by Victor Karamalis

Facebook quietly said on Wednesday that it is working on implementing a targeted ad system based on user information and community-centric themes. Facebook which has declined buyout offers by Viacom Inc. and Yahoo for $1 Billion, believes it can remain independent and create an IPO for as much as $10 billion to the chagrin of its investors. Currently, the company has its $10 per ad “Flyer” program but the new system has become a top priority as publicized through a company spokesman as reported by the Wall Street Journal.

The ad system is said to be based on ‘demand generation’ which is based on a combination of user information and other Facebook network information. This is in contrast to ‘demand fulfillment’ as implemented by Google’s ad systems. According to the spokesperson, the company needs to do a better job profiting from its proclaimed 30.6 million user base.

With agreements in place with Microsoft, that IPO may indeed happen. The deal may bring in anywhere from $200 to $300 million through 2011. Facebook claims that their relationship with Microsoft is strong in spite of Microsoft’s attempts to build technology to make it easier for advertisers to place targeted ads on Facebook. As per the Wall Street Journal, a Microsoft spokeswoman declined to comment on this issue.

Having Microsoft on board not only bolsters Facebook’s chances on its lofty IPO goal of $10 billion dollars, but it also validates that the software giants are embracing social networking as part of its overall marketing mix. It also sends a message to everyone and its competitors by silently stating ‘we believe we can pick up customers in this relatively young user base’. It would not be surprising to see the other big league tech companies put their hats in the Facebook ring. This may well be the first solid step for Facebook’s Multibillion dollar IPO.

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