I suppose, as with most techniques, that this one is effective when done at the right time with the right circumstances. I can honestly say I have seen many people armbarred from that position* and I can just as honestly say I've seen it work just as many times.
The thing to remember is that seeing the opportunity for the right technique is an extremely important part of grappling, mma, whatever. A square peg will never fit properly in a round hole, and if the holes are temporary and constantly changing and moving it is even more imperative to identify proper technique, timing and the adaptibility to change as the circumstances change.
It is also important to remember that the higher calibre of training partner the less "concrete" these things are and the more 'fluid' they become. No one who is experienced is going to let you stand up, post on their throat and whale away...there will be a strong counter as to any other technique in MMA. So rather than saying a technique is wrong, it is reality that every technique has flaws and counters - that is why we keep studying, practicing, competing and training with others better than ourselves, to reduce the likelihood of being without a strategy in any scenario.
*(lots of guys will be able to withstand the shots from above and you have to remember they are well experienced in defending them...excellent example of tremendous defence is Joe Doerksen against Joe Riggs in UFC 49. Even though he lost, Joe D. withstood tremendous aggression from the very strong Joe R.)