The Internets are humming with chatter about Google’s music service, possibly in partnership with iTunes. Now mind you this is based on one report, based on one comment by an options trader in TheStreet.com, not exactly a publication known for reporting accurate mac-related reporters. (ThinkSecret would make me take this more seriously!) Anyway if it does come to pass, it would be a stiff blow to Microsoft ecosystem and also to Yahoo’s musical ambitions. iTunes is to digital music, what Google is to search, and it would be a magical combination. Dave Winer had earlier reported that Google might be working on “an iTunes-clone, based on RSS 2.0, and fully podcast-capable. Multiple sources on this one.”

I believe a service like Mercora would be a great addition to Google, and helping realize its music ambitions. Why? First of all, it does not really involve in cutting any deals with record labels. The peer-to-peer streaming, along with instant messaging, combined with audio search are some of the features of Mercora. Google could simply plonk its “contextual ads” right into Mercora app, and become a credible player in the digital music business. Of course, that would not preclude any deals with Apple’s iTunes.