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Last week General Motors' (NYSE: GM) marketing department made waves not once but twice. The first was when they decided to stop advertising on Facebook (NASDAQ: FB). The announcement got a lot of attention as it was made just days before Facebook's IPO. The second was the announcement that they had decided not to buy an advertising spot during the 2013 Superbowl. Either one of these announcements made alone would probably not have piqued my interest, but because these announcements came within a week of each other they got me wondering what was going on at GM.
Apparently Joel Ewanick, the Chief of Marketing at General Motors, is making some big changes and cutting the advertising budget. According to Kantor Media, last year GM spent 4.5 billion on ads worldwide, 1.78 billion in the US alone, making it the third largest spender in the US. While I applaud their desire to cut costs, and I think their recent move to consolidate their ad agencies is a plus, I wonder if now is the best time to be scaling back on advertising. According to GM, by the end of 2013 around 70% of their North American portfolio will be new or newly updated vehicles. That is an enormous overhaul one they even call a "product barrage" and one that seems to be worthy of their current advertising budget, not a smaller one.
It is true that GM's budget dwarfs it's U.S. competitors. Even after Chrysler raised it's spending on TV advertising 38% to 890 million in 2011, it was still behind GM's 1.1 billion dollar expenditure which was 7% lower then it was the year prior. I certainly agree that GM could get its ad spending more in line with it's competitors, but I think it needs to be careful about how the cutting takes place. Car sales are competitive and slashing ad costs just prior to a "product barrage" seems risky, especially when you don't just trim certain spending but rather eliminate it completely like in the case of its Facebook advertising.
I understand why they are giving up their Facebook ads, they aren't the only ones questioning the efficacy of Facebook ads. I can see why an advertiser might want to put their money elsewhere, but I wonder about the wisdom of pulling all advertising on one platform which leaves your competitors free and clear to rule the space. Ford (NYSE: F) seems excited about this potential and is a Facebook supporter. Overall, I believe in GM and I am pleased with the recent moves to shrink their advertising costs, but I am wary of the changes they have made before the launch of new products and I will be watching to see if any other marketing changes are to come.
briars owns shares of General Motors Company. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.