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Unless you actually refute EVERY SINGLE OBJECTION, apps still win, at least in the user-experience sense. Something as small as not getting an hourglass when the app is "thinking" is a bug, which every web app has right now.

Well, that's pretty subjective. I prefer GMail's user-experience than any competitive desktop app, same for Google Calendar, Google Reader, Basecamp and FreshBooks. I guess I'm biased as I am a firm believer that the open web is the platform of the future. That being said, I totally agree that there is still a lot of room for improvement, but we're on the right track :)

It's pretty trivial to turn the cursor into an hourglass with CSS. That isn't a limitation of web applications.

Then why do nearly none of them do it? Probably because they can't judge when they will stutter and lag - so many layers of web indirection. The fact is, most web apps only a mother could love. The rest of us are sitting stunned and silent when someone shows off their latest "jewel" which stutters, lags, has buttons that don't react when pressed, takes 3-5 seconds to put up/take down a dialog based on a server database query...

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