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Today in Tech: GM Dumps Facebook Advertising Right Before the IPO

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Facebook just lost the third-largest advertiser in America... what happened? Also, the new iPhone might have a bigger screen.

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MINYANVILLE ORIGINAL Today, Internet Week NY is buzzing about General Motors (GM) pulling its advertising from Facebook (FB). GM, the third-largest advertiser in America, is not the client that Facebook wants to lose just days before an IPO.

At a panel this morning, Todd Wasserman, the business editor of Mashable, pointed out that GM will not be pulling out of Facebook entirely. The company, he says, poured $40 million into the social network last year, but only $10 million on paid advertising. It represents only a small fraction of GM's $1.8 billion ad spending and Facebook's $3.7 billion in yearly revenue.

GM released this statement on the matter:

We regularly review our overall media spend and make adjustments as needed. This happens as a regular course of business and it's not unusual for us to move our spending around various media outlets – especially with the growth of social and digital media outlets.

In terms of Facebook specifically, we are reassessing our advertising, but remain committed to an aggressive content strategy with all of our products and brands, as it continues to be a very effective tool for engaging with our customers.

The Wall Street Journal quoted GM's marketing chief, Joel Ewanick, who said that the company "is definitely reassessing our advertising on Facebook, although the content is effective and important."

By "content," GM refers to the other $30 million that GM spent on Facebook last year maintaining its branded page on the social networking site. The brand page might be effective for GM, but none of that money goes directly to Facebook.

Potential Facebook investors should look at this news and wonder whether the site can keep up its fast growth or justify its high valuation if advertisers are pulling out. Though other big advertisers like Ford (F) and Chrysler will not pull out of Facebook, GM might still be leading an exodus.

As Forrester analyst Melissa Parrish noted on her blog recently, "One global consumer goods company told us recently that Facebook was getting worse, rather than better, at helping marketers succeed. And companies in industries from consumer electronics to financial services tell us they're no longer sure Facebook is the best place to dedicate their social marketing budget – a shocking fact given the site's dominance among users."

Parrish says that Facebook doesn't put enough effort into improving the site's efficacy as a marketing platform, opting to put more work into user experience.

GM stock is up 5.42% this morning.

In other technology news, Apple's (AAPL) new iPhone will have a bigger screen. Production of an iPhone with a 4-inch screen will commence next month. Apple seems to be giving in to competition from phones running Google's (GOOG) Android and Microsoft (MSFT) Windows Phones, which typically have screens much bigger than the 3.5 inch iPhone.

Apple won an injunction alleging that the much-hyped HTC One X and Evo 4G LTE phones infringe on Apple patents. The phones are being delayed indefinitely by US customs. Apple won an open-ended exclusion order on the importation of any HTC Android device from the International Trade Commission last December.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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