Plaxo has their Pulse service that is maturing nicely. In the social networking space Plaxo is a well established "glue" service. I am one of the many users that make daily use of the address book integration to keep my contacts up to date. I have written about the power of this feature in previous blogs.
Plaxo was an early adopter of Google's OpenSocial API and they have done a great job of pulling together information for their users from the various social networking services. One of the feeds I have in Google Reader is from Plaxo with an update on all my contact's twitter, blog, flickr and other postings. I am betting that it is this technology that is of interest to Google. The other piece is the background synchronization Plaxo offers with Outlook and the Mac OS X address book as well as with mobile handsets. I bet android could benefit from this capability.
Synchronization tools are looking like one of the battlegrounds in the near future. As smartphones expand their functionality it will become critical that information can move seamlessly between the various computing platforms we use and the web cloud. Anyone with robust tools in this area has an advantage because building robust synchronization software is not a trivial task.
If this rumor turns out to be true it just confirms that Google is busy building the next market while Microsoft is desperately trying to gain a position in a maturing market.