Facebook’s $16 billion IPO values the young company at $104 billion, bigger than McDonald’s, Citigroup, and Amazon. Its debut on the stock market today caps a remarkable run for the eight-year-old social network. Begun in a Harvard dorm room, it is now one of the largest companies on the web in terms of its user base and global reach. Mark Zuckerberg has proven a ruthless leader with an eye for talent and ambition to match. But even as the company takes its turn in the Wall Street spotlight, with Zuckerberg ringing the opening bell, some of the best minds in the business are saying Facebook has reached its zenith.

"The flame may already be flickering down," quipped John Borthwick, CEO of Betaworks, when we chatted with him at Betaday, a collection of around 500 thinkers, founders, investors and entrepreneurs from the elite of New York and San Francisco’s startup communities. "Look at what happened with Instagram. Facebook was losing the battle for mobile photo sharing, one of its core features. We are living in an era where things are shifting very rapidly, from search to social, from PC to mobile and tablet. If Google had its time at the top of the mountain, Facebook’s will be even shorter. The cycles are getting ever shorter."

Facebook’s $100 billion valuation is, by several standards, quite high. For example, look at this chart from Erick Schonfeld, which compares the revenues generated by Google and Facebook prior to their IPO. Facebook is hitting the markets with more revenue and profit than Google did when it went public, but has not grown anywhere near as fast or as large as the search engine did.

Fb-goog-revenue

When you compare Facebook to other public tech companies, its valuation also looks way out of whack. The company earned around $1 billion last year, which means its price to earnings ratio, a common method for evaluating stocks, is roughly 100 to 1. Google currently trades around 20 to 1 and Apple, far and away the most profitable tech company of our times, is trading around 16 to 1.

Why would so many smart, rich people put such a premium on the stock? IPOs are an insider’s game. Buying the stock today at $38 means paying a premium to the founders, early investors, bankers, and even the bankers best clients, all of who have passed the stock down the food chain and taken their bite along the way.

Part of that premium comes from the company's incredible reach and recognition which appeals to mom and pop shareholders. "The average person thinks they understand Facebook. They will buy this stock because, duh, they get it. And of course they have no idea what Facebook’s real business is," said Douglas Rushkoff, pacing back and forth on stage during an impassioned set of remarks at Betaday. "I’ve never slept with Zuckerberg, so I don’t know his intentions, hell even if I did, he probably wouldn’t tell me. But I know that in that Facebook boardroom they are not talking about how to help Johnny find more friends. They are worried about how best to sell Johnny’s data to advertisers."

Ron Conway, the Godfather of Silicon Valley, was the biggest Facebook bull at Betaday. "That is an incredible company, incredible talent," he said, when asked about the IPO. "I don’t think they have begun to scratch the surface of what they can do in terms of Open Graph and their ability to build a marketplace that powers social commerce. Big business."

With 900 million users, how much room does Facebook have to grow?

The question now is, with 900 million users, how much room does Facebook have to grow? Regions like China are still off limits to the social network, and it faces stiff competition in fast growing markets like Russia and India. And despite its terrific size and massive user engagement, the company’s business actually dropped in the first quarter of 2012. It wasn’t a disaster by any means, but it highlighted the simple fact that Facebook — until now the golden child of the tech world — was mortal. Its business was vulnerable to seasonal slumps in ad revenue, right alongside crusty old media companies like the New York Times. One of the few businesses who didn’t seem to be hurt by the marketing slump that begin 2012? Google.

"Facebook enjoys the enviable benefit of being a network effects business in three ways: they experience viral user acquisition growth, they are a developer platform, and they are a big data learning loop. The only thing missing from this cocktail is a marketplace which they may yet attempt to conquer," said David Pakman, a venture capitalist with Venrock. "Their ad products and targeting methods are primitive and will evolve in important ways, they have under-exploited opportunities around mobile, in-stream and offsite advertising, and with Instagram can build an important ad product around images. Yes, there are threats to their business, but they have demonstrated enormous execution ability, perhaps the best we have seen out of this generation of web companies They are not yet being left behind. They have enormous potential."

Basically, while many investors agree the company has unlimited potential, few see much upside in its current business model. "They’re not going to be able to continue relying on display advertising as a means to an end," said Jeff Dachis, who took his digital agency, Razorfish, public during the peak of the dot-com boom, and now specializes in social media marketing. "When Facebook is able to regularly monetize through innovative engagement-driven features that sophisticated marketers can leverage, that’s when we’ll see true growth."

"They're not going to be able to continue relying on display advertising as a means to an end."

Even the Facebook bulls acknowledge that it needs to keep innovating beyond its current ad business if it’s really going to live up to its $104 billion valuation. But Facebook is, for the foreseeable future, a central part of the web and our daily lives. Betting on Mark Zuckerberg will cost you, it always has. People said it was crazy to value the company at $1 billion when Friendster was the king of social networking, or at $15 billion back when Microsoft invested and Myspace ruled the roost. So far, wagering on the hoodie-wearing-Harvard-dropout has paid off very nicely.