The bell has been rung by a hoodied billionaire. Facebook's stock is trading and the question is whether the bell will toll for the shorts or the longs. Here are realities, fundamental and exogenous, that will work together, along with the market’s very own alchemy, to chart the stock’s course.
The only other confounding variable is that Facebook is both a company and a platform. Those who will determine its future valuation are likely to use it every day, or often. It’s a new species of financial performative utterance . If all your friends on Facebook are talking about how the company has been destroyed by the IPO, well, it’s hard to remain ebullient.
The valuation could be low if these things go right:
• New and innovative advertising solutions emerge
Analysts are looking at the cheesy little ads on the right of a Facebook page, and wondering if advertisers will ever spend enough money on them to move Facebook from its roughly $4 billion in revenue to something Google-like. But if that's just the beginning, if Facebook develops more elegant and integrated ad units that maintain the user experience but give advertisers more to work with, and room for creativity. Then the revenue number is far more realistic.
• A search breakthrough
Google and Bing are already attempting to make their search more social, by including results from your social graph. (That's one of the drivers behind Google +.) They are desperately worried about the amount of data Facebook has about your friends' and family's preferences, and what they could do with it. If you're searching for a Thai restaurant in an unfamiliar neighborhood, you'd trust your connections more than strangers on Yelp. If Facebook Search turns into an actual product, it's easily monetizable and could be a game-changer.
• Transformative acquistions
Spending $1 billion for Instagram was a bold stroke that shows Zuckerberg isn't suffering from a not-invented-here syndrome. The company will be sitting on bushels and buckets and boatloads of cash, and the nature of its social platform is such that there are many companies which can be integrated into its ecosystem and create extraordinary value through the 900 million people who use Facebook now. Think back to the smartness of Google buying DoubleClick in 2007.
• Charge corporations
Zuckerberg has said Facebook will always be free to users, but there's wiggle room to create a freemium model for corporations. It's one thing for Facebook to be free for a mom-and-pop pottery school, and another for Starbucks to have 30 million fans and not pay for it. If Facebook started to charge corporations who have over 100,000 followers, say, there could be substantial upside revenue for them.
The complexities and obstacles to Facebook launching successfully in China are vast--and it's virtually impossible to predict whether the government's tight hold on social media will be maintained. But the upside of the world's largest market could make valuation niggling appear silly.
The valuation could be high if these things go wrong:
• Facebook grows--but not fast enough
Online advertising is expected to grow faster than any other segment, up from $21 billion in 2011 to a projected $38 billion in 2016. But that's not even a doubling. Facebook will need to grow much faster to justify its valuation, which means it must take share from other digital publishers. But the market is getting more and more competitive, not less. Consider that Twitter hasn't fully figured out its monetization model, and LinkedIn is just getting going. Facebook will need to justify both its ROI and its ability to shift perception in a quantifiable fashion against really smart competitors that offer experiences that are actually more ad-friendly.
• Mobile flops
The company has admitted it has been slow to develop a compelling mobile strategy. Facebook failed to anticipate the rapidity of the shift to smartphones in that same way that, almost a generation ago, Microsoft failed to recognize the Internet. And there are real questions about the grab-and-go mobile experience, versus the kind of more prolonged engagement that users have been accustomed to on their computers. And even if mobile succeeds, it monetizes far less well than non-mobile digital advertising.
• Ad scrubbers
I haven't read anything about this, but why not? In today's New York Times, directly below the Facebook story, is a story about a new DVR  being offered by Dish Networks that blocks advertising, called Ad Hop. Why couldn't a clever entrepreneur develop software that would effectively scrub the ads from your Facebook page?
• We get bored with games
According to Facebook's S-1 filing, approximately 19% of its 2011 revenues came from Zynga. If we reach a level where Farmville fatigue sets in, the company is in trouble. Perhaps the reason that nearly half of Americans think that Facebook is a fad , according to a survey released this week, is that they associate it with casual games, and they're feeling that the water is quickly draining from that bathtub.
Schumpeter's famous theory of "creative destruction"  hasn't taken a vacation in the digital world. (Ask Yahoo!) What seems like an unstoppable machine can quickly turn into a poster-child for the impermanence of everything.
[Image: Flickr user marketingfacts ]