What a shame. Facebook and Twitter won't be making babies anytime soon.

Kara Swisher's BoomTown blog yesterday detailed how acquisition talks between the two hottest privately held dot-com companies recently fell apart. What derailed the deal? The same thing that tosses many such pacts into the woodchipper: price.

Unnamed sources from both sides told Swisher that Facebook was offering $500 million in stock for Twitter, the rapidly growing platform that lets users crank out tiny text messages to the masses in 140 characters or less. 

Half a billion bucks seems like a great price for a revenue-less microblogging site ... if this were real money. The offer's certainly higher than the $150 million to $300 million estimate fellow Fool Tim Beyers made yesterday, regarding Twitter's true value. And it's way higher than the $60 million to $150 million springtime value that TechCrunch was hearing from venture firms earlier this year.

But the money in this particular offer seems more Monopoly than U.S. Mint. Facebook is using its $15 billion valuation from last year, arrived at chiefly because Microsoft (NASDAQ:MSFT) decided to fork over $240 million for a 1.6% stake in Facebook 13 months ago.

That wasn't an investment -- it was a cover charge. Microsoft's stake came with expanded advertising rights on Facebook. There are plenty of reasons why Facebook isn't worth anywhere near $15 billion today:

  • Valuations have fallen sharply since Microsoft slipped past Facebook's velvet rope. Dot-com darling Google (NASDAQ:GOOG) peaked at $747.24 just a few weeks after the deal. It has gone on to shed roughly two-thirds of its value. By that gauge, Facebook would be a $5 billion company -- but we all know that its worth was exaggerated to begin with.
  • Facebook has grown more quickly than Google, but even social-networking top dog MySpace finds its parent company News Corp. (NYSE:NWS) trading at a third of its 52-week high.
  • That $15 billion is greater than the enterprise values currently attached to Yahoo! (NASDAQ:YHOO) or eBay (NASDAQ:EBAY). However damaged those companies may be, they're still proven, profitable juggernauts. Swapping either one for Facebook would be like trading Baltic Avenue -- or at least St. Charles Place -- for Marvin Gardens.
  • At the time of the Microsoft deal, Facebook was gearing up to revolutionize social advertising with its Beacon platform. It bombed, proving overly intrusive.

So where does that leave us? Well, you can't broker a real-world deal with Monopoly money. As long as Facebook is clinging to an outdated, inflated valuation, it will be unlikely to strike any kind of equity-based acquisition, even if Twitter would look great on its arm.

Facebook is a lot like St. Charles Place on the Monopoly board right now -- wedged between a jail cell and something electric. Let's hope it does the right thing and moves forward. Even if it has to go back three spaces first.

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