Just this week Facebook raised another $25 million in venture funding from Greylock, bringing their pre-money valuation to close to $525 million.  Now this indicates one of two things, either they are burning cash like CRAZY and can’t generate enough to support their big staff, OR they are looking to finance some new expansions or new features. I’m hoping for the latter, but for the purposes of this article, let’s go with the former.

Note before I get started, let me say that the closest my affiliation goes to Facebook is that I’ve met a few of their employees, and use their site from time to time.

Now on to the good stuff.

How Facebook can save face in 5 steps:

1. Partner up like crazy: make deals with companies that cater to college kids (AOL’s AIM, Book publishers, music and film companies, etc.). Use these deals to leverage some of your influence and cash in on the rich demographic info you’ve got just sitting there waiting to be mined. These partnerships have to be done in a sensitive manner though, as young adults are very fickle about being overly marketed to. But some of the partnerships could be in promotion form: i.e Facebook members save $2 on  Netflix, get 1 free rental coupon at Blockbuster, can purchase the new Strokes album 2 days before everyone else online, etc. Things along these lines would be a boon to Facebook’s bottom line, and work extremely well for the marketers involved as well.

2. Open up your site to APIs, let people create applications and services which piggy back on your network, have them charge a fee, then you take a cut. Someone like Dodgeball would be a good fit, TONS of students would pay a per message fee to see where their buddies are (or that guy they like).

3. Leverage the fact that you are so deeply ingrained in student life, by letting them create more content that is relevant to each other. (note: this steps on the toes of what I’ve got planned for CampusFix, but if they benefit, we all benefit, right?) If students can do a lot more sharing of microcontent, then they will come back more, and Facebook won’t lose its #7 traffic ranking.

4. Go international! This should’ve been number 2, but its tough to localize the software for use elsewhere. College kids across the globe are getting more and more ingrained in the network, so it only makes sense. Take the current new model (lots of local services) and replicate it another 1000x, and you’ve got yourself a Billion in revenues just like that.

4b. Partner up with established communities/sites abroad, this will make handling the problems easier (as each partner has a stake in the local site, and knows the market).

5. Merge with LinkedIn. Why? Because you are both funded by Greylock, LinkedIn could use a huge boost in membership, and this way your network keeps feeding itself. Once everyone graduates, they won’t mind having their Linkedin account created automatically, as employment is going to be the key factor here. Or even let Facebook users tap into the Linkedin job market before they graduate. Lots of employers hire based on your Alma Matter, so this makes perfect sense to boost recruitment, etc.

The key to all of these issues is monetizing the traffic you have. From what I can gather they are trying little things here and there (facebook flyers, etc), but on an aggregate, these can’t be producing hundreds of millions per year ( so as to justify the valuation).