Social networking site Facebook will not be acquiring micro-blogging utility Twitter, AFP reported Monday. Discussions between the two sides started in mid-October, but the deal fell apart almost three weeks ago after disagreements over the US$500 million that Facebook offered to pay.

Both companies said the proposal was an "all-stock offer" that was based on the $15 billion valuation that Facebook attained after Microsoft bought a 1.6 per cent stake in the firm for $240 million in October last year.

According to an article written on AllThingsD.com posted Monday, Twitter thought the figure was steep and that the shares should be valued lower in order to correspond to Facebook's true valuation, which is more likely in the $5 billion area. The venture would be priced at $150 million in that case, but would be "too low" because it would not be coming from cash but from Facebook stock, according to AllThingsD.

Twitter investors and management were "reluctant" to sell since they may have been hoping to establish a profit model for the utility, which may be popular but is still missing revenue flow, AFP reported.

"Facebook has its own revenue-generating challenges," a person close to the firm told AllThingsD. "As much as Twitter would give them a lift in the status area, it was still a worry."