It seems most things sailing in the wake of twitter simply defy all logic and common sense. There have been literally dozens of picture sharing services before twitpic. The only difference I can see is the name ("look, we're for twitter!") and that he basically integrated an url-shortener.
The entire site looks like about a week's worth of work. 700k in annual profit? Not sure if I want to laugh or cry.
Laugh. Be happy. Learn from this that you don't have to make something people want that nobody else could make because it's so complex and you're awesome. You just have to make something people want.
Twitter could easily have built the functionality to share pictures into twitter (Like facebook did). Heck - then they might have a reasonable revenue stream.
If Twitter had done that, twitpic would have been stomped on.
Chance of Success * Reward - Cost. Just because the chance of success is low doesn't mean it's a bad idea.
But I agree, why not try stuff like this... Might just work.
To clarify; I didn't mean to talk down the author nor the site. I was just expressing my surprise (and partly envy) about the success of such a seemingly trivial project.
My laugh/cry statement was about the fact how I (and many others) struggle in comparison. Seeing a site like this take off is a bit disconcerting. But well, you can't blame the lottery winner.