The move, if true, would form a new stream of revenue for the social network in the months before the company launches its initial public offering, according to a report from the The Financial Times citing unnamed sources.
The report said Facebook has been in contact with advertising agencies regarding what would be “featured stories” in users’ news feed. The ads reportedly would launch in early March.
Last week, Facebook filed documents for an IPO with the U.S. Securities and Exchange Commission. With an expected $100 billion valuation, the social network has a preliminary goal of raising $5 billion. The IPO is expected in May. A stock price has not yet been announced.
In its SEC filing, Facebook made it clear to potential investors that it plans on putting a lot of focus on its mobile users. Of the company’s 845 million members, 425 million monthly active users access the site with their mobile devices.
Zeus Kerravala, an analyst with ZK Research, said adding a new revenue stream wouldn’t just bring in more money, it also could increase Facebook hype – both of which would benefit the IPO.
“Well, the valuation at IPO is based on basic company fundamentals and hype,” he added. “Hype can bring in investors that might not typically participate in an IPO, and another revenue stream adds to Facebook’s long-term potential.”
The problem with such an ad plan is that it could bring in more user ire than revenue, Kerravala said.
“It’s like spamming users,” he said. “Putting ads in the news feed is, in effect, spam. The news feed is meant for users to keep updated with other users, not for Facebook marketing. This can only have a negative backlash.”