Everyone likes a good fight and even though there really isn’t a fight going on here it is worth noting Apple’s market capitalization is now ahead of Google’s (reminder I own shares in Google).

According to this story, by the close of trading on Wednesday, Apple’s market value had edged up to $158.8bn – a shade ahead of Google’s $157.2bn.

My take is that while Apple is obviously on fire, Google has a monopoly in search advertising and at the moment the world is in love with the model. Over the past years, Google has hired thousands of engineers to develop innovative products and services. Google’s advertising model will be embedded into virtually all of these new services.

Gmail is an example of Google’s ad model expanding onto a new service. This massive investment in people is for the long-term. In the short term, these people are a drag on earnings. Over the years, we will see the ad network supporting more and more services (or vice-versa). As this happens, the profit margins at Google will increase and Google should overtake Apple. After all, hardware is great but the margins on hardware are generally not great.

Apple can get away with charging more for their products because of the cache of the Apple name and because they know how to design products people like. One would imagine other hardware companies will eventually catch up and give Apple a run for their money.

Sadly, Microsoft has not impressed users with Vista so on the software front, Microsoft needs to come up with a better OS if they don’t want to lose more share to Jobs and company.

On the PC front, Sony, Dell and even HP have begun to design computers which appeal to the Apple faithful. They seem to finally understand what is at stake.

On the cell phone front, RIM is worth watching closely as after Apple they have the most cache (at least in the US). I have tremendous respect for Nokia but they already have a device called the N800 which is better than the iPhone in many ways but no one seems to care for some reason.

I guess in the end, my feeling is hardware and devices are able to be duplicated given enough time but unknown and unseen algorithms that index the world’s information are tougher to copy. In addition, Google’s profits grow exponentially as more advertising competition comes online. After all, advertisers pay per click for ads and bid against others. Sure we are in an economic slowdown now but when things turn, the company should do better as advertisers will justify spending more on clicks that yield more buyers.