GM to Drop Facebook Ads

General Motors Co said on Tuesday it will stop advertising on Facebook, even as the social networking website prepares to go public, with a source familiar with the matter saying the automaker had decided Facebook’s ads had little impact on consumers.

The decision by GM, the third-largest advertiser in the United States, marks the first highly visible crack in Facebook’s strategy and underscores doubts about whether advertising on Facebook works better than traditional media.

“This does highlight what we are arguing is the riskiness of the overall Facebook business model,” said Brian Wieser, Internet and media analyst at Pivotal Research Group.

“It is not a sure thing. It sure looks likely that it will be one of the most important ad-supported media properties, but it’s not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle,” reuters reported.

For now, these worries do not appear to be impeding strong investor demand, with Facebook Inc increasing the size of its offering by 25 percent to raise about $15 billion, a separate source told Reuters on Tuesday.

Facebook, founded eight years ago by Mark Zuckerberg in a Harvard dorm room, is expected to start trading on the Nasdaq on Friday.

GM said it will still have Facebook pages, which cost nothing to create and for which it pays no fees, to market its vehicles and added that it is not unusual for it to move spending around various media outlets.

“In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers,” GM said. Facebook declined to comment on GM’s move.