(source)Well, it sure looked promising back last September, but since then, the interest in AR has stopped increasing, at least when measured is search volumes and news references
The current trend is even more obvious when compare with Foursquare (in red in the graph below), which really does show exponential growth:
so, what's going on? there are a couple of possible explanations:
(a) Augmented reality has peaked. I can't really believe that's the case.
(b) Google trends was never an adequate tool to measure the popularity of augmented reality. Other measures, such as investments, acquisitions and actual downloads are much better indicators. All of those show positive trends.
(c) We have entered a new, uncharted area in Gartner's hype cycle, one that I call the Plateau of immature technology. Simply put, the iPhone is not the optimal AR device, and it's not even the best currently out there. However, most of us limit ourselves to developing AR applications on the iPhone (or even worse, in Flash), and thus the solution space is really limited. We see the same ideas rehashed time after time (though, some pleasant surprises do happen), and people loose interest. The trend line seems pretty constant (for now) because there are still some users who discover AR for the first time.
If you'll ask me, augmented reality is not dying, but stalling, waiting for a breakthrough either technological or conceptual that will bring new type of applications to the market (much like Foursquare was for location based services). Would it come for one of the incumbents companies, a giant like Google, or maybe a stealthy startup? only time will tell.