News has spilt over about a failed acquisition of Twitter by Facebook. Kara Swisher of Boom Town tells us that Facebook offered $500 million of Facebook Stock (at Microsoft’s valuation) to acquire Twitter which it rejected. Reasons? The first of course of whether the $500 million of stock represented $500 million or a more realistic $150 million. And more importantly, Twitter execs’ belief that they can eventually come up with a revenue model and take advantage of their exponentially growing user base.

Despite Facebook’s application certification programme, it is far from solving its own revenue problem and picking up Twitter would mean picking up its costs too.

However, the biggest worry for Twitter users is its fit in the Facebook platform and network. The Twitter API is a lot less restrictive than Facebook’s which has allowed users to use the service in a wide variety of ways. Think Twibble, Tweetdeck, Twhirl and Twitterfox to start up with. Any curtailment of this is sure to piss off a lot of users.

Besides the way I see it, there is not a lot Facebook stands to gain from Twitter apart from its large user base. Updates and commenting is already part of the functionality. So I’d say good call by the folks at Twitter. Forget acquisitions and focus on your scaling and revenue issues and all will be fine and dandy.