Because bit.ly took on a round of funding which probably made them too expensive for Twitter to buy.
http://techcrunch.com/2010/03/01/bit-ly-1-5-million/
Would you pay millions of dollars for an URL shortner or build your own?
http://techcrunch.com/2010/03/01/bit-ly-1-5-million/
Would you pay millions of dollars for an URL shortner or build your own?
Bitly seems to be the default in these discussions and it's clearly the market leader, but there are other companies to consider. I think even starting discussions with another company would force Bitly's asking price down considerably. They may talk about how Twitter is _only_ 30% to 40%* of their traffic, but no business wants to lose those kind of numbers.
* http://www.businessinsider.com/google-and-twitter-wanted-to-...
Unfortunately, it seems like an acquisition of Bitly would really amount to charity because if they wanted, they could easily come out with their own competing service which would likely be adopted simply because it's easier to use. Presumably it would be right there on your twitter page or better yet, automatic.