advertising is not a big number for them. Nor is it a large number for Facebook in relation to its overall revenue. Yet, it hurts Facebook, says something telling about GM, and has others questioning the value of advertising on Facebook. “Several analysts believe that GM’s decision will cause other marketers to take at least a second look at their own Facebook strategy”.

This decision, coming at this moment, intuitively tells us: “Something important just occurred.” Let’s examine what that could be. GM’s reasoning comes across as simple enough: “GM, started to reevaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads. GM marketing executives, including Mr. Ewanick, met with Facebook managers to address concerns about the site’s effectiveness and left unconvinced advertising on the website made sense, according to people familiar with GM’s thinking”.

Others are beginning to sound the alarm that GM’s move is a sign that perhaps the emperor has no clothes. Some argue Facebook is a social media site that people use for free in order to connect with their friends. It is not a business site, an e-commerce site, or a search engine. People use Facebook to interact with others —not companies. Facebook is a space where people want to be people and not consumers for the 15 minutes they are on to chat with a friend, post a picture of a child’s soccer win, and say happy birthday to a college buddy. Perhaps GM figured this out and realized Facebook advertising is not the best use of their marketing budget. End of story.

Here is another thought. Advertising on Facebook is complicated and requires deep sophistication, patience, storytelling, creativity, and authenticity. On Facebook a company has to arrive in a casual atmosphere where nobody’s intent is to buy something. A big company showing up out of context could feel like a party crasher interrupting a friendly get together. One of the tidbits in today’s news stories is worth noting, “Facebook has also been a source of stress for GM. In November, Saab lovers virtually occupied a GM Facebook account, flooding it with messages urging the brand be preserved. The social network was also the medium through which environmental groups embarrassed the company into ending its funding of the Heartland Institute, a global warming-denying group”.

This is the tricky thing about Facebook for advertisers to get their head around: it’s not a one way mirror. People can see the advertisers too in real time, their habits, goals, and predilections. And if they don’t like them they can speak out not as a solitary consumer but through live real time large scale criticism and debate. Advertising on Facebook is risky because of its transparency for the company and power that is in the hands of the users. As a corporation, if you have something to hide you’re in trouble.

Facebook is here to stay and represents an ultrapersonalized medium for users to have power and choice. Advertising has shifted a lot in recent years, bending away from mass media and becoming more personalized but it has further to go. GM is openly admitting that it hasn’t cracked the nut on doing it. Some think this speaks to Facebook’s failure as an advertising platform. Might it be that GM is giving up early in a game that has new rules, new tools, and requires a new level of corporate transparency?

GM’s competitor, Ford, on the upswing after not taking the auto bail out, had this to say: ““We’ve found Facebook ads to be very effective when strategically combined with engagement, great content, and innovative ways of storytelling, rather than treating them as a straight media buy.” Seems like Ford has a different understanding of how to interact with Facebook. The world of consumer advertising is changing daily and those who bet wrong lose big. Will GM’s $10 million savings in the short run on Facebook be seen as folly two years from now as big brands better learn how to join in on casual conversation in a transparent real time environment? Time will tell. For more information on advertising, strategy and marketing in the age of Facebook and other social media refer to AMA courses #5521 Leveraging Social Media to Engage Customers and Build Your Brand, as well as #5105 Measuring and Maximizing Marketing ROI, and #5537 AMA’s Advanced Course in Strategic Marketing.