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Why GM Re-Friended Facebook

A 2013 Chevrolet Sonic. GM is testing ads for the Sonic on Facebook. Photo credit: General Motors Co.

Did General Motors (NYSE: GM  ) just re-friend Facebook (NASDAQ: FB  ) ?

Yes, it did. Almost a year after GM dumped Facebook in a move that rocked the advertising world, the social media firm has won back the Detroit auto giant as an advertiser.

GM said this week that it is running test ads for its Chevrolet Sonic small car on Facebook, and Facebook confirmed that GM had returned as an advertiser on the giant social-media service.

Clearly this is a plum for Facebook. But what does it mean for GM?

The Facebook break-up was just one strange move in a series
GM was spending $10 million a year on Facebook ads when its former chief marketing officer, Joel Ewanick, pulled the account last May. That was just one of several controversial moves the colorful Ewanick made during his tenure at General Motors, which ended when he was abruptly fired (on a Sunday, no less) by CEO Dan Akerson last July.

Ewanick had seemingly done a lot of good for the General, making moves to consolidate GM's global marketing efforts that were expected to save the company $2 billion over five years. But he had also rubbed a lot of people the wrong way, both inside and outside the company.

Strange moves, like his decision to punt on GM's traditional Super Bowl ad effort, and the Facebook break-up, didn't help his cause. While officially, Ewanick was fired for mis-handling the financial details of a sponsorship deal with a European soccer team, there was a sense at the time that frustration with GM's lackluster U.S. sales was a big driver of Akerson's decision.

And since his departure, slowly but surely, many of the changes he made have been unwound. GM ran ads in the most recent Super Bowl, it has reversed some of Ewanick's changes to its longtime ad agency structure, and now it's going back to Facebook.

So is this a big deal?

GM needs to be on Facebook
The decision to go back to advertising on Facebook is unlikely to be a big deal for GM, financially speaking. GM is one of the world's largest buyers of advertising, with an annual budget that runs well over $4 billion. The $10 million that GM was spending annually with Facebook before Ewanick dumped the social-media firm was a relative drop in GM's global advertising bucket.

GM's return is clearly a big deal for Facebook, which wants badly to be taken seriously by consumer marketing heavyweights like GM. Facebook says that had been trying to win back GM as an advertiser ever since the breakup. But is it a big deal for GM in terms of marketing impact?

It's not on the scale of a great Super Bowl ad, but it might be significant. Ford (NYSE: F  ) has had a major presence on Facebook, using the platform to market its Focus and Fiesta small cars to a youthful audience. That effort seems to have worked well for the Blue Oval – and GM's small-car efforts could use a dose of the same medicine.

That's why it's not a surprise that post-Ewanick GM's first Facebook effort involves the Chevy Sonic, which competes directly with Ford's Fiesta. I think it's a good sign: With a slew of new models set to hit the U.S. market over the next couple of years, GM needs to be making best use of all of its different marketing channels.

If Facebook proves to be effective for GM with the Sonic, it won't be a surprise to see this relationship take off -- again.

Is GM a buy right now?
Few companies lead to such strong feelings as General Motors. But ignoring emotions to make good investing decisions is hard. The Motley Fool's premium GM research service can help, by telling you the truth about GM's growth potential in coming years. (Hint: It's even bigger than you think. But it's not a sure thing, and we'll help you understand why.) It might help give you the courage to be greedy while others are still fearful, as well as a better understanding of the real risks facing General Motors. Just click here to get started now.

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