Word Lens: The Kind Of App Augmented Reality Has Been Waiting For

Yahoo’s Babelfish has been spared the axe in the latest wave of cuts at the company, but the future of technology-fuelled translation appears to be going into a new direction anyway: mobile, augmented with augmented reality.

A new app for the iPhone, Word Lens, has made a huge splash since launching only on Friday.

It’s one of the most compelling uses yet for mobile augmented reality technology: a user points the on-device camera on a piece of text in one language; then Word Lens instantly translates it to another. What’s handy is that the app does not need any mobile connectivity for it to work, meaning you can also use it on iPods equipped with cameras.

Word Lens takes advantage of the in-app charging system that is getting to become an increasingly popular way of encouraging downloads in an increasingly crowded market that is still largely driven by free apps: the app is free to download, and then a user pays $4.99 per translation language (or $9.99 to translate in either direction).

Currently the only languages are English and Spanish, although developers Quest Visual say many more will be added: “We’re starting out with European languages and will expand from there. We won’t stop until we get all the way across the globe!” the developers write on their site.

They also plan to extend the app to other platforms, specifically naming Android, Windows Phone 7, Palm (NSDQ: PALM) OS and BlackBerry in its list. But they are not giving specific release dates yet.

The app is not really designed for texts with lots of words — eg books — although over time, the technology may well be able to support that.

Indeed, augmented reality is one of those mobile technologies that has a lot of hope pinned on it. Even though it is a relatively new area, and even though there haven’t been that many case studies of how to apply it commercially, startups working in A/R have had some good attention from the VC community, who see in it the potential to enable a host of search and advertising services.

A/R platform Layar raised $14 million in its latest round of funding last November; and Mobilizy (makers of Wikitude) raised between $1.4 million and $7 million in October (the exact figure was not confirmed).

Juniper Research forecasts that A/R will drive revenues of $732 million by 2014, but it also notes that A/R services would only generate about $2 million in 2010.

We have asked Quest Visual about how many downloads they have had so far, and if they are tracking yet how many of those are converting to paid users. We’ll update when we get more news.