GENERAL Motors kills a $10 million Facebook campaign with other advertisers set to follow as world's largest social networking prepares for it's highly anticipated IPO.

GM, the third-largest advertiser in the United State, is the first major company to indicate disappointment with Facebook and pulls its ads, according to The Wall Street Journal.

But analysts say GM is not the only company doubting Facebook's ability to woo consumers with paid ads.

"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,'' Forrester analyst Nate Elliott wrote in a blog post, according to the Journal.

Bad news on the advertising front reflects poorly on Facebook just days before an initial public offering expected to reap billions for the company and value it at up to $104 billion.

Advertising is Facebook's main revenue stream, and it has already admitted that it is not yet able to convert its mobile app's growing popularity into more advertising dollars.

It will be psychologically devastating to sales management there, The Journal reported.

GM said it would still have Facebook pages, which cost nothing to create, to market its vehicles. GM pays no fee to Facebook for its pages, which allow the car maker to reach consumers directly.

"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 multiple social and digital media outlets,'' a GM spokesman said in a statement.

The motoring giant is reportedly pulling out of the paid Facebook ad market because the company found its ads on the Menlo Park company's social network to be ineffective.

While GM's decision could be an exception in the advertising world, it marked the first highly visible crack in the Facebook strategy, said Brian Wieser, Internet and media analyst at Pivotal Research Group, the Sydney Morning Herald reports.

"This does highlight what we are arguing is the riskiness of the overall Facebook business model," he said.

"It is not a sure thing. It sure looks likely that it will be one of the most important ad-supported media properties, but it's not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle."

Facebook ads make up a small percentage of GM's advertising budget, but the company said it is committed to the website to market its vehicles.

An acquisition announced this week could help Facebook in its mobile attempts, however - the company agreed to acquire the team behind a London-based mobile firm called Lightbox.

The deal is solely for the employees of the small company, which produced apps and products similar to Instagram, which Facebook has agreed to acquire for $1 billion, but Lightbox has more of a focus on Android devices while offering nonmobile options.

Lightbox will stop accepting new members and close its doors in about a month.

Car makers are increasingly turning to social media sites to reach younger consumers on their turf for less than a tenth of the cost of a traditional marketing campaign.

Locally, Holden’s social media and digital communications manager Andrea Matthews says there will be no impact on the local Facebook scene, as Holden doesn’t buy ad space on the site, carsguide.com.au reports.

“We don’t at the moment spend any money on paid Facebook advertising, but we do use it for a range of different things,” she says.

“For us it’s about building and maintaining our brand, creating awareness for our product, letting our customers know new products are coming, when special offers are available, and celebrating our heritage.”

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