Twitter yet another Microsoft-Google battleground

Facebook, Yahoo and now Twitter. AllThingsDigital's Kara Swisher reports that the battle between Google and Microsoft to strike some kind of commercial search deal or product partnership with Twitter is reaching comical "Spy vs. Spy" proportions. And even if one outplays or outlasts the other, neither Google nor Microsoft is assured that getting the upperhand with Twitter will translate into real business benefit. Pretty whacky.

First, Microsoft agreed to sponsor Twitter's Exec Tweets, a compilation of tweets from heavy-hitting corporate executives. Then TechCrunch reported that Google was in late-stage talks to acquire Twitter, only to have that rumor squashed by Twitter founder Biz Stone, who claims Twitter is simply a small start-up focused on growth. In the end, it turned out all the fuss was simply about an ad deal where Google lets marketers stream their five most recent Tweets across its AdSense network.

Swisher reports that both Google and Microsoft are assiduously courting Twitter, however, in the hopes of landing either some kind of search deal, like Google currently holds with News Corp's MySpace, or something more on the lines of Microsoft's $240 million purchase of a 1.6% interest in Facebook. Both companies are dealing behind the scenes, jockeying for the best position and deal in an effort to get a stronger play in social networking. But what will that actually get them?

Right now, Twitter is struggling to handle its explosive growth (and concomitant service disruptions and outages), while searching for its own formula for monetizing the site. It's a start-up, with huge success in terms of audience, but much less so in terms of revenue. And being the target of a Google-Microsoft war can't be helping either. (It's never a good thing to be the prize there--just ask Yahoo.)

Google and Microsoft need to be careful so that in their zeal to win the prize, they don't sabotage it instead. Microsoft has seen the worth of its Facebook stake plummet, now that Facebook's overall worth has dropped from $15 billion at the time of its deal to just $3 billion to $5 billion today. And Google's MySpace deal hasn't panned out to be all that lucrative for the search giant either.

The fact that Google's purchase of Twitter turned out to be either wrong, or very premature, is actually a good thing. Rather than purchasing an outright stake in Twitter now, perhaps it would be wiser to let it grow a bit--all while testing various ad schemes and monetization plans. The risk is that once Twitter hits paydirt, its eventual purchase price will skyrocket. But the downside is that Google may pay a pretty penny for Twitter now, only to see its investment disappear (think Dodgeball, Jaiku, etc.).

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