Facebook has built the internet's largest ever social network, and on the back of that, a multi-billion dollar business.
Not surprisingly, a big part of that business is advertising. Much like Google before it, Facebook serves as a gateway to millions upon millions of consumers. On volume alone, Facebook makes a mint.
The ads it distributes? They're not always so hot.
While many if not most major brands are now active on the site in one form or another, Facebook's self-serve advertising platform still seems far more popular with advertisers hawking 'interesting' products and services, or pushing users to their Facebook apps.
Could that change?
For Facebook, it almost certainly has to if it hopes to build a sustainable long-term business. It's biggest hope is that all of the data it collects will help it help advertisers connect with consumers in a much more targeted fashion than ever before possible.
When it comes to targeting, we're not just talking about demographic and interest information here. What if Facebook could deliver real-time ads based on the conversations its users are having when they're having them? According to AdAge, it is experimenting with precisely that.
The appeal to marketers is as powerful as it is obvious: as AdAge's Irina Slutsky describes, "Users who update their status with 'Mmm, I could go for some pizza tonight,' could get an ad or a coupon from Domino's, Papa John's or Pizza Hut".
If Facebook can manage to connect consumers with businesses in real-time at the right time using data mining, the exorbitant valuations given in secondary markets might not be so crazy.
On paper, Facebook has everything it needs. It not only possesses a massive audience, many of the members of this audience share with Facebook on a regular basis their needs, desires and intentions.
A good number of these needs, desires and intentions are potentially commercial in nature, creating an opportunity for Facebook to deliver relevant advertising at the very moment needs, desires and intentions emerge.
It's far too early, however, to predict success with real-time ads. After all, data mining will never be perfect, and what looks like the right time to hit a consumer with an ad might not be.
For example: a status update about a family member losing his or her house being is probably not the time to pitch an ad for a mortgage, yet conceivably a status update mentioning 'house' could trigger such an ad.
Perhaps more important than the quality of Facebook's data mining: the ads themselves. If Facebook users start to see that their status updates and conversations produce more advertising, some might think twice about what they share and how much they share.
That, in the long run, would probably be harmful as Facebook needs its users to keep sharing.
From this perspective, it's clear that Facebook has a fine line to walk as it looks to exploit more and more of the opportunities that it has created. The world's largest social network is sitting on a proverbial gold mine, but if it has to strip mine it to reach the gold, all of the pretty things on the surface of the mine may disappear.
At the same time, advertisers will also need to tread carefully.Assuming Facebook's real-time ads are eventually rolled out as a polished product, advertisers will need to explore how best to use them.
After all, just because they may be able to participate in a lot of conversations doesn't mean that a lot of the time, they shouldn't sit them out and listen instead.