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GM Halts Facebook Ads; Site Faces User Distrust Ahead of IPO

Claudine Zap

Facebook heads into its initial public offering on target to become a $100 billion company.

But while its supporters see it as the next Apple (AAPL) or Google (GOOG), not everyone "likes" the company: Some detractors wonder whether the social networking giant could instead ultimately be headed to the junkyard to join MySpace and Friendster.

General Motors (GM), for one, appears to no longer believe in the power of Facebook -- the automaker plans to stop advertising on the site because it said its paid ads had "little impact on consumers' car purchases," according to The Wall Street Journal. GM, the country's third-largest advertiser, had been spending about $10 million on Facebook ads, according to the Journal. The company will continue to reach out to customers through its Facebook pages, however.

A spokesperson for GM said, "We look at this with all media outlets. We look at the effectiveness." The representative added that the auto maker moves "money around to various outlets."

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GM's ad spending is only a drop in the bucket compared with Facebook's $3.7 billion in revenue, but it comes at a bad time in advance of Friday's planned IPO and would be a big blow if it influences other large advertisers to do the same. In addition, other negative news about Facebook's business has come out recently. According to an AP-CNBC poll this week, 57 percent of Facebook users never click ads or other paid content. Facebook makes its money mostly from display advertising, and clicks are how advertisers decide whether the ad space is worth the money they pay.

More worrisome for investors, perhaps, is the trust issue. In a poll, 59 percent of respondents said that they had little to no trust in Facebook to keep their information private. That could become a problem as pressure builds on the company to wring more revenue from its hundreds of millions of users.

For now, it's clear that Facebook still has work to do if it wants to make more friends.