Market cap isn't real. That's just a valuation based on...well, usually, 'feelings'. Microsoft has real money. Google has real money too, but not Microsoft money.
That's why Twitter, which is a tiny company with no profits and probably not much more growth potential, has a higher market cap than some insurance companies an retail chains with good growth, real money and solid long term market potential. "Feelings".
I think I generally agree with what you're saying, but a comment made during a CFR discussion[0] makes me want to point out that those "Feelings" can be of value:
"What about Facebook? What about Twitter? I have no idea what Twitter is good for. But if it flips out every tyrant in the Middle East, I'm interested."
I guess it's just pretty hard to allocate resources in the traditional sense that most people are used to because of leverage that companies like google can provide, but people try anyways.
All in all, I think google is just trying to increase confidence from advertisers in it's content network.
.... That's a valuation based on "There exists a person who has recently put his money where is mouth is and paid someone $MARKET_CAP/N for 1/N of the company."
Which is hardly to say that you can unload the entire company at that price, or that it'll last, but it's a step above mere 'feelings'. :b
I think you nailed it there. Market cap is valuation and subject to change on a whim [edit- specifically, it's a measure of sentiment; it's a prediction of future cash flows] . Free cash flow is probably a more accurate measurement of the "poor" vs. "rich" concept. Let's be honest though- both companies are filthy rich.
i had this conversation with a friend on why are tech companies the darlings of public opinion but guilty of such terrible things. look how Monsanto is the Devil Incorporated, while Apple has in US tax evaded cash more money than around 2 times Monsanto's market cap (Monsanato trades at a frothy 24 PE). Walmart is everything evil despite cant do no wrong Amazon does everything they (in a negative sense) do only many times greater.
Meanwhile Google has done terrible things including ripping off bandwidth providers, and not to mention they hold a monopoly on search. conspiracy theorists seemed ill concerned on one organization responsible for answering all their web queries. could go on about outsourcing of jobs, h1b visas, causing a recession, etc etc.
not that any of these companies are 'evil' or even 'wrong' in my eyes, but why do others treat tech companies with such endearment and throw so much hate at a handful of other companies?
we're thinking geography has a lot to do with it. Many influencers on the east and west coasts know a lot of people that work in these companies, and write very positive things about them. not completely altruistic, as they are also heavily invested in them.
We need to stop pretending Google is a rich Mozilla, They're a poor Microsoft.