Sunday, May 16, 2021

Are Advertisers Disembarking the Facebook IPO Hype Train?

That deafening buzz? It’s the anticipation building in Silicon Valley and on Wall Street on the eve of what promises to be a historic IPO for Facebook. But not everyone is singing the social media behemoth’s praises.

On Wednesday, the social media giant raised the initial public offering (IPO) price range from $28-$35 to $34-38 in amended filings to the SEC, which could push its valuation past $100 billion, up from $96 billion. As of this writing, Facebook is reportedly finalizing the price — perhaps edging ever closer to, or even crossing, the $40 mark — as it prepares to go public tomorrow.

Facebook will trade on NASDAQ under the “FB” ticker symbol.

Adding fuel to the fire is the prospect of newly minted Facebook billionaires and millionaires, and what the windfalls could mean to the Silicon Valley venture capital scene and startups that hope to follow in founder and CEO Mark Zuckerberg’s footsteps. Even co-founder Eduardo Savarin’s decision to renounce his American citizenship — a move some view as a tax avoidance measure — has tongues wagging.

It seems there’s no end to the enthusiasm fluttering in the hearts of both the tech and finance industries as the clock ticks down to tomorrow. Yet, while Facebook’s IPO is the talk among Wall Street traders, Madison Avenue advertising executives are sounding the alarm.

Facebook Ads in GM’s Rearview Mirror

General Motors made waves this week by voicing its stance on Facebook ads. The automaker said that its paid advertising had little impact on purchasing decisions, according to a Wall Street Journal report. As a result, GM is pulling its paid ads, though it will maintain a presence using Facebook pages.

Why should it matter what GM thinks? Because when it comes to advertising, it’s a big spender.

According to the report, GM is the third largest advertiser across all media in the United States, behind Procter & Gamble and AT&T. Last year, GM spent $1.8 billion in advertising, $10 million of which went to Facebook. While $10 million is a paltry amount compared to GM’s total ad budget or the $3.7 billion in revenue that Facebook generated in 2011 — most of it from advertising — it’s a sign that Facebook’s advertising platform is struggling to prove its worth to influential marketers.

And GM is not alone in questioning Facebook’s effectiveness as an advertising vehicle, according to a DealBook post at The New York Times. Although few are as vocal as GM, Forrester analyst Melissa Parrish reports that other companies she and her colleagues have spoken to are considering shifting their spending away from the social media giant.

Mobile, Upwardly?

Complicating the issue is that users are increasingly interacting with Facebook on mobile devices like the iPhone, according to the company. On a desktop Web browser, Facebook ads are already fairly unobtrusive. The company pushes marketers toward embark on socially engaging campaigns rather than strategies that rely mainly on display ads and other traditional Web marketing techniques.

On mobile devices, Facebook advertising barely registers. In a recent SEC filing, Facebook informed, “we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

A lot is riding on Facebook getting mobile advertising right. “Accordingly, if users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected,” concludes Facebook.

Pedro Hernandez is a contributing editor at, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @ecoINSITE.

Similar articles

Latest Articles

How IBM has Changed...

Think is IBM’s big annual conference, and again this year, it was digital. I’m noticing a sharp quality difference in shows like this where...

Database-Tuning Platform Launches and...

PITTSBURGH — A team out of Carnegie Mellon University is launching its automatic database-tuning product today with the help of $2.5 million in funding.   OtterTune,...

Top 10 Professional Services...

Professional services automation (PSA) software aims to offer service-based companies most of the software they will need to run their businesses in one package....

What is Data Aggregation?

Data aggregation is the process where raw data is gathered and presented in a summarized format for statistical analysis. The data may be gathered...