I think if the $3 billion Zillow would merge with the $1 billion Trulia, the online real estate store would be the No. 1 player pretty much forever. But I don't think it's going to happen, because Zillow wants to wipe out Trulia. I would have to believe that Google and Facebook now believe they can wipe out anyone in the space. Yahoo! wants to buy up shares, and not make big acquisitions, so I don't see it coming in to acquire the consumer-based Internet companies, either.
The good, established companies' aversion to acquiring the newly public -- even as Facebook buys WhatsApp for $19 billion and as Google picks up a drone company -- should make us very concerned.
How did things get so out of hand? I think the Twitter (TWTR) deal truly wrecked the pricing model. You knew that no public company could afford Twitter before it came public, even as there was a time when Microsoft (MSFT) could have grabbed it for about one-tenth of the price where the stock currently trades. The Twitter deal made the bankers and the insiders giddy. They knew the public market would pay anything for some of these Net companies, well beyond reason. Ever since then, so many companies have become out of reach.
Until these go back down to where they make sense to be acquired, I think the overhang from these new companies is going to cause a real problem for the market. When will the smoke clear? Easy: when you see deals. Until then, the pricey companies will be easily shorted, and heavily sold, by insiders who know these prices should never have gotten to where they have gone, even as they have come down a great deal from their highs.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB and GOOG.
Editor's Note: This article was originally published at 9:18 a.m. EDT on Real Money on April 15.