There has recently been a lot of buzz about the new mobile ad network that Facebook Inc (NASDAQ:FB) is testing. It will help advertisers target users on third party sites and apps based on their Facebook profile data. It offers Facebook a huge opportunity in the ad network space.

Baird Equity Research says that Facebook Inc (NASDAQ:FB) is aggressively trying to improve user monetization. The social networking site is currently developing the technology and infrastructure necessary to sell ads on other websites. Looking at the rising importance of mobile and Facebook Inc (NASDAQ:FB)’s recent shift to the mobile platform, Baird analysts think that the social networking site has the potential to compete directly with Google Inc (NASDAQ:GOOG).

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Presently, Google Inc (NASDAQ:GOOG) is the king of online advertising, primarily because of the relevance and strength of AdSense. Facebook Inc (NASDAQ:FB) doesn’t generate even a penny outside of its own site, but with its 955 million users, the company has the potential to grab a chunk of $15 billion display ad market.

Additionally, the mobile ad network will help the company reduce ad clutter on its own site. So far, Facebook Inc (NASDAQ:FB) has been conservative in mobile advertising because it fears that too much of ads may alienate users. By placing ads on other sites, it will still leverage its strong user profile database, while lowering the dependence on ads on its own site.

Baird Equity expects that, by monetizing the mobile ad network, Facebook Inc (NASDAQ:FB) turnover will reach $15.6 billion within next five years, recording an annual growth rate of 26 percent.

The revenue growth from advertising has declined in the first quarter, Baird thinks that it is largely due to infrastructure and technology investments, and shift to mobile devices.

The Menlo Park, California-based company’s success with social games proves that the company has capabilities to combine social networking with content distribution. Baird says that Facebook Inc (NASDAQ:FB) also has opportunities to combine e-commerce with social media.

Facebook stocks closed at $21.98 yesterday, giving it a market value of $52.26 billion. Baird Equity has set the price target of $37 with Outperform rating.