At the worst possible time — on the eve of the social site’s IPO — The Wall Street Journal reports that General Motors plans to quitadvertising on Facebook because ads there don’t get the job done:
General Motors Co. plans to stop advertising with Facebook Inc. after deciding that paid ads on the site have little impact on consumers’ car purchases, according to a GM official.
The move by GM, one of the largest advertisers in the U.S., puts a spotlight on an issue that many marketers have been raising: whether ads on Facebook help them sell more products. On Friday, Facebook is expected to sell shares in an initial public offering that could put a market value on the company of as much as $104 billion…
That aside… personally, I have trouble understanding why Facebook wants to go public anyway. Of course, I’m pretty sure Mark Zuckerberg doesn’t want to — hence his childish, obnoxious gesture of showing up for business meetings on Wall Street in a sweatshirt.
But while I blame him for not dressing like a grownup, I find any reluctance he feels to go public totally understandable. I say this as someone who suffered for decades working for publicly-traded newspaper companies — and who would still be a newspaperman if his paper had not been owned by an overleveraged public company. To me, anyone who is making plenty of money from his private company would be totally insane to go public.
No one, but no one, would accuse me of being any sort of financial whiz. But I fail to see the presence of any of the usual reasons for going public. What does Facebook really need an infusion of cash for? It’s not capital-intensive like, say, a steel mill. It’s always been able to rake in the money for relative little investment.
Yes, I’ve gone out there and read explanations of why. But I’m unconvinced. So what if, for instance, going public would be a huge windfall for Facebook employees? Why would I, as an investor (if I were an investor), want to spend my money to give them that windfall? Where’s the competitive advantage in encouraging a company’s founding talent — the people responsible for making the property valuable — to cash out?
The one rational excuse seems to be that in this converging online world, the only way to compete with the other titans out there, such as Google, is to have mountains of cash on hand, so you can beat the others to the punch when it comes time to buy a YouTube or an Instagram.
In other words, it’s a necessary step in the bid to become all things to all people online. Which seems, in and of itself, a debatable goal. But hey, nobody’s asking me.