Web services have many advantages over shipping software. You can continuously update the service, fix bugs and add new features. There are no long development cycles. Embracing this is a key to success. The first version (or several versions, probably) of any service you create is most likely going to suck. And that's ok. Your service won't scale to handle a lot of traffic. It will be missing a huge amount of functionality. It'll probably look bad. And it'll have bugs. All of this was true for both ONElist and Bloglines, but they both ended up reasonably ok. Because you can continuously update the service, you can deal with these issues.
One of the many great things about running a web service are the users. A passionate user is one of your greatest assets. And I would argue that the only thing of real value a web service has is its users. They act as advertising for you, telling all their friends about your service. They are the best source of new feature ideas. And they are the best Q.A. testers you can get. Most importantly, they're the gauge that tells you whether your service is actually useful or not (ie. is it worth losing years of your life continuing to develop and run it). By getting your service launched as quickly as possible, you'll get exposure to this wonderful resource sooner. By listening to your users as you add features and improve the service (because, remember, it won't be perfect at launch), your users feel like they are a part of the process. They start to have a sense of ownership of the service. Which reinforces their passion. And with the constant updates and fixes to your service, you're continually giving your users reasons to talk about you. Users are the one thing that your competition cannot copy and develop internally. Technology can be copied. Users have to be earned. One thing to remember, however, is that you need to be responsive to customer support, because that's one of the key ways to cultivate passionate users.