GM’s Decision To Stop Advertising On FB; Wake-Up Call

General Motors Inc’s decision to stop advertising on Facebook may be a wake-up call for the No. 1 social network, but Top advertising executives say it’s far too early to know if the site will take off as an advertising platform.

“There’s a lot of potential but it’s not a slam-dunk,” said Martin Sorrell, chief executive of WPP Plc, the world’s largest advertising agency.

“Showing the impact of branding on Facebook is going to take a long time,” he added.

Facebook is due to begin trading on Nasdaq on Friday in an initial public offering that will raise about $15.2 billion, the biggest ever from Silicon Valley. With almost a billion users, Facebook generated nearly $4 billion in revenue last year, mostly from advertising.

News on Tuesday that GM, the third largest advertiser in the United States, was pulling back from Facebook raised questions about whether ads on the social network are really more effective than on traditional media.

In addition, the company last month reported its first quarter-to-quarter revenue slide in at least two years.

“For GM, advertising on Facebook is the equivalent of hanging up posters in a high school … why would anyone stop to look at the posters when they are congregating, talking in the hall?” Russ Lange, co-founder of marketing consultancy CMG Partners said.

When companies set their marketing budgets in August and September, Lange expects them to consider the question of whether Facebook can be an effective advertising tool.

“They’re going to see the GM pullout as a reality check,” said Ronald Camhi, head of the Advertising Marketing and Media practice at law firm Michelman & Robinson.

Advertising experts do not expect many companies to follow GM. Major brands such as Nike, Nordstrom, Wal-Mart and Ford said they were continuing to advertise on Facebook.

“Macy’s does advertise on Facebook, and digital media overall continues to be one of our fastest growing media segments. Our Facebook brand page serves as a forum for rich conversation with our most passionate customers, and we continue to see great growth in fan participation and engagement,” said a Macy’s spokeswoman, Holly Thomas.