"When I'm at an event -- say, a concert -- there are hundreds of people around me taking lots of different pictures."
You're absolutely correct. They just aren't using Color, and that's the problem. Every single person I've talked to has said that Color is a great idea, _hypothetically_. In reality, Color fails on the most basic of user experience, it shows absolutely no content when it starts up, ever, and there's no sort of reward for even taking a photo with Color-- you don't get anything out of the experience.
I get the idea that the product guys at Color sat down and thought, "okay, if everyone who has an iPhone or Android used our app instead of the default camera app, and everyone at a concert stood within 150 feet of each other (don't laugh, that's the range of Color), and all took photos within a short amount of time, they'd be in a great social network."
I'll leave it to the reader to determine how absurd that sounds. The constraints on the application at startup basically doomed it.
Take a look at Foursquare as a counterpoint. Early adopters didn't get to see anyone else checking in, they likely didn't have any friends also checking in, there weren't any photos, and there were very few non-NYC badges. But goddamn, you could be the mayor of _everywhere_. The functionality of Foursquare still works even when there's only _one_ person using it. The functionality of Color completely fails unless there are groups of people in very close proximity all using it at the same time.