Based on the rumor that Facebook Inc. (NASDAQ: FB) will start the equivalent of a news feed (Reader) for its members, the market ought to be trading the social network’s shares higher. The effort would help Facebook further corner the market of users who share information with other users, with news as the latest type of content. That, in theory, should increase the time that visitors spend on Facebook. At least the rumor cannot be viewed as negative. However, Facebook’s stock is taking a beating, probably because its basic business model will come under siege if the online display ad market continues to erode in value and a weak economy worsens the situation.

Facebook’s shares have fallen to $23.55, well down for the year, and off a 52-week high of $33.44. With the overall market still relatively near all-time highs, Facebook’s failure in terms of share price appreciation is notable.

Facebook’s primary source of revenue is display advertising, and by some estimates, it has 25% of that entire market in the United States. However, financial results from other online companies have show that CPMs for display remain under pressure. With a rising concern that the growth of the overall economy may taper off, Facebook’s double-digit growth rate may be threatened. And there is a great deal of evidence that mobile advertising yields much less than PC-based ads. Facebook has made a push into mobile.

The more often mentioned challenge to Facebook is that it has stopped growing in terms of users, at least compared to the past. At 1.1 billion users, it may be huge, but almost no one believes it will rise rapidly to 1.2 or 1.3 billion.

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