Is time running out for Facebook?

Because of the rapid pace of technology and the fickle nature of internet users, Facebook's founder, Mark Zuckerberg, needs to lay the foundation for an initial public offering now, before a new flavor-of-the-month social network comes along and makes Facebook look like yesterday's news.

So Zuckerberg is reshaping his management team with experienced corporate hands. In the latest change, Adam D'Angelo, Facebook's 23-year-old chief technical officer, is leaving the inner circle.

D'Angelo, who has known Zuckerberg since high school, is the programming whiz widely credited for building Facebook's technical infrastructure. He follows Facebook co-founder Chris Hughes, who left the company to join Senator Barack Obama's presidential campaign, and Owen Van Natta, the company's former chief operating officer, who left after being demoted to chief revenue officer—a tough job at Facebook, apparently.

D'Angelo's departure comes amid a series of high-profile hires, including new C.O.O. Sheryl Sandberg from Google, who was brought in after a series of Facebook missteps, including the disastrous launch of the Beacon social-advertising platform, which prompted calls for "adult supervision" at the company.

But will new, more experienced management make a difference if the company can't figure out how to make money off its exploding user base?

More than six months after Microsoft injected $240 million into Facebook, Zuckerberg is coming under pressure to justify the $15 billion valuation implied by Microsoft's investment, not to mention the company's rapidly growing head count, this year expected to grow to more than 1,000 employees.

That may be why Facebook failed to raise the full $500 million it had sought in the funding round with Microsoft, instead topping out at about $350 million. But that hasn't kept Facebook from spending—and borrowing—cash: It recently secured a $100 million loan from Silicon Valley startup lender TriplePoint Capital to buy computer servers to handle its exploding user base.

In the beginning, Facebook was a place where college students seeking an alternative to MySpace's wretched interface and spam could congregate online, share photos, gossip, and generally carry on beyond earshot of nosy parents and teachers—not to mention future bosses.

Zuckerberg spoke of highfalutin concepts like the "social graph"—which was supposed to connect everyone in the world into a giant social network.

If Zuckerberg wants to take Facebook public, the time has come to prove that the company is more than just a nifty way for friends to stay in touch, and an actual business with a revenue model that will prove attractive to public markets.

The simple fact is that despite its rapid growth, Facebook has yet to turn a meaningful profit. The company is expected to earn $50 million on $300 million to $350 million in revenue in 2008, but is also expected to spend $200 million on capital expenditures, bringing its "negative cash flow" to $150 million. That's not a good sign for a richly valued company eyeing an I.P.O. in the next year or two.

In recent months it has become increasingly clear that advertising on social networks like Facebook and MySpace is proving to be a trickier proposition than many people had anticipated.

Earlier this year, Google co-founder Sergey Brin acknowledged that his company hasn't found "the killer best way to monetize social networks yet." This is a problem for Google, because it is obligated to pay News Corp., MySpace's owner, $900 million in guaranteed revenue through 2010.

And last week, News Corp. said that selling ads on MySpace is proving to be more difficult than anticipated, which helps explain why Fox Interactive Media's revenues dropped from $233 million to $210 million in the previous quarter.

Part of the problem lies in the fundamental reason why users join online social networks in the first place. Put simply, they're not there to buy things, they're there to socialize.

By contrast, people go to Google, by definition, because they are looking for something. Often, that "something" is a product or service. Thus, by targeting Web advertising to a user's search query, Google has built an enormously profitable business.

This leads to an inherent—if underappreciated—maxim of the internet economy: Not all eyeballs are created equal. Users who visit a site actively looking for something are more valuable to advertisers than users who visit a site to hang out with their friends.

Thus Facebook's watchword is no longer community, but scale, which is why Zuckerberg brought in Sandberg, who built Google's search-advertising business from the ground up. (That business is now responsible for the bulk of the company's $16.6 billion revenue haul.)

Even if Facebook users' eyeballs are less valuable to Web advertisers than Google's, Zuckerberg is hoping that Sandberg can leverage the site's exploding user base (over 100 million globally) to turn a profit.

Time is running out.