Spot on.

I think Color's pitch was to stealthily suck value out of Facebook by attacking what it perceived (and Instagram proved out) as its greatest weakness: a healthy amount of user engagement on FB is around photos. If one could create the "perfect" photo sharing mobile network, FB users would start sharing photos outside of FB. As soon as a critical mass of users and photos was achieved, FB would recognize the attack and defeat it via acquisition.

IMO the main difference is that Color (and their investors) had a well-defined strategy, but it was Instagram that had the perfect app.