I just finished listening to this week's TWIG. They were talking about how users prefer apps over web based applications. It seems fairly obvious to me why this is but they didn't talk about it at all. I think there are a few reasons that web based apps didn't take off.
First is discoverability. Apps in a marketplace or iTunes store are easy to find. Sure, you could use "the Google" to find web based apps but finding web based applications that were specifically designed for a mobile phone was not an easy task against the background of the entire internet. If google or apple had made an interface to help discover web based tools that worked well for mobile phones, then those apps would get discovered and used. Even now, I know there are plenty of websites that use smart phone styles that would look good on my phone but finding them and knowing what they are is still difficult.
The next reason is that the network still sucks. I can't be in my office now without dropping off of 3g down to the edge network. Leaving the city is a disaster for my data connection. I think users would rather start an app, have limited functionality without network, or at least a friendlier error message indicating that the app can't connect to the server. In many cases, the app doesn't need to be internet connected and so having a reliance on a terrible network would be bad for that app. If the US had some decent wireless internet infrastructure, then web based apps would always be available and the need to be offline wouldn't exist as much.
One final reason I will talk about that apps became more popular than web pages is that the functionality of HTML5 was not as well known 2 years ago and even now I don't know how much access there is to phone based hardware systems. Certainly any app that deals with local hardware would always be more preferable as an app than a web page. Anything dealing with the camera, video, audio, file systems (ring tones, etc.) will need to be an app on the phone. That being said, it would be nice to see some good functionality and libraries available for common tasks dealing with phone multimedia on the web server side. Some common things like cropping a photo to a face, uploading pictures and video, should be very easy and hopefully as HTML 5 develops, this sort of thing will be more prevalent. The phone browser can already detect location and use that. The Gowalla web app is really very good, but without a presence in the marketplace, they ended up getting missed.
All this being said, although Google has certainly jumped on the app bandwagon, I don't think they are moving away from web based stuff. They tend to have some of the better web interfaces for their applications such as gmail, google reader, calendar, etc. I think they should get some sort of optimized search for phone web apps so that people searching for apps will see these web based options in the list. In the long term, I do think it is better for developers and users to have web based applications available. It brings instant interoperability making development easier across multiple platforms. But until there is fast internet everywhere, decent toolsets for making web based apps, and a good search for them, this development will languish.