Why do people get excited about profits of a company that never pays dividends? Is it about preservation of capital? Or a hope to see a trickle down effect of dividend payments at some point?
The retained profits (much of which go to productive activities such as R&D) add to the value of the company. Theoretically, the market should see this and then revalue shares accordingly.
The fact that Google is trading on the open market, as compared to Facebook's makes these two valuations hard to compare directly.
SecondMarket aside, when valuations are based on participants (insiders & investors) who have no reason to be skeptical/down-to-earth (is there any way to "short" a startup and affect it's valuation?), they are bound to be somewhat exuberant.
Because it's still a privately owned company, only small amounts of Facebook stock can be purchased by an exclusive club of Goldman Sachs' best buddies. That's the only reason for the absurdly high valuation. If this stock begins trading at $70B there's nothing to stop every hedge fund in the world from short selling it into the ground. Wall Street was skeptical of Google too but they proved everyone wrong once the ad money started rolling in.
Respectfully, the premise of this question is incorrect. You are essentially saying "Superman can fly on TV, so it doesn't seem so insane that I could fly in real life does it?"
There are several ways to measure value. For example, the stock market value of a company is based on its perceived future value. The value I prescribe to is a measure of how efficiently the business turn its capital/revenues into profit.
