Speaking on the sidelines at the CEATEC technology conference in Chiba on Friday, Takahito Iguchi made a bold statement: “We will make a new environment.”

Iguchi is the CEO of TonchiDot, the company behind Sekai Camera, a much-hyped program that lets users digitally tag and annotate places in the real world. The mixing of computer-generated images and the physical environment is known as augmented reality (AR), and Iguchi is at the forefront of a barrage of mobile AR applications.

But can it live up to the hype? Virtual reality created similar excitement in the 1990s but later fizzled, mostly because it was too expensive to bring to the average user. In stark contrast, AR applications have a decent shot at riding the smart- phone boom to become truly ubiquitous.

Sekai Camera has got off to a good start, cracking 100,000 downloads in its first four days on iTunes.

Sekai Camera’s application is akin to digital Post-it notes. Suppose you go to a nice restaurant, and you want to leave a recommendation for other would-be patrons. Using your mobile phone you can post an “air tag” for that geographic location. Your air tag could include text, an Internet link, a photo or even audio and video.

Now suppose that other users are sharing air tags as well, the result is a collaborative effort that ends up annotating the city with digital Post-it notes. Potentially it could become an entirely new information infrastructure, and that’s why it’s generating so much excitement.

Using an application like Sekai Camera on your mobile device, you can now view an alternative world where points of interest (POI) have been air tagged by people who have been there before.

Iguchi says the idea for the air tag moniker came to him after seeing Steve Jobs give the 2008 Macworld keynote speech, titled “Something in the Air.”

While it sounds like science fiction, this concept is no longer the realm of fantasy. Sekai Camera and various other iPhone and Android smart-phone applications have made it a reality. Or at least, a quasi-reality.

Such applications are already making an impact in personal navigation for mobile users, and there are countless other possibilities such as geographically specific virtual tours, or crime and crisis reporting. Besides user-generated tags, services like Wikipedia, Facebook, Google Maps, Yelp, Craigslist, Ustream, or Twitter might also syndicate air tags for AR apps in the future.

Available in the iTunes store since late September, Sekai Camera for the iPhone relies on GPS technology and the 3GS model’s new compass, as well as a Wi-Fi location system called Place Engine.

Blogger Joseph Tame, who runs iPhoningJapan.com, is enthusiastic about Sekai Camera, but not without some reservations.

“I was impressed by how fluid it was, [with] very little delay between iPhone movement and tags being updated,” he says. “My second thought was ‘Wow, there’s so much crap on here!’ It’s only natural that there’s going to be thousands of meaningless tags as people try it out. The filters are critical, but I think we’re going to need a lot more of them.”

Sure enough, a quick peek through Sekai Camera brings up air tags of things like “my desk” and “front door.”

While augmented reality may be difficult for some users to wrap their heads around, in Japan the idea is not entirely new. The animated TV series “Denno Coil” featured a world augmented with “cybersubstance” that children could view with specialized glasses and even interact with.

Much like a traditional role-playing game, Sekai Camera will eventually feature an “air pocket,” a function that will let you conveniently store air tags in your inventory so you don’t have to return to that specific geographic location to view them.

Iguchi says the second version, due out in November, will establish Sekai Camera as a social platform that can integrate with networks such as Facebook, Twitter or LinkedIn.

“It’s very good for a mashup with social air. If I have Version 2 of Sekai Camera, I can see my followers nearby. It’s a very useful and very cheerful, charming feature.”

Since Apple’s most recent iPhone upgrade, there have been many iPhone apps making headlines. Besides Sekai Camera, you can find Bionic Eye, Wikitude, Cyclopedia and Robotvision in the iTunes store, and Layar is likely to join them there soon. Some location-specific AR apps already in the wild include Tokyo Underground, London Tube and Metro Paris Subway, which help you navigate public transport systems.

Following a recent flurry of AR apps, Iguchi feels encouraged by the competition instead of threatened.

“Right now it’s the beginning stages [for augmented reality],” Iguchi says. “We are still a baby and our competitors are not enemies, they are partners. We need to make a market, an air market.”

Adrian Cheok, director of the Mixed Reality Lab in Singapore and a professor at Keio University in Tokyo, says these early commercial steps are a prelude to even more exciting developments in the AR field.

“Before there was virtual reality, but actually there was no particular product in mind and no big companies working on it,” says Cheok. “It was basically hype with no practical application. But in this case here you have very big players like Nokia with their mixed reality lab in Santa Monica [Calif.].”

Nokia smart phones have made great strides in video over the past few years, and it will be exciting to see if they are able to supplement that with AR.

The next steps for applications like Sekai Camera will likely be even more exciting. Maybe digital pets that we can view through an AR lens? Imaginary friends? The future of augmented reality is wide open.

According to Iguchi, these ideas are not so far away: “Do you know about Tamagotchi, Pokemon or Yugio?” he asks. “If you have Sekai Camera Version 3 or 4, you can recognize other players in air games. It is a new dimension of the real world. You can join with this world, we call it Sekai Switch. Sekai Switch can make [alternate] viewings of the gaming world. If you have a Pokemon Switch, you can find new Pokemon in the real world.”

TonchiDot will also release an Application Program Interface (API) that will allow developers to build upon their work.

As for their business model, Iguchi says that one possible revenue stream could come from air posters or air pamphlets, which much like Google Adsense, would serve contextual ads to the user based on their individual likes and tastes.

So while questions about consumer demand and practicality might linger for a while, it’s certain that AR applications like Sekai Camera are only scratching the surface of what might very well be an important part of our digital infrastructure in the future.

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