People were saying it was risky 12 months ago, and 24 months ago. Bit.ly chose their domain because it's short, and they probably couldn't afford as short of a name for a .com. In retrospect they should have taken bit.us or something similar.

Now their plan seems to be to distribute amongst many domains (having used j.mp a lot recently) so there's no single point of failure and that seems to be working as well.

Bit.ly's a unique case though, and doesn't represent the fad of taking .ly domains because it turns your company name into an adverb.