The Google rumor mill is in full swing. Following reports last night that the search giant was interested in buying Yelp for more than half a billion dollars, word now comes that San Francisco online real estate upstart Trulia also may be on Google's wish list this holiday season.

That deal could have much bigger implications for the Seattle startup community since Trulia competes directly with Zillow.com and to a lesser degree with Redfin. Kara Swisher at All Things D -- who reported on the acquisition talks this afternoon citing sources close to the situation -- put Trulia's valuation somewhere between $150 million and $200 million. Swisher said the rumors about Trulia -- which has raised $33 million from Google backer Sequoia -- have bounced around for the past year.

Google has been inching deeper into the real estate search niche where high advertising rates rule the day. And that interest could be a threat to Zillow.com, which last month was crowned the top online real estate Web site in the country by comScore. (Editor's Note: A blog post from Zillow.com earlier this week did not accurately report the numbers from comScore. Go here to see more on the snafu, but Zillow still trails Realtor.com in terms of unique visitors).

Back in September -- after Google CEO Eric Schmidt said that the company had seriously started looking into acquisitions -- I speculated on five companies in the Seattle area that the search giant could go after.

Zillow.com was on that list, but I placed higher odds on that deal (30-1) than my other four choices.

The reason?

Rich Barton and the rest of the crew at Zillow -- which has raised some $87 million to date -- appear to have bigger ambitions than a quick M&A. I don't think there's any doubt that Barton wants to build another multi-billion dollar company in Seattle, as he already did with Expedia. (Swisher reports that Google is more interested in Trulia because it is based in San Fran and has a lower valuation).

Rich Barton

Zillow -- as I've written in recent weeks -- has been strengthening its revenue channels with paid listing for rental properties and a new auction system for its mortgage marketplace. In that regard, Zillow -- which also maintains data on nearly every home in the U.S. -- has a much more diversified revenue stream than Trulia.

But if Google bids for Trulia, it could be interesting to see if Microsoft makes a move in online real estate. And there might not be anyone left except for Zillow -- which could lead to a serious premium in valuation. (Maybe Barton would get the $1 billion plus valuation after all).

Microsoft has been in that situation before. After Google bought DoubleClick, Microsoft went out and paid $6 billion for aQuantive because it was really the only player left in the online advertising space.

John Cook is co-founder of TechFlash. Follow on Twitter @johnhcook.