It's not just hindsight; a lot of people, commentators here and elsewhere, were bemused by the entire Color story. A ridiculous amount of money for a product that didn't exist, had no market, likely had niche interest at best, and had no clear business strategy.
It did have disaster written all of it, and a lot of people called them on it at the time.
Let's not forget: the product itself was hideously creepy. It was intended to be a Trojan horse designed to harvest semi-private data from previously inaccessible spaces / transactions / situations, etc, but the design made those intentions a bit to clear - at least to a critical mass of people who were actually paying close attention (not surprising giving the $ involved).
It did have disaster written all of it, and a lot of people called them on it at the time.
As just one example, a quick google first turned up, but i read mountains of commentary like this: http://news.ycombinator.com/item?id=2655652
edit:the parent thread is better to read. this was after shit started hitting the fan, but i can't turn up earlier convos atm http://news.ycombinator.com/item?id=2655592