It appears I jumped the gun some time ago with my post twitter is on the verge of eating Google for breakfast, here's why. Google is well aware of it's "breakfast" and is more than likely to make a YouTube like deal with twitter. Google is actively tweeting with it's account, "acknowledging" the service (Oprah's tweeting why not). Here are just a few reasons why it's a match made in heaven:
twitter is becoming a powerful competitor in real time link sharing and search
Pro's like Fred Wilson are trying to understand the value of The Power Of Passed Links when it comes to conversions. The growth of social media for link sharing and converting is much larger in his ballpark figures than the growth of search. Google has to understand the strength of controlling a vested interest in social media.
Google has some of the best semantic interpretation tools available, or has the best people to develop them further
Google has been developing arguably the most powerful database in the world. Google is also the best in the world at understanding what people are looking for when they type in search terms. It doesn't take a huge logic leap to perceive the financial power of contextual advertising applied to microblogging. The significant way for twitter to monetize is through contextual personalized advertising, and for this to happen they'll need powerful semantic interpreters and some pretty snappy data mining on the fly.
Google is able to purchase twitter now while it's still small (compared to Facebook which has aligned itself with Microsoft)
From a business standpoint, the timing couldn't be better for Google to align itself with twitter. Facebook has grown rather large and expensive for an acquisition, besides the fact that is already has a pretty strong ties to Microsoft (to the tune of $200 million a year). Alternatively twitter is small and on the rise, and is a high value purchase, precisely because of what Google can bring to microblogging.
Google may want to consider purchasing friendfeed as well while they're price is relatively cheap.
Thanks to Fadi for his post Is it time for Google to start tweeting? , and Michael Arrington from Tech Crunch, Sources: Google In Talks To Acquire Twitter (Updated).