DETROIT/NEW YORK - Facebook may only have itself to blame for why General Motors rained on its IPO parade this week.
GM announced the decision to drop Facebook paid ads on Tuesday in what was the first highly visible crack in Facebook's strategy and illustrated doubts about its perceived advantage over traditional media.
GM's decision followed Facebook officials' failure to convince top marketing executives at the U.S. automaker of the benefits of Facebook's paid ads at a meeting that took place in the past few weeks, people familiar with the meeting said on Thursday.
That was after Facebook officials focused more on touting the social networking website's free pages, the sources said.
"It kind of backfires on them in a funny way," said one of the sources, who asked not to be identified, of the emphasis on the free pages.
News of the meeting, which sources said took place at Facebook's Menlo Park, California, headquarters, comes on the eve of its much-anticipated market debut. The company on Thursday priced its initial public offering at the top of its target range and is set to raise up to US$18.4 billion (S$23.1 billion).
Facebook and GM declined to comment about the meeting or their relationship.
GM dropped its Facebook ads because they were less effective than other options such as Google's AdSense, the sources said. Facebook's ads garner about half the clicks per page view, a measure of effectiveness, compared with the average website.
Moreover, Facebook's ad prices were expected to rise after the company's IPO. Ad prices are set in auction and vary depending on the target audience.
Some investors fear Facebook has not yet determined how to make money from the growing number of users who access the website from their smart phones. Further, revenue growth from its ad business has slowed in recent months.
However, Facebook boosted the price and the size of the offering earlier this week, underscoring investor enthusiasm for the company's shares despite ongoing questions about its long-term money-making capabilities.
During the meeting with GM, Facebook officials emphasized the lure of free posted content on their website, the sources said. By contrast, the ads looked "kind of meager and perhaps expensive by comparison," one source said.