Twitter Inc. co-founder Biz Stone ... denied widespread rumors that its acquisition by Google Inc. is imminent. The rumors erupted late Thursday when tech blog site TechCrunch, citing two anonymous sources, reported that the companies were engaged in "late stage negotiations."
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It can't be encouraging that Google decided to stop actively developing Jaiku, a Twitter competitor Google acquired in 2007. Instead, Google has decided ... to release the Jaiku engine as an open-source project under the Apache license ... Google also recently put mobile social-networking service Dodgeball out to pasture.

Why would Google want to buy Twitter?

They have yet to properly monetize Youtube ... Sure, Google has lots and lots of money to spend. But there isn't much to Twitter that Google couldn't recreate itself with its vast internal resources. So why spend a billion dollars on something so (relatively) simple?


For one, Twitter is already running at full speed. Google can't recreate the buzz and the excitement in the rapidly growing Twitter community ... While I get a kick out of seeing what my friends are doing and like to update them with neat things that I observe, the real value for me in Twitter is the real-time search and trending ... If I am looking for information about a hot technology topic, Twitter is the best place to find up-to-the-second information.

But

For all those Twitterers madly typing 140 characters and caught up in the grand idea of Twoogle, we return you to your regularly scheduled tweeting ... In fact, Twitter and Google (GOOG) have simply been engaged in “some product-related discussions,” according to one source, around real-time search and the search giant better crawling the microblogging service.
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[But] what if, for example, Microsoft (MSFT) offered some huge cash payday for Twitter? In that case, I am certain Google would jump into the faceoff, backing up a giant Brinks trunk to the door of Twitter’s San Francisco offices.

Further

Microsoft should resist the temptation to become a "me-too" bidder to try to buy the company out from Google. Twitter might offer Microsoft some badly needed "cool," but ... it makes no sense at all. True, Microsoft is generally seen as old and stodgy, but buying Twitter won't change that.

As for helping Microsoft catch up to Google in search, Microsoft shouldn't even bother. It's not going to happen, and buying Twitter for hundreds of billions won't help. Microsoft should play to its strengths, notably bringing Office online, and continuing to build out its Live services. Buying Twitter would only be a distraction --- and a waste of cash.

A Better Idea :

A few weeks back, Bernstein Research analyst Jeffrey Lindsay wrote a provocative research piece asserting that Internet companies have a long and terrible track record of destroying shareholder cash by acquiring pre-business model start-ups ... in a follow-up piece today triggered by the Google/Twitter speculation, Lindsay declares that Internet companies in general, and Google in particular, should ... instead give back the cash to shareholders in a once-a-year dividend.
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Indeed, Lindsay comes close to calling the entire Web 2.0 company-creation mechanism something of a Ponzi scheme. (Though he doesn’t actually use the term.) ... Lindsay, in short, has issue a kind of manifesto calling for a new focus in the Internet industry on responsible stewardship of their investors’ money.

What it all means..

At present, Twitter is having a media honeymoon. Not a weekend passes when The New York Times doesn’t devote a considerable part of its expensive newsprint to Twitter. Jon Stewart jokes about it. Even Playboy models have Twitter accounts!

In today’s dismal economic climate, thanks to its simplicity and its chameleon-like ability to be “many things to many people,” Twitter in many ways has come to represent the zeitgeist. No wonder some hip-hop moguls want to invest in the company.