If the product was released differently, it very likely could have been successful. It seems to me that once they got all that VC funding, they were desperate to release something to prove their worth. But, since their product depends on tons of people all using it in a geographically tight area, it crashed and burned. I think had they started releasing at events (ala twitter @ sxsw), they could have had some success.
That sounds like a great co-branding opportunity. Color could also sell/host conference services such as preloading conference-related photos/ads or providing additional Color photographers to "augment" the conference's Color photos when the app's adoption is still low.
I feel like their target market should not have been the US but rather Europe or Japan. Both much higher population densities where location/presence based technology does much better (see 3DS Street pass feature).
