“For now we are too small and local to be paid-for developers for hundreds of layers,” says Lens-FitzGerald. “We have two revenue streams. Firstly, our ‘pay for prominence’ programme allows companies who want extra attention to pay for a place in the phone’s features menu. Among the companies to opt for this service is UDR, a big American property player. Secondly, we have recently started to offer ‘premium layers’ which enable publishers or game designers to generate a return from their investment. Producers can fully focus on content without having to worry about distribution, developing for multiple mobile platforms, or financial administration.” At the Mobile World Congress event in Barcelona in February, Layar’s first game, Jewel Collector, created by Melbourne, Australia-based John Sietsma, was unveiled.

There are echoes of all this in Mobilizy’s strategy. “Our business model includes licence fees for our API as well as for ‘white label’ solutions we’re doing for other companies like Lonely Planet, Red Bull or IBM,” says Rittchen. “Location-based ads will be the second part of our model. Ads can be delivered when and where people demand them; for example, a voucher for a free coffee at Starbucks just around the corner. Relevant information will gain in importance. But we also see potential in the field of construction: How to assemble an IKEA bed? How to repair your car? AR could also assist doctors during operations by showing information like X-rays.”

Key to all such apps, the simplest versions of which can be created very cheaply and in a matter of hours, is the availability of constantly updated data that already comes embedded with their geographical co-ordinates. Publicly accessible maps and government data troves are immediate sources of such tagged information. So also are user-generated services like Wikipedia, Fickr and Twitter, which between them serve up a vast hoard of text, photographs and message streams absolutely free of charge. Point your mobile camera out of an apartment window and you will see a dynamic portrait of a 24/7 city, plastered over with instant thought-bubbles and random pictures that feed off the world’s growing preoccupation with self-publicity.

Several mobile applications, including Yelp’s Monocle service, Loopt, BrightKite and Sekai Camera from Japan’s TonchiDot, aim to capitalise on all this social interactivity by allowing users to leave location-sharing messages for one other. These can be as simple as “check-ins” announcing one’s presence at a particular watering-hole to known passers-by, or they can be full-blooded “air tags” that recommend – or trash – a hangout to other would-be patrons that are virtually attached to the location itself. The digital equivalent of post-it notes, they can let you know what your friends have bought in the same store. They can even include audio and video messages.

Add a gaming element into this interactive mix and you have Foursquare, a much buzzed-about app that uses incentives to create a self-perpetuating community of social revellers. Users rack up points based on how many new places they visit and how many stops they’ve made in any given night. A leaderboard lists the most socially promiscuous, who are then rewarded with various badges. Those earning “Mayor” status at particular establishments become entitled to freebies such as coffee, ice cream, even a night’s hotel stay. Although Foursquare is a typical product of the US app craze, the popular AR layer that was built for it was the brainchild of a Dutch hacker – an indicator of which way the world mobile software is turning right now.

Combine geo-cached games with advertising and you have what is shaping up to be AR’s killer capability. “AR in theory can impact every single type of business but it will really take off in areas where engagement is key. This will be the entertainment area. It will also be a major force in gaming, and particularly in advertising, branding and marketing – areas that need to reinvent themselves very quickly”.

In this regard, AR is already one step ahead of Minority Report. Rather than bombard drinkers with shouty mall-style advertising, Guinness already has a layer that highlights the cheapest places to find its beer in Paris, complete with a mobile coupon. The brewer has also served up an interactive treasure hunt in the guise of a pub-crawl for all those still sober enough to see their mobile screens.

In Lens-FitzGerald’s view, AR breakout will come when users can participate in an augmented real-world version of a reality show. Think: “Idols”-type layer. How far such participatory games will incorporate face-recognition will be a matter of technology, and public sentiment. Privacy advocates and civil libertarians already charged up by CCTV, will have a field day once phones realise their full potential. Forget personalised marketing; imagine pointing a camera at a stranger and instantly seeing all their personal interests and connections.

Among those pushing the boundaries on this is TAT. Its facial recognition system, Augmented ID, theoretically allows users to identify people using To Bruce Sterling, the American author associated with the cyberpunk genre, fear-mongering simply comes with the high-tech territory. An AR evangelist, Sterling says this hot-button technology will incite “the same publicity panics that every single new means of communication technology has had since the days of bulletin board systems 25 years ago”.

“You’re going to have trouble. I can’t predict what form it will take, but I can guarantee it will happen,” Sterling warned a gathering of Amsterdam tech-heads at a Layar browser launch last August. After all, he noted: “If AR is good for anything, it will be for hunting down sex and drugs.” Sterling’s advice for dealing with such PR nightmares is for the nascent AR industry to arm itself through pre-emptive publicity campaigns and to draw up a code of ethics.

In the meantime, AR could do well to clean up its image as a functioning technology. Look beyond all that gorgeous eye-candy and you see a platform whose limitations already fall behind consumer expectations and media hype. Technical glitches and complaints from Apple customers have already forced Layar to temporarily withdraw its third-generation browser from iPhone usage, citing bad memory management systems that are now being re-engineered. Crack that and you still have to deal with stares from passers-by as you hold your phone up and circle around frantically seeking information on the nearest public lavatory. No wonder, sci-fiwriters imagined us wearing head-mounted displays, special eyeglasses or even AR-equipped contact lenses.

Layar believe that AR interfaces in glasses are the next frontier. Within the next few weeks, video eyewear company Vuzix is bringing out its Wrap 920AR, which have two embedded cameras, a 6-Degree of Freedom Tracker, which identifies the field of view, and a compass. One barrier must be broken through, however: Apple iPhones and iPods, for example, block the mobile device from sending video display to an external monitor. Vuzix also recently started an AR training division, which services industries like aviation, medicine and the military.

Nevertheless, while Europe’s creative pioneers pave the road to riches, there is still a one-hundred-billion-pound gorilla sitting silently in the corner of the viewfinder. As a sign of what’s to come, the search giant Google launched “Goggles” in December, in an ambitious effort to marry its search prowess and mapping software with its vast computational power and endless index of

stored images. Owners of its Nexus One devices can search using pictures taken from their phones. When they do, Google returns relevant results using image recognition tools including GPS and optical recognition.

“Our goal is for Goggles to recognise every image,” says Vic Gundotra, Google’s vice president of engineering, but the company wants to do so quietly. Mindful, no doubt, of the uproar caused by its Latitude location-sharing app, not to mention the antitrust hackles the company raises the world over, Google has turned its face-recognition technology off. For now, at least.

Google’s arrival may not necessarily spell the end of Europe’s AR dream; an injection of deep tech know-how and even deeper pockets could be a win-win situation for those across the Atlantic too. Layar’s Lens-FitzGerald says: “We have lots of functional competitors – although none of them yet have 3D – and of course Google could put us out of business. Or they could buy us! But in a sense our competition is anything that disrupts usage of our layers; talking on your phone is a rival. The great thing is, talk to anyone for a few minutes and they will come up with good ideas for layers. The technology is not quite there but it will come. The point is this: people get excited about AR.”

Indeed, Germany’s Metaio’s plans for 2010 include creating the world’s first AR city, an attempt to move AR into the mainstream by blanketing a specific geographic location in the US with a high-density of AR data. Such an environment could soon be a giant test lab for the entire AR industry.