Today, a report is bouncing around the web about Digg’s expenses, profits, and what both mean for the future of the company. Basically, they’re spending more money than they’re making.

Of course, this is a blog about Facebook,  so we can’thelp but ask what it means.

We believe it means that simple, mass-inventory display advertising won’t equal profits for the site. Digg at least appears surprisingly passive in its approach to revenue, relying on deals with Microsoft and other ad networks to buoy its bottom line. That hasn’t been enough.

The same is true for Facebook. Facebook has shown that it sees the need to employ innovative advertising products, with Beacon, Social Ads, and other offerings. But it hasn’t been as aggressive as MySpace- with active ad sales and full-site takeovers- or other sites on the web. Digg provides an instructive lesson on the risks of relying on display ads to support engineering intensive efforts.