In what way are they good? How they provide revenue for twitter.

People are the product. If they are using the third-party apps they are producing content on the platform for others to engage with, which drives traffic to the site and allows for delivery of ads to others.

- Twitter could have turned the apps into a revenue opportunity (gate API access behind the paid Blue service for users, charge developers per user for API access)

- Twitter apps had the reputation at one point of being “UI playgrounds” — a good place for designers to experiment with different ideas around presentation of the feed; while Twitter didn’t directly benefit from it, these apps provided a massive amount of design iteration that enabled Twitter to steal the best ideas

Putting the API behind Twitter blue might not have worked. The paid badge has become a mark of derision amongst a portion of the user base.

It would go a long way towards making such a service acceptable ("I'm only paying for Blue for Tweetbot!"). The other option would be to charge developers for per-user access to the API, which developers could build into subscription payments (eg: Twitter could have charged Tapbots $2/user/month for access, so Tweetbot would have to charge their users $31+/year on iOS).

Just put the ads in their feed. Twitter makes no effort to target the ads as it is, so they can't be any less targeted.

Yes.

A lot of these users are just going away - not migrating to a different app.