Is there any money in making

Is there any money in making URLs shorter?

After the crunch … a squished web address is handy, but it may not keep working forever Photograph: Rebecca Cook/Reuters

Not according to the makers of tr.im, the URL shortening service that announced this week it would be closing down and probably erasing all its data – causing much uproar.

"There is no way for us to monetise URL shortening," the site's authors wrote. "Users won't pay for it, and we just can't justify further development since Twitter has all but anointed bit.ly the market winner. There is simply no point for us to continue operating tr.im and pay for its upkeep."

The sideswipe at its rival bit.ly has a whiff of sour grapes – after all, it was only adopted as Twitter's default partner in May after a long-term flirtation with granddaddy tinyurl.com (bit.ly is also used by Technology Guardian).

But the truth is that there has been an unsustainable explosion in address-shortening services. Alongside tr.im, bit.ly and tinyURL are is.gd, snipURL and icanhaz.com, along with others provided by big websites such as Digg.com.

But while the sudden spurt of growth shows that there is certainly a market, they are struggling to find a way to make money. Bit.ly has decided its basic service will operate as the loss-leading front end for a data collection system it plans to expand.

Like tr.im, it collects information about every URL it creates and offers users statistics about them. That data is useful to website owners – who want to track how effectively their links work – but bit.ly also plans to build a news service on top of the information, mapping current events by understanding what people are linking to and clicking on right now. It's an unproven model, but one that has already persuaded investors to pump more than $2m (£1.2m) into the company.

While making money from shortening URLs may the biggest problem for the companies creating them, users should be worried about some more fundamental things. What happens if a service shuts down? Will you lose all your valuable tracking data? Will all those links simply die? Could it break the web?

For tr.im's users, the answers to all these questions is "yes" – and although there are charitable organisations such as the Internet Archive who could step in to save tr.im's data, it is the users who are often left to mop up the mess after such closures.

All of this makes Joshua Schachter, the founder of the web bookmarking service Delicious, sound even more prescient – he pointed out in April that URL shorteners may not be such a good thing after all.

"Shorteners are bad for the ecosystem as a whole," he railed on his blogin a widely read post (http://bit.ly/linkrot). Unless we do something to make link shorteners accountable, he suggested, the most likely outcome "is that we don't do anything and that the great linkrot apocalypse causes all of modern culture to disappear in a puff of smoke".