I looked at your site and then went to usersnap. Overall, both ideas are good but usersnap is beating you in terms of landing page/design and most likely sales/marketing efforts. For example, on your landing page, there is no clear way of knowing what bugmuncher is for. Sure, I want to "Fix bugs like a boss!" but how ? Then I realize you have a small text description "BugMuncher is the best way to receive feedback on your website. With BugMuncher annotated screenshots can easily be sent along with feedback reports, making it ideal for internal use, as well as getting feedback and bug reports from your users." Why not make this prominent ? Usersnap smartly says "Screenshot is worth a thousand words" and we know immediately what it is about.

I would not throw in the towel yet. Functionality wise, your demo video is pretty cool. Other than work on your landing page, you definitely need to go out and do sales/marketing. Stop working on the product and turn your sales/marketing hat on. Get help from someone who knows this better than you do if possible.