By Craig Wilson

Last week, Facebook took the first step to becoming a public company by filing its S-1 documents with the US Securities and Exchange Commission. Enormous figures are being bandied about but, as with Google, which listed the year Facebook was founded, the question investors have to ask is whether it’s sensible to invest in a company that deals in the intangible and that counts people, a notoriously fickle species, as its primary product.

Valuations of the company now range somewhere between US$75 and $100bn, quite extraordinary for a company that’s eight years old.

Backing the blue horse means you believe it’s going to keep growing and that its advertising model is going to become ever more effective, prompting companies to spend more of their ad budgets on the platform.

It’s also means betting that people are going to agree that searching with a social element is better than searching without one; that each successive generation is going to value its privacy less than the previous one; and that no newcomer is going to come along and win over Facebook’s users.

That’s a whole lot of boxes to tick and, even though Facebook doesn’t have to tick them all at once, each presents a potential stumbling block and calls into question the valuations being thrown around for a company that generated only $3,7bn revenue in 2011.

The sky-high valuation — at $100bn, Facebook will have a trailing price-to-earnings multiple of 100 times versus Apple’s 13 times — is predicated on the idea that Facebook is going to continue to enjoy the sort of robust growth over the next decade that it’s enjoyed in the last few years. Is that possible? Maybe.

For a start, Facebook still has plenty of potential users it can tap in emerging markets like Brazil and India. Millions of people are getting online in these countries for the first time, primarily via mobile phones.

In fact, in its S-1 listing documents, Facebook says half of its users access the service via mobile. But in the same breath it says it hasn’t yet figured out how to monetise its mobile platforms to meaningful extent.

Monetising mobile isn’t an insurmountable challenge, but it’s one that will have to be addressed.

Though mobile presents the potential for location-based advertising, it remains a notoriously difficult medium because consumers, both young and old, are far less tolerant of ads when screen space is so limited.

Companies with much lower multiples, such as Apple and Microsoft, make tangible products. Facebook doesn’t have a product per se. Rather, its product is us, and it uses our information to help advertisers target us.

Facebook makes 85% of its revenue from ads, but a growing number of users are also using third-party applications to block ads.

Then there is the issue of sharing. Facebook works because people, particularly youngsters, value the ability to share more than they value their privacy. But this may not always be the case.

And then there’s the problem that Facebook is eventually going to run out of people to sign up. Though new markets may keep numbers ticking over for a good many years to come, there’s a risk more mature markets will become apathetic.

Facebook is no doubt painfully aware that just as it overpowered MySpace, another service could potentially do the same to the Palo Alto-based company. Without users, Facebook has nothing to sell — which is why we can expect it to diversify its offerings and include financial services, Internet search and anything else that will keep users on the site for longer.

Another worry is that, for a company that’s all about sharing, there’s little sharing that goes on at the top. Zuckerberg may only own 28,4% of the company’s shares, but he has in the region of 56% of voting stock and will maintain iron-clad control over the company. That has to be alarming to potential shareholders who aren’t used to companies behaving that way.

There’s no denying Facebook is growing like wildfire, and its figures to date have been the stuff investors dream about, but it seems bizarre to think it can keep it up. After all, there are only so many people on earth and once you’ve got them what happens next?