The Independent says Alaba's camp were approached by Liverpool chiefs last year to discuss a potential free transfer.
Alaba wanted a package worth £12million a year after tax - the equivalent of £230,000 per week post-deductions - an astronomical figure by any club's standards.
That was not necessarily a deal breaker as far as Liverpool were concerned, but the club had their own reasons for dropping their interest.
Firstly, Alaba was deemed by Liverpool coaches as smaller than their ideal height for a central defender, as he stands a good few feet below Joe Gomez, who is the smallest of the Reds' current options.
There was plenty of appeal in Alaba's versatility to occupy at left-back, but that soon diminished when Kostas Tsimikas was brought in as cover for Andy Robertson.
In addition, Alaba will turn 29 in the summer, and while Liverpool were happy to sign Thiago at the same age, they would rather focus on developing a younger player to fulfil the role instead.