Facebook's Real Big Data Problem

Facebook’s first quarterly earnings report as a public company is coming out this Thursday and everyone’s wondering what will be in it. One question is whether advertisers are going to Facebook over other sites like Google.

“Advertisers need more proof that actual advertising on Facebook offers a return on investment,” said Debra Aho Williamson, an analyst with the market research firm eMarketer. “There is such disagreement over whether Facebook is the next big thing on the Internet or whether it’s going to fail miserably.”

Facebook’s unique asset is the pile of personal data it collects from 900 million users. But using that data to serve up effective, profitable advertisements is a daunting task. Google has been in the advertising game longer and has roughly $40 billion in annual revenue from advertising — 10 times that of Facebook. Since the public offering, Wall Street has tempered its expectations for Facebook’s advertising revenue, and shares closed Friday at $28.76, down from their initial price of $38.

There’s a pretty fundamental question here: Does it work?

With all the data Facebook has at its fingertips, it would be a shame if they couldn’t answer that question.