I used AppJet myself for small personal projects, and liked it a lot. However, it wasn't complete enough for commercial use, perhaps as a platform for another startup to build their web app on. For example they didn't support development outside their web IDE, multiple code files in a project, a storage system with known scalability properties, or paid accounts with higher resource constraints.
I know they were working on at least two of the four features I mentioned above before they decided to abandon AppJet in favor of EtherPad. Building their own app to prove their platform was a good idea, but I guess they just didn't have enough resources to work on the app and the platform at the same time.
I'm not sure what the AppJet guys would have considered success to be, but if they expected other companies to build commercial apps on top of their stuff I think they gave up too early.