News has surfaced from Kara Swisher at AllThingsDigital about apparent talks that had been ongoing between Twitter and Facebook. Under the discussed terms, Facebook would have acquired the micro-blogging site for $500 million in Facebook stock. Facebook initiated the talks in mid-October, but they seemed to have broken off sometime around the beginning of this month.

The reasons for the breakdown in talks was the typical merger concerns over integration and whatnot. However, it also appears as if some within Twitter wanted to first try to build up the revenue side of their business on their own before looking outside of the company.

As it is well known. Twitter has no real revenue stream, and is being funded by venure capalists. With the economy going sound — and VC with it — now may be a good time to get that going.

In any case, it seems at least to me that Twitter would be a great fit for Facebook. The social networking site’s users are already familiar with twitter-like functionality through status updates, and Twitter users could stand to benefit from Facebook’s development team which likely could assist in making the service more stable.

$500 million is also more than a fair price to offer for Twitter. The latest round of funding put a value of the company at about $100 million, and as I’ve said previously, it has no real incoming revenue.

I’m not sure how Twitter thinks it is going to monetize the system, or why they should wait. With such uncertianty in the economy, just take the money and run.

 
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