Facebook is set to announce its share price today, ahead of floating on the stock market on 17 May in what will be the largest initial public offering in internet history, but the firm's huge reliance on earning money through advertising could pose a threat.


The social network earns 82 percent of its $1bn (£620m) quarterly revenue from advertising, but a survey this week by Associated Press and CNBC reveals that 57 percent of Facebook's 901 million active users never click on adverts.

A further 26 percent said they "hardly ever" engage with advertisements that appear on their news feed and just four percent admitted to clicking on adverts "often" - this is only slightly higher than the two to three percent clickthrough rate that is considered the benchmark for traditional banner ads, according to CNBC.

Facebook makes money whether an advert is clicked on or not, but the clickthrough rate of users is the metric used by advertisers to determine if the ad is worth their investment. General Motors earlier this week revealed that it would no longer invest $10m a year in Facebook advertising, claiming that the ads do not help to sell cars.

GM has instead opted to maintain its free brand page on the social network instead of paying for adverts targeted at specific users.

Facebook's reliance on advertising revenue is such that the site issued what investors treated as a profit warning on 11 May, stating that demand for its mobile applications - which do not yet display advertising - has outstripped the revenue they generate.

To reduce pressure of earning revenue almost exclusively through advertising, Facebook is looking into alternative revenue streams, such as charging users a small fee to display their posts in prominent positions on friends' walls - a trial for this service is currently available to users in New Zealand.

The survey looked at potential growth in the e-commerce sector for Facebook, but was met with reluctance as 54 percent said they wouldn't feel safe using the website for financial transactions and a mere eight percent said they would feel "extremely safe" or "very safe" doing so.

On 16 May Facebook made an eighth change to its S-1 filing with the Securities and Exchange Commission, releasing a further 96 million shares to potential investors and raising the estimated price to between $34 and $38 per share.