Report: Google in Talks to Buy Twitter? Update: Probably Not

Google is in talks to buy the hot microblogging service Twitter, according to Mike Arrington at TechCrunch, who cited two unnamed sources in a post late Thursday. How far along the talks are—if they are indeed acquisition talks—is in doubt, however. TechCrunch first reported talks were in the late stage, then later updated the post to say they’re early, and that the two companies are considering working together on a real-time Google search engine.

OK, so while Mike often has good sources, even he seems to be implying it may be early to take this one to the bank. UPDATE: Kara Swisher at Boomtown says it’s not happening, no way, no how. Twitter cofounder Biz Stone also offered, well, not much of anything, saying in a blog post that “it should come as no surprise that Twitter engages in discussions with other companies regularly and on a variety of subjects” and going on to say he’s got some job openings. A lot of bloggers seem relieved that Twitter hasn’t been gobbled up yet, their belief that Twitter would wither under Google surpassed only by their even firmer conviction that its fate would be even worse if Microsoft bought the company.

There’s good reason to think Google is interested in Twitter, because as a number of people, including Mike, have pointed out, a good chunk of Twitter’s potential may be in search. Twitter, which recently introduced a search feature and just announced plans to expand it soon. Twitter would instantly add to Google search an immediacy it currently doesn’t have.

What’s more, Twitter would give Google the credible play in social networking it has lacked outside of its Orkut service, which is popular in only a few countries, and not in the U.S. As for Twitter, its frequent outages and glitches show it needs a bulletproof computing infrastructure like Google’s.

Finally, it’s clear from my recent conversations with various Google people that they’re watching Twitter very closely and are intrigued. Vic Gundotra, who heads Google’s software developer and mobile efforts, said Friday morning at the Web 2.0 Expo in San Francisco that he’s a “big fan” of Twitter but declined to comment on the rumors of a deal.

But just because a combination seems to make sense doesn’t mean it will happen at any price. I think even Google will think very hard about spending hundreds of millions of dollars on a company that makes virtually no money and has left everyone guessing how it might do so. Maybe it should anyway, but I don’t think it’s a slam dunk, especially given Google’s newfound parsimony. Indeed, in a new post, Mike says Twitter wouldn’t take less than $1 billion. All the more reason to think Google will think thrice before pulling out the checkbook.

I wouldn’t be surprised if Twitter sold out to someone, and Google is the most logical buyer. If the price being dangled is high enough, and it’s getting pretty high at upwards of a quarter-billion dollars, its executives and VC backers will almost be compelled to take it in the face of the considerable risk that Twitter can’t fulfill the sky-high expectations placed on it. And that price could rise even higher if Microsoft gets into the bidding. After all, Facebook apparently offered a half-billion dollars a few months ago, albeit with privately held stock that may be worth less today.

But for now, it seems doubtful Twitter and its potential suitors will be able to find common ground on a price.

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