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GM Unfriends Facebook Ahead of IPO: What Went Wrong?


Days away from Facebook's (FB) IPO, General Motors (GM) has announced it's pulling $10 million in advertising business from the social media kingpin. No full explanation was given, and the dollar value is a mere rounding error for either company. Regardless, the move is raising questions as to what can be inferred from the nation's third largest advertising buyer walking away from Facebook.

After suggesting GM may have pulled their ads in response to not getting a large enough allocation of Facebook stock, James Altucher of Formula Capital says it would be a mistake to read too much into GM's move.

"Maybe General Motors' ad agency just completely failed," Altucher suggests in the attached clip. A failure in this case would mean anything from a poorly designed campaign to an inability to track user information from click to purchase.

"I just don't think you can make a sweeping statement about Facebook's ad revenues, particularly given the timing of GM's statement, which I think is very suspicious," Altucher says. "They could have said it next week; they could have said it a month ago."

The timing matters because Facebook can't defend itself with any comment on the matter, stuck as they are in the so-called blackout period. The investing world is hardly going to run screaming from the FB IPO because of GM's move, but it's clearly a headache Facebook doesn't need right now. Facebook has an audience too big for GM to ignore. GM spends too much money on advertising for Facebook to stay angry.

It would seem the two companies are going to have to make up and play nice again at some point. So why this, and why now?

"Some negotiation went bad," surmises Altucher. Somewhere in the love triangle formed by Facebook, General Motors, and an advertising agency there was a miscommunication or hurt feelings. Altucher thinks GM is looking the least trustworthy in terms of motives, but he has no doubt that the car company and Facebook will be re-friending one another soon.

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