The move follows Google's own switch last year to "instant" search results, which also update advertisements while a user is typing in a query.
The development also comes as Facebook is attempting to boost its revenue ahead of a possible IPO next year. Advertising makes up the vast majority of the company's turnover, with the social network expected to reign in $US2 billion in ad revenue this year, according to eMarketer.
Lara Solomon, LaRoo chief executive and SmartCompany Facebook blogger, says the idea has merit for businesses using very specific advertisements.
"Facebook ads can be really effective because they're quite cost-effective compared with other sources of advertising, such as banner ads and so on," she says.
"The great thing about them is that you can target them really tightly, which obviously goes along with what Facebook is experimenting with here."
A report from AdAge claims Facebook is testing the feature among only 1% of users – which equates to roughly five million people worldwide.
While Facebook has always used a profile's information to deliver specific ads, now is the first time they will be doing so in real-time. And the report also claims the company is doing nothing to change the actual algorithm of how advertisements are displayed – it's just doing so faster.
For example, if a user types in their status update box that "I'm shopping today for some sunglasses", that user may see an ad from an eyewear shop such as the Sunglass Hut pop up immediately.
The idea is that Facebook wants to connect advertisers with users at the particular moment they want something. When a user posts a status update, they are expressing a desire or some type of feeling at that particular moment, and may be more inclined to buy a product.
A Facebook spokesperson told the Huffington Post the development is being tested among some users to see how much they can personalise the ads shown to each profile.
"Advertising on Facebook is more relevant for people because they have explicitly stated their interest in things...We are currently testing a feature that simply helps surface relevant advertising more quickly."
Solomon says while the social network may have some issues with location-based ads – users won't buy a pizza from a shop hundreds of miles away – the idea nevertheless has merit for small businesses if it eventually develops into a product.
"I'm not sure how Facebook is going to deal with that in terms of advertising, so it will be interesting to see. But it definitely a great opportunity for small business."
"This development is really interesting because they are trying to be more like FourSquare, and be more reactive instead of proactive in their advertising. There's definitely a shift that way."
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