Remember - information about individuals is worthless. It's the large-scale aggregate data that has value.
Another false assumption.
Remember 'Total Information Awareness"?: http://en.wikipedia.org/wiki/Information_Awareness_Office
Officially, that died on October 1, 2003, when President Bush signed the defense budget in which Congress axed the program after its existence caused a public uproar. Read through the various programs under that umbrella, including "Scalable Social Network Analysis". Zuckerberg released his first "social network" project (Facemash) on October 28, 2003, only 27 days after TIA was officially put down and split up between different agencies. For some reason, Harvard saw fit to drop their proceedings against Zuckerberg to have him expelled for hacking into the student ID databases to obtain the photographs he initially used to populate his site. He was then able to rapidly expand his project and get venture capital funding. Given that this all occurred well after the dot-com bubble burst, it seems that selling the associated data to advertisers would be a weak financial foundation to rapidly build such a project on, particularly when the principal leader of the project is a college undergrad, and its membership was limited to colleges at the time. I think the underlying idea may really have been to privatize parts of TIA all along. In particular, while the US government is bound by the Freedom of Information Act and the Privacy Act amendments, later amendments weakened the original acts in favor of protecting corporations, so the government is not required to reveal information that is considered a "trade secret" of a third party. See the article from a few days ago ( http://yro.slashdot.org/story/11/10/13/1938241/facebook-the-law-says-you-cant-have-your-data ), where Facebook is claiming this exact protection.
One related point is that the FOIA gives you standing to find out what records the government is keeping about you, to challenge the accuracy of it, and to sue the government for abusing it; the Privacy Act limits how they can share it, even between agencies. Data held outside the government is exempt from all that, at least in the U.S.
Viewed in that light, the individual information is the *most* valuable and unique; not worthless at all. Now, pair the social network information with all of the photographs that are pumped into FB and tagged by individual... Take a look at cheap software such as http://http//www.facegen.com/ (even has a free version) and http://www.youtube.com/watch?v=BsFj1-fvbkA&noredirect=1 (first couple of relevant Google links I could find, I sure the three-letter agencies have access to better). Even if you aren't on FB, you are probably tagged somewhere in a photo, unless you are a total hermit. If the authorities were looking for you and had access to parametric data about your facial and body structures from this database, as well as access to the National Facial Recognition Network discussed recently ( http://yro.slashdot.org/story/11/10/07/2342240/fbi-plans-nationwide-face-recognition-trials-in-2012 ), they have a solution that would make the Stasi drool. You have everyone snitching on everyone else, documenting their comings and goings, providing up-to-date photographs, etc., and it is all there in one place, already tagged and organized.
The advertising revenue may just be the gravy on top of the government contracts.