There's still a place for desktop applications. It depends upon what you're building and whether that's a fit for the medium.

For example, I've built game creation tools. These are better suited for the desktop because of the complex interactions and user data involved.

There are plenty of startups that have built their software partially or wholly on the desktop such as Dropbox and Unity3D. For small developers, building desktop clients to popular web services like Twitter is another relevant path to take.