IMO, the people who care about ads on social networking have Adblock+ installed. I would even go so far as to throw this (very probably unsourcable statement) and say that most users don't care about ads, period. The one thing that pulls me to social networking is people, not the ads. A social network isn't social or a network if there aren't people I know or care about using it.
Currently, I'm okay in paying $50 to get access to a great community of early adopters (lets admit, it is mostly tech people). I'm not naive to expect it won't change, but once killer apps start popping up on the ecosystem, more users will join which will bring back the value that the older social networks provided.
The highest paying ads will surface to the top over the highest quality status updates.
They're now trying to freeze innovation and homogenise us. That's the real killer, not the ads (although the ads are shit too).
Sure, it'll be ok for many people in the future. But it probably won't be the Twitter that I and others want. What's wrong with trying an alternative?
It's an interesting alternate perspective that has somehow gained the force of common wisdom without the evidence to support it. On a service like Twitter, the users are both customer and product, as five minutes of objectively clear thought would show.
App.Net make succeed or it may fail, but it won't be because of this issue.
I hate adverts, but I think app.net is unlikely to topple FB or Twitter in the social sector.
Myspace is a warning to Twitter and FB, if you don't look after your users, improve your service and keep them happy then you the advertisers will leave too.
Sure the advertisers are a force that doesn't necessarily align with the users, but this is something the people running the network have to mitigate, because it isn't in their intrests to piss off their users.
That being said, I think advertising is in a bubble, so from that perspective app.net has an advantage.
Twitter is NOT going to compromise the integrity of the entire site for ads. Google haven't. Facebook haven't. Microsoft haven't. And thousands of other sites haven't.
As for Twitter... they've done better than most, so far. But at some point, they'll have more pressure to show revenue. And then... how do they make money, again?