It’s an interesting time to be Facebook. You know, as in the old Chinese curse “may you live in interesting times.”

They’ve been the target of freedom and privacy advocates for some time. All the way back in 2008 I was talking about the company’s anti-privacy tendencies and arguing that things were only going to get worse for the citizenry. More recently, I called them the most congenitally dishonest company in America, and I’m waiting for evidence that proves me wrong.

But these days, us privacy ankle-biters are the least of Mr. Zuckerberg’s concerns. You’re no doubt aware of the debacle surrounding the company’s IPO. They opened at 38, then all hell broke loose, and as I type they’re trading at 20 and change. I’m not sure how much of a loss that represents, but if you were one of the people who bought at 38 (or worse, caught the wave as it surged into the 40s) you’re probably not especially happy right now.

Predictably, some analysts are advising that we remain calm and stick to the plan – long-term prospects are strong.

Investors can expect Facebook’s stock to be volatile for a few years. But analysts say that those willing to wait will likely be rewarded – someday.

“I view it as a tomorrow stock,” said Christian Bertelsen, chief investment officer at the wealth-management firm Global Financial Private Capital.

“The whole thing on Facebook is, look, if your time horizon is hourly, weekly, or even monthly, this is not the stock for you,” he said. “You need to take a much longer-term view on it.”

Bertelson is no doubt an informed resource. But it isn’t clear that he’s taking into account Facebook’s real problem. To wit: the company faces mounting evidence that its advertising simply doesn’t work. Back in May, just a couple of days before the IPO, General Motors announced that it was dumping Facebook from its advertising/marketing mix.

A hammer blow was struck for the Facebook advertising model today as car giant General Motors (GM) declared that they were scrapping their Facebook ads because they were not delivering results.

The decision by GM puts the spotlight on the effectiveness of advertising on Facebook. A study by TNS last year found that over 60% of Facebook users didn’t want to be bothered by adverts, whilst the click through rate on Facebook adverts is notoriously low, often hitting just 0.05%.

How much damage GM’s move inflicted is hard to assess, but if I’m Facebook the $10M lost in direct revenue is nothing compared to the PR hit.

Now this comes along: another advertiser just decamped FB, saying that 80% of its Facebook clicks come from bots. From MediaPost:

In a much-circulated blog post, Limited Run, which offers Web site services to artists and musicians, informed fans that it is deleting its Facebook page and moving over to Twitter, with the following explanation, which I have taken the liberty of re-posting at length:

“Unfortunately, while testing their ad system, we noticed some very strange things. Facebook was charging us for clicks, yet we could only verify about 20% of them actually showing up on our site. At first, we thought it was our analytics service. We tried signing up for a handful of other big name companies, and still, we couldn’t verify more than 15-20% of clicks. So we did what any good developers would do. We built our own analytic software. Here’s what we found: on about 80% of the clicks Facebook was charging us for, JavaScript wasn’t on. And if the person clicking the ad doesn’t have JavaScript, it’s very difficult for an analytics service to verify the click. What’s important here is that in all of our years of experience; only about 1-2% of people coming to us have JavaScript disabled, not 80% like these clicks coming from Facebook. So we did what any good developers would do. We built a page logger. Any time a page was loaded, we’d keep track of it. You know what we found? The 80% of clicks we were paying for were from bots.”

Yow. So, how worried should Facebook be? Or perhaps I should ask the question this way: if you own Facebook stock, should you hold or sell now and cut your losses? Should you take Bertelson’s advice and think long-term (or cut and run if you’re not a long-term investor)?And what if you’re an advertiser? Do you spend your cash with FB or go somewhere else?

Keep an eye on what happens with the Limited Run story. It’s a near-certainty that others are going to conduct the same kind of proprietary analysis and if LR’s results are replicated consistently you’re going to see revenue fleeing Facebook like rats off a sinking ship. This doesn’t mean that Facebook will be out of business this time next week – mountains of cash are a wonderful hedge against bumps in the road – but it does probably mean the following:

• 20.13 (the stock price at the moment) isn’t the bottom.
• That long-term success horizon may be further out than some analystas imagine.
• Facebook may have to rethink its business model, a process that will be dramatically complicated if ad revenues plummet – that kind of stress can wreak havoc with the innovative juices, as it’s hard to be creatively brilliant with a gun to your head.

Things to think about.

Oh, one more. If I’m Limited Run, I’m currently ramping up a new services offering. There are lots of companies out there wondering if they’re wasting money on Facebook. If they’d like to find out for sure, they can either a) reinvent the wheel, or b) use my proven tools and methodology. This sounds to me like a revenue stream.

Again, just throwing things out there….