From the responses I got I have decided to continue with my project, infact, I am going to be leaving my job in a few weeks to concentrate on it full time.
The world (and the internet) is a vast place, there is more than enough room for healthy competition in most fields. The way I ended up looking at it is that the worst case scenario would be that you don't sell many copies (if your competitors can sell it, so can you), but will have gained so much more experience in trying. Even if it doesnt make it big and just gets a small amount of sales, it is better than nothing. If it under performs and I have to go back to work, any sales that continue to come in will supplement my income.
If you enjoy the project you are doing and think you can improve on even just 1 part of your competitors solution its worth sticking with it. You can also watch your competitors and learn how they work, let them do the experimenting for you, see how they are spending their marketing budget etc.
I've been working my first startup application for a couple of months out of hours from my 9-5. Not long ago a competitor surfaced and released an application which is very similar to what I have been working on.They are targeting the same market and the application has the same features.From what I have read so far about them they have been very successful (both financially and with creating a...