Robyn Beck / AFP - Getty Images

Facebook employees walk past a wall of graffiti at the company's headquarters in Menlo Park, Calif. GM's decision to yank its ads from Facebook could be a case of the automaker not correctly seeing the potential power of the social network to build brand loyalty.

General Motors Co.’s decision to stop advertising on Facebook is like the story of The Emperor’s New Clothes. In this cyber scenario, GM, not a child, is pointing out that Facebook may be a bit underdressed when it comes to getting consumers to buy the automaker’s products.

But is Facebook really naked when it comes to providing a bang for advertising bucks, or is GM just not able to see the real potential of the social media powerhouse?

The answer may come down to what companies want out of social networking sites such as Facebook: immediate clicks on ads, or the potential for brand-loyalty building.

“GM is making a mistake, and it’s probably because they don’t have the right analytics in place and are too obsessed about short term sales effects,” said Rex Briggs, CEO of Marketing Evolution Inc., which has worked with a host of large companies including GM to measure how ad dollars are spent.

The company, he stressed, is living in the past if it expects quick returns similar to the results from television ads or rebate promotions. Social media just doesn’t work like that.

“Social media is a square peg that doesn’t fit in those round holes and doesn’t fit the traditional way marketers think about incentives,” he noted. “It’s based on people engaging with a brand and becoming an advocate of the brand.”

Consumer products companies, he continued, need a major presence on Facebook and other social networking outlets, but they also need to spend money on ads, especially things like sponsored stories, which he said bring in $3 plus for every dollar spent on Facebook.

For GM, however, the ad payoffs on Facebook weren’t enough.

“GM could not see the value and I am guessing it’s not the only one,” said Peter Cohan, a management consultant and venture capitalist. “If an advertiser on Facebook can track a user clicking on an ad to an online purchase, then – depending on the price of the ad and the value of the purchase – that advertising money would be well spent,” he maintained. “Otherwise, it’s a waste of money.”

Some social media experts think the main value in Facebook is in building a loyal fan base.

“There has been a great deal of skepticism around Facebook's advertising model, but simply relying on display ads to do the trick is the wrong approach," said Jeffrey Dachis, CEO of Dachis Group, a social business consulting firm that works with companies such as Disney and Target. “It's about engagement. Users that can interact with compelling content on Facebook will be more likely to serve as brand advocates than those who are presented with an advertisement with no opportunities for interaction."

GM, Dachis noted, doesn't plan reductions to its marketing budget for content creation and community management on Facebook. GM did not immediately return a phone call requesting information on their decision. But a story in the Wall Street Journal Wednesday quoted the company's marketing head Joel Ewanick who said on Facebook "the content is effective and important."

When it comes to building a fan base, Jan Rezab, CEO of social media analytics company Socialbakers, said the auto giant has done a crummy job engaging potential customers on Facebook, noting that Mercedes-Benz has more than 7 million likes on its Facebook page, compared to less than 400,000 for GM.

“We think that GM should not scrap their Facebook marketing strategy yet,” Rezab advised. “A lot of brands have been successful.”

Indeed, Ford Motor Company, with 1.5 million Facebook likes, tweeted Tuesday that: “It's all about the execution. Our Facebook ads are effective when strategically combined with engaging content & innovation.” The company could not be reached to elaborate on the tweet.

GM’s move to dump Facebook ads, just days before the social networking site's initial public share offering, could get other companies thinking the same way.

“A lot of marketers at places like GM continue to see Facebook as a media buy rather than a conversation tool. When you look at it from that standpoint it doesn’t look like a good media buy,” said Elliot Schreiber, marketing professor with Drexel University's LeBow College of Business. “I suspect we’re going to see others who’ve been sitting on the fence that are going to back out.”

As for more companies bailing, Marketing Evolution’s Briggs said, “you can always get another lemming to follow over the cliff, but anyone who’s studying this and thinking through the difference between planting the seed and harvesting won’t follow GM over the cliff.”

Minutes from the Fed's March meeting had said "a couple" members thought more stimulus might be needed.

The Fed remained sober about economic prospects. Members said the economy had been "expanding moderately" and generally agreed the economic outlook was broadly similar to that at the time of their March meeting.

While noting that labor market conditions had improved in recent months, almost all members said they still viewed unemployment as still elevated and to decline gradually, the minutes said.

Members also cited strains in global markets stemming from the banking and debt crisis in Europe, and the potential downside risks from contractionary U.S. fiscal policy.

About half of participants in the April meeting said that exceptionally low rates would be appropriate at least until late 2014. One thought the Fed should extend its current bond-buying program, known as Operation Twist, that is due to be completed next month.

JPMorgan Chase reportedly has let go of the infamous "London Whale," Bruno Iksil, aka Voldemort, whose massive hedging bets led to a $2 billion loss which has reignited calls for more stringent controls on risky trading by banks.

The New York Times reported Wednesday that Iksil would be leaving the bank at an unspecified time. The newspaper attributed the news to unnamed current and former colleagues of Iksil.

If confirmed, Iksil would be another victim of the trading debacle at JPMorgan after the bank announced earlier this week that his boss, former Chief Investment Officer Ina Drew, resigned. Drew is being replaced by Matt Zames, who is the co-head of the bank's global fixed income unit.

Drew, 55, had worked for the bank for 30 years, rising to become one of Chairman and CEO Jamie Dimon's top lieutenants.

Two others are expected to step down: Achilles Macris, who headed the London-based team involved in the trade, and trader Javier Martin-Artajo. 

As if JPMorgan Chase (JPM) didn't have enough to contend with -- a $2 billion-and-counting  from a series of risky trades; regulators and the FBI poking around because of the trades; and the embarrasing loss of face that has ensued -- now it has been hit with two lawsuits from shareholders accusing the bank of being imprudent.

Reuters reported that the lawsuits were filed by California shareholder James Baker on behalf of JPMorgan Chase and by shareholder Saratoga Advantage Trust financial services portfolio on behalf of owners of common stock.

The Baker lawsuit accuses CEO Jamie Dimon, Chief Financial Officer Douglas Braunstein and board members of breaching fiduciary duty, unjust enrichment and wasting corporate assets, Reuters said.

The Saratoga lawsuit claims Dimon, et al., lied to investors and kept material information from them during an earning conference call with investors on April 13 when he said the trades were "a tempest in a teapot."

"Defendants misrepresented the losses and risk of loss to the company arising from massive bets on derivative contracts related to credit indexes reflecting interest rates on corporate bonds," Reuters reported the complaint said. "These derivative bets went horribly wrong, resulting in billions of dollars in lost capital for the company and billions more in lost market capitalization for JPMorgan shareholders." 

Reuters said a spokesman for JPMorgan declined to comment on the lawsuits. 

Photo courtesy of Skechers

Kim Kardashian was part of the Skechers ad campaign called "deceptive" by the FTC.

Skechers, the company that makes those extremely popular Shape-ups toning shoes, has agreed to pay $40 million in refunds to settle charges of deceptive advertising brought by the Federal Trade Commission. 

(Click here to get the facts about this settlement and instructions on how to file for a refund if you are eligible.) 

You’ve probably seen the ads for Shape-Ups. They say you can “get in shape without setting foot in a gym.” Some of the ads feature celebrities, such as Kim Kardashian and Brooke Burke. 

Skechers USA said its shoes provided more weight loss and muscle toning and strengthening (of the buttocks, legs and abdominal muscles) than regular fitness shoes. 

The FTC complaint charges Skechers with falsely representing that it had clinical studies to back up those claims. The commission alleges the company made similar deceptive claims about its Resistance Runner, Toners and Tone-Up shoes.

“Skechers’ unfounded claims went beyond stronger and more toned muscles. The company even made claims about weight loss and cardiovascular health,” said David Vladeck, director of the Federal Trade Commission’s Bureau of Consumer Protection, in a written statement. “The FTC’s message, for Skechers and other national advertisers, is to shape up your substantiation or tone down your claims.” 

In a press release, Skechers denied the allegations and "believes its advertising was appropriate, but has decided to settle these claims in order to avoid protracted legal proceedings."

Some of the ads for Shape-Ups featured an endorsement from a chiropractor, Dr. Steven Gautreau, who said his recommendation was based on an “independent” clinical study he conducted. The FTC’s lawsuit alleges this study did not produce the positive results claimed. Dr. Gautreau is married to a Skechers marketing executive and the company paid him to conduct the study. The ads did not disclose this information. 

Under the settlement announced today, Skechers is barred from making claims about strengthening, weight loss or any other health or fitness-related benefits from its toning shoes, unless those claims are true and backed by scientific evidence. 

Last year, the FTC reached a similar settlement with Reebok International LTDk about claims for its toning shoes. Reebook agreed to make $25 million in customer refunds.

The federal settlement is part of a broader agreement that resolves an investigation conducted by 44 states and the District of Columbia.

Something else to consider
I first warned you that the claims for toning shoes appeared to be over-hyped back in November of 2010. (ConsumerMan: Do those funky shoes really promote fitness?) I explained that toning shoes are designed to be unstable, which could cause problems for people who already have trouble maintaining their balance.

At that time, Consumer Reports was concerned that seniors who wore toning shoes could increase their risk of falling, which could result in hip fractures or other serious injuries. That’s still something to consider before you buy a pair of these shoes.

More information:

• How’s that Work-out Working Out? Tips on Buying Fitness Gear 

Photo courtesy of BMW

BMW gave U.S. buyers a first taste of the X1 at April's New York Auto Show, but only last week revealed the crossover-utility vehicle's $31,545 base price.

Sometimes you have to think small to grow bigger. Hoping to lock down its position as the U.S. luxury market leader, BMW is getting ready to introduce some of the smallest products it has ever sold here, including a new version of its little 1-Series and the all-new BMW Vehicle.

The Bavarian maker isn’t alone. The compact and even subcompact luxury classes, which barely existed just a few years ago, are suddenly being flooded with new product and may be critical in an increasingly competitive market where a new generation of buyers is proving unexpectedly resistant to the siren call of luxury automobiles.

“You can no longer assume Gen-Y buyers necessarily want a luxury vehicle anymore,” cautions Rebecca Lindland, senior analyst with IHS Automotive, “and even if they do aspire to luxury, they may not have the money.”

But even older buyers are rethinking their options in the wake of both a deep recession and rising fuel prices, industry observers say.

BMW gave U.S. buyers a first taste of the X1 at April’s New York Auto Show, but only last week revealed the crossover-utility vehicle’s $31,545 base price.  The compact crossover was offered in a number of countries in its earlier form, undergoing some extensive updates before the maker felt it could launch in the U.S. 

The market has changed significantly since the X1’s global introduction in 2008. Fuel prices have repeatedly surged to record or near-record levels.  Younger buyers have shown a growing preference for downsized offerings, matching trends in other parts of the world.  Of course, that may also reflect the realities of a generation that, according to the pundits, could be the first to see their standard of living dip below that of their parents.

Whatever the reason, BMW won’t be alone.  Mercedes-Benz is also downsizing, with a totally redesigned A-Class coming to the U.S.  In fact, company officials hint they may offer as many as four different versions of their smallest-ever model in the U.S.  And the German maker will share the underlying platform developed for the A-Class with its Japanese alliance partner, Nissan using it for the planned Etherea model now under development.

The global downsizing trend has swept through the luxury side of the industry.  Even Aston Martin has responded with the Cygnet, a two-seat microcar based on a Toyota platform that recently appeared in the U.S. as the Scion iQ.  Loaded with leather and other high-end details, Aston currently has no plans to bring the Cygnet to the U.S., but that strategy could shift.

Analyst Jim Hall, of 2953 Analytics, remains skeptical about just how much demand there will be for the smallest of new luxury models, but agrees makers are likely to give it a try – if for no other reason than “as a CAFE play.”  Facing a Corporate Average Fuel Economy standard that will nearly double by 2025 BMW, for one, will have to offset low-mileage models like the big 7-Series and the X5 Sport-Activity Vehicle with models like the 1-Series and X1.

The luxury market as a whole is expected to be a bit smaller than many had once anticipated, contends Lindland. While luxury demand has been recovering along with the rest of the U.S. new car market, IHS now forecasts that high-line models will account for, at most, 13 percent of overall sales by decade’s end, compared with the 14 percent or more the consulting firm projected prior to the start of the 2008 recession.

And considering that the firm anticipates the overall auto market will fall short of earlier expectations that could mean a real dogfight in the luxury end.

In recent years, it has been a three-way battle for supremacy, pitting last year’s winner, Mercedes-Benz, against BMW and Lexus, which had been the U.S. luxury leader for more than a decade. 

Whether the new small cars, such as the BMW 1-Series, Audi A3 and Mercedes A-Class will make a significant difference remains to be seen. So far, the few entries in the segment have generated relatively modest sales. But the smaller among the brands’ more traditional offerings, such as the Audi A4 and Mercedes C-Class, have continued gaining traction.  The 3-Series has long been the dominant model in BMW’s line-up.

But just making a model small won’t necessarily be enough, cautions Jack Hollis, a vice president with Lexus parent Toyota, especially in appealing to Gen-Y.

“Young buyers don’t look at needing a car as much today to have a social life. Their world of community is so much larger and (they) don’t need a car to take them there,” he contends, arguing that it will also require exciting products that also incorporate the sort of connected technologies that have become an essential part of Millennial life.

The brand that can find the right balance between size, style, performance and connectivity should win the shoot-out.

Facebook plans to increase the size of its IPO by 85 million shares, says someone familiar with the matter, a move that could value its upcoming offering at as much as $18.5 billion.

The social network’s 25 percent upsize plan will be filed with regulators at the U.S. Securities and Exchange Commission Wednesday morning, this person said.

Facebook’s expected move takes the size of its new issue from roughly 340 million shares to roughly 420 million, a change that, combined with the greenshoe -- additional shares that could be sold by bankers in the aftermath of the IPO -- could value the total deal at nearly $20 billion.

A final decision on Facebook’s IPO price, which is expected to be somewhere between $34 and $38 per share, will be made Thursday evening.

Previously: Facebook raises price range for IPO

CNBC.com: As investors Fawn over Facebook, poll finds user distrust, apathy

CNBC.com quiz: What's your facebook IQ?

CNBC.com: Confidence lacking in Zuckerberg as corporate steward 

Full Facebook IPO coverage from CNBC.com  

Joe Raedle / Getty Images

Protesters watch as cars leave outside the building where a JPMorgan Chase shareholders meeting was taking place on May 15, 2012 in Tampa, Fla.

It took less than an hour for JPMorgan Chase's CEO Jamie Dimon to dispatch a relatively tame group of shareholders at the bank’s annual meeting in Tampa on Tuesday.

That was the easy part.

Now, the bank’s combative CEO faces two government inquiries and a substantial legal liability from angry investors who have lost more than $20 billion after a series of risky bets inflicted at least $2 billion in losses on the nation’s largest – and once most-admired - bank.

On Tuesday, the New York office of the FBI opened an investigation into JPMorgan’s ill-fated trading scheme, a source familiar with the probe told Reuters. The source, who requested anonymity because the investigation is ongoing, said the probe was in a "preliminary" stage.

The investigation follows a separate inquiry by regulators at the Securities and Exchange Commission, first reported in early April, into JPMorgan's accounting practices. When JPMorgan reported its quarterly earnings on April 13, Dimon dismissed those reports as “a tempest in a teapot.”

Investigators will likely be looking into how well Dimon was briefed on the losses, which began mounting weeks before they were disclosed on May 10. Securities laws require public companies to disclose in a timely manner material information that could affect shareholders’ investments.

With some 850 million shares traded between April 13 and May 10, the bank faces “substantial liability" from shareholders who lost money based on Dimon’s initial assurances, according to Dennis Kelleher, a securities lawyer who heads a Better Markets, nonprofit shareholder advocacy group.

“This is supposed to be a well-managed bank with a CEO who sweats the details with a gold-plated risk management team,” he said. “The lawsuits will be a mile high by the time they’re all filed.”

Several hundred of those shareholders gathered Tuesday at a suburban office park in Tampa, Fla., under tight security that had been arranged for a protest that never really materialized. After rushing through his prepared remarks, Dimon listened patiently to series of mild scoldings.

"We heard the same refrain: We have learned from our mistakes. This will never be allowed to happen again," said Rev. Seamus Finn, representing shareholders from Missionary Oblates of Mary Immaculate. "I can't help wondering if you are listening."

Among the shareholder proposals under consideration was a provision to force Dimon to abandon his dual role as chairman and CEO. The move won only 40 percent approval despite the backing of large institutional investors such as the California Public Employees' Retirement System, which argued that a separate board chairman would provide stronger management oversight.

Some shareholders also pressed Dimon on the bank’s failure to provide greater assistance to families facing foreclosure,

“If Chase can afford to gamble with $2 billion without an impact on its bottom line, why can’t it reduce principal for borrowers. We’re talking about real people. They’re not just dollar signs,” Laura Johns, a former housing counselor, told Dimon at the annual meeting.

Dimon and JPMorgan face an even tougher round of questioning from Congress, regulators, federal prosecutors and shareholders.

On Monday, Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee, announced hearings in the next few weeks on financial regulation that will include the JPMorgan loss. The hearings are expected to address the question of whether the loss-making trades were “hedges” against wider financial risk – or outright bets with depositors' and shareholders' money.

“Nobody actually knows what was going on because JPM has decided not to disclose what was going on,” said Kelleher. "So you basically have only speculation so far."

Until last week, Dimon had been an outspoken critic of new regulations aimed at restricting so-called proprietary trading that Congress has sought to outlaw since the financial collapse of 2008. He had led his industry’s effort to water down some provisions of the Dodd-Frank regulations enacted in 2009 to curb speculative trading.

The bank’s spectacular trading blunder – the final loss is still been tallied – has bolstered the case for tougher rules to prevent a repeat of the risky strategies that brought down the financial system in 2008. On Tuesday, U.S. Treasury Secretary Timothy Geithner said JPMorgan's losses strengthened the case for reform.

"The test of reform is not whether you can prevent banks from making mistakes ... the test of reform should be: Do those mistakes put at risk the broader economy, the financial system or the taxpayer?" Geithner said in Washington.

At Tuesday’s shareholders meeting, Dimon struck a more conciliatory tone on the subject of regulating the financial system,

“Our interest is the same as yours: to make it strong and sound,” he told shareholders. “We believe in strong simple good regulations. It’s not simply a question of more or less. We supported an awful lot of what is in Dodd-Frank."

Dimon also faces calls to resign as a member of the board of the New York Federal Reserve, one of JPMorgan’s chief regulators.

Having bankers on the boards of regional Fed banks “is a problem, period,” Sheila Bair, senior adviser at Pew Charitable Trusts and a former chairman of the Federal Deposit Insurance Corp. told Bloomberg news. “Why the regional banks have members of the industry that they regulate on their boards is beyond me.”

Facebook’s long-awaited initial public offering will be a long-term bet, and selling pressure on the shares after the market excitement post-IPO will “relax,” Martin Sorrell, CEO at advertising bellwether WPP, told CNBC Tuesday.

“I don’t think 900 million people can be a passing fad. A lot of people have taken a position in Facebook, it’s a self-perpetuating situation,” Sorrell told CNBC’s “Worldwide Exchange.” “The $100 billion was predictable and they’re trying to build a momentum.”

Sorrell said he would buy the shares with a view to looking at them again in “15 or 20 years’ time.” He said through WPP he buys $75 billion worth of media a year, adding that he spent $200 million last year with Facebook and while he would increase his spend in the network, it would be lower than he had first envisaged.

“We’ll increase (spending) this year, but it is a social network and you interrupt a social communication with an advertisement at your peril,” Sorrel said.

Facebook has been keen to argue that its advertising revenue would form a key component of its ongoing success, saying it would make ads “more relevant, more social, and more engaging” as it looks to grow.

The social media giant hiked the widely anticipated price range of its IPO to $34 to $38 a share Tuesday with trading expected to commence Friday — valuing the company around $102 billion, Silicon Valley’s largest ever IPO to date.
Sorrell described the price range as “hard to stomach.” 

An AP-CNBC poll found that half of Americans believe that the company’s expected stock price is too high.

Crucially, the same poll found that more than half — 57 percent — of respondents do not click on the ads on the site.
Critics of the hype surrounding the highly anticipated IPO argue the company’s advertising revenue history is weak and are doubtful about the site's longevity in the competitive technology sector.

Michael Browne, fund manager at Martin Currie, agreed that Facebook was a “unique proposition” and compared it to Twitter, the rival social network which has been snapping at Facebook’s heels as it has seen its popularity and users grow.

Browne said Twitter was more about “celebrity status and the cult of following people,” whereas Facebook was about interacting with “a smaller, more closed group of people.” 

CNBC.com: As investors Fawn over Facebook, poll finds user distrust, apathy

CNBC.com quiz: What's your facebook IQ?

CNBC.com: Confidence lacking in Zuckerberg as corporate steward 

Full Facebook IPO coverage from CNBC.com  

Investors may be hot to trot over Facebook's IPO, but a new AP/CNBC poll finds the company is facing potential monetary roadblocks CNBC's Kayla Tausche finds in the video below.

Stocks clung to minor gains Tuesday, in part driven by signs the U.S. economy is gathering steam.

Just after 1 p.m. Eastern, the Dow Jones Industrial Average was up 0.26 percent. The S&P 500 was 0.23 higher. And the Nasdaq rose 0.71 percent.

The markets wavered in early morning then returned to positive territory after a report saying major homebuilders were optimistic about the sector.

Consumer prices were flat in April, but the cost of gasoline dropped.

One sign of concern for the economy was a report showing retail sales barely rose in April.

Stocks are having their worst month in the past eight. For the month, the Dow is down 518 points — about 4 percent — after hitting a four-year high on May 1. The average is on track to post its first monthly loss since September, when it fell 6 percent.

If the Dow closes higher, it will be only its second up day since the peak reached on May 1.

The Associated Press contributed to this report.

Zillow

The custom home is designed to resemble a 1700s Austrian-style cottage.

885 Hill Lane, Lake Tahoe, Nevada

For sale: $3,700,000

When Paul Arnold and his wife Elizabeth decided to build their custom home, they wanted something beyond fun. They wanted something fantastic.

Hence, "The Hobbit House" was born.

"As a framing contractor, I do hundreds of homes a year," explained Arnold. "To do something different and beautiful was always our mindset if we were going to do something for ourselves."

For years, Arnold has worked alongside Jim Brashers, a local expert in designing, constructing and renovating historic and period homes.

"We have built lots of really cool Disneyland-looking mountain cottages," explained Arnold. "My wife has always wanted to have a Jim Brasher-designed house."

The resulting property is something that belongs in a fairy tale -- literally. The 1700s European-style cottage that is more the size of a castle, ringing in at 6,640 square feet. It resides on a forested lot complete with a waterfall, and views of the lake. 

It is a most fascinating mix of whimsy and formidable architectural styling.

A carved stone entry and 3-foot thick door, built with trees from the property, lead into the home where visitors are greeted by a handmade dragon chandelier holding court over an enormous entryway with hickory floors. Most of the woodwork was hewn from trees on the property, including the cabinetry and paneling -- a decision made by Arnold's wife.

"She asked me if we could build the house without taking down any of the trees," said Arnold. His compromise was to build the house the best he could around the trees, and to incorporate the few trees that fell into the home's design.

Other whimsical details in the Reno-area home include a giant wood-burning fireplace, guest suites with small windows looking over a great hall, and an indoor pool that is only accessed by a stone bridge. An outdoor wine cellar is built into the side of the hill.

And of course, detailed murals cover many of the walls.

"That's a very favorite part of the house," Arnold says. "There was an artist in that house for months, and the artwork on the walls is spectacular."

Despite the rustic appeal, the home is firmly planted in the 21st century -- a blend of a "yesterday and tomorrow," says Arnold, who amped the home with technological details, including a controlled lighting system by Creston.

The 4-bedroom, 5.5-bath home is listed by Ronda Moll of Sierra Sotheby's International Realty.

According to Zillow's mortgage calculator, a monthly payment on the home would be $13,616 a month, assuming a 20 percent down payment on a 30-year-fixed mortgage.

Zillow

A stone bridge is the only way into the indoor pool area.

Zillow

Many of the rooms are covered in murals.

See more photos of the storybook-style home on Zillow.