'Several weeks of serious talks' about a purchase of Twitter by privately held Facebook began in mid-October but broke down about three weeks ago, said the website which covers technology, media and the Internet.

AllThingsD quoted 'sources on both sides' as saying the US$500 million bid was an all-stock offer based on the US$15 billion valuation of Facebook from Microsoft's purchase of a 1.6 per cent stake in the company for US$240 million in October 2007.

'The Twitter side felt that figure was inflated and the shares should be valued at the lower figures that have also been reported for Facebook's true valuation, more in the US$5 billion range,' it said.

'That would have given the deal a US$150 million price tag, which was seen as too low, especially since it was in Facebook stock and not cash,' AllThingsD added.

It said the San Francisco-based Twitter wanted cash or Facebook stock at an even lower valuation than US$5 billion.

Twitter's investors and executives were also relucatant to sell, AllThings D said, because they still hope to build a revenue model for the service, which is wildly popular but has yet to develop an income stream.

'Facebook has its own revenue-generating challenges,' AllThingsD quoted one person close to the company as saying. 'As much as Twitter would give them a lift in the status area, it was still a worry.'

Twitter claims six million users of its service, which allows users to send short messages known as 'tweets' of 140 characters or less. -- AFP