About a year ago we asked if you would be happy with 100 million visitors and 5 billion hits a month on your website – if it also meant that you were losing $40 million a month to service all that traffic.

The website in question was YouTube.  Its owner, Google, was struggling to find a way to make money on all those eyeballs, and happily it has begun to find a path to profitability. (See YouTube Goes Hollywood.)

Now it’s time for another conundrum. How would you like to own a service hosting 50 million messages a day – that isn’t minting money?

That’s Twitter, a fabulous giant that proves once again that no matter how mountainous the wave of hits to your website may be, you are not a successful business until and unless you monetize all that traffic.  This is a fundamental law of business, yet more than one startup has been so dazzled by the hits lighting up its site that its creators were blinded into believing they had struck it rich.  In time they discovered that unless they converted those eyeballs into cash it was all in vain. Some learned the hard way: they went out of business.

In the case of Twitter, many clever developers have found a way to convert the eyeballs to cash – only they don’t work for Twitter. They are independent appsters who slipstreamed in the host company’s wake, battening on opportunities that Twitter’s management failed to see or capitalize on.

“Twitter has been unusually free about letting developers tap into its data and technology, through what is known as an application programming interface,” writes Claire Cain Miller of the New York Times.

That’s an elegant way of saying Twitter gave it away. But the company is beginning to figure it out and stop shy of giving away the store.  “If developers build something Twitter wants, the company has three options — let it exist separately, create its own version, or buy the start-up,” Miller explains.  It would appear Twitter is abandoning the suicidal option #1 and focusing on creating its own proprietary apps or  buying firms that advance its business agenda.

It would seem to be a sensible strategy but it may come at a price.  It’s easy to attract a stampede of customers when your service is free. But once it starts costing…?

And what happens when the apps that Twitter generates in-house compete directly with former partners? “When you go to write a Twitter application,” Miller quotes a developer, “you almost wonder, is Twitter going to come out with the same feature in a month and blow me away?”

These questions will hang in the atmosphere over Chirp, the first conference for Twitter developers commencing this week in San Francisco.  To see which way the wind is blowing – well, read your tweets.

You can read Miller’s coverage in full here.

Richard Curtis

Every Blogger owes a debt of gratitude to newspapers and magazines. This posting relies on original research and reporting performed by the New York Times.