Urs Hölzle writing on the Official Google Blog:
But despite these wins, and numerous loyal fans, Wave has not seen the user adoption we would have liked. We don’t plan to continue developing Wave as a standalone product, but we will maintain the site at least through the end of the year and extend the technology for use in other Google projects. The central parts of the code, as well as the protocols that have driven many of Wave’s innovations, like drag-and-drop and character-by-character live typing, are already available as open source, so customers and partners can continue the innovation we began. In addition, we will work on tools so that users can easily “liberate” their content from Wave.
It still amazes me that Google ever pitched Wave as a consumer product. Google Wave was was made by a group of Google employees who wanted a better alternative to email, but that’s where it should have ended. Google Wave would have worked perfectly as an internal tool at Google that employees could have used to collaborate on projects. Google could have even licensed it to other companies so that they could use the same highly efficient collaboration tool that Google does. But, to announce Google Wave as “the next big thing” was just ridiculous.