I can see how exciting and satisfying this can be for the Twitter team. There's nothing like watching your creation start to grow on its own.

I can also see how this helps Twitter's overall growth.

But I still can't help thinking - doesn't this mean that Twitter can only monetize 10% of their traffic? Given the choice between 100K web users + 900K API users, and 200K web users + 0 API users, which one is really preferable?

Whichever gives faster and more sustained growth is preferable.

I believe this shows that there's plenty of room for innovation for API's that have seamless integration with SMS/E-mail/IM.