This is completely disappointing. Wave was an awesome system and the only reason it didn’t get user adoption was because it didn’t integrate fully into anything that was currently in use. If they’d made it work with email or had it replace the interface for gmail, they would’ve seen a greater adoption rate. Expecting people to abandon something simple that they already know for something complex that they’ll have to learn that only a few other people use is just a recipe for failure.
We have always pursued innovative projects because we want to drive  breakthroughs in computer science that dramatically improve our users’  lives. Last year at Google I/O,  when we launched our developer preview of Google Wave, a web app for  real time communication and collaboration, it set a high bar for what  was possible in a web browser. We showed character-by-character live  typing, and the ability to drag-and-drop files from the desktop, even  “playback” the history of changes—all within a browser. Developers in  the audience stood and cheered. Some even waved their laptops.
We  were equally jazzed about Google Wave internally, even though we  weren’t quite sure how users would respond to this radically different  kind of communication. The use cases we’ve seen show the power of this  technology: sharing images and other media in real time; improving  spell-checking by understanding not just an individual word, but also  the context of each word; and enabling third-party developers to build  new tools like consumer gadgets for travel, or robots to check code.
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.
Wave has taught us a lot, and we are  proud of the team for the ways in which they have pushed the boundaries  of computer science. We are excited about what they will develop next as  we continue to create innovations with the potential to advance  technology and the wider web.
:: Update on Google Wave ::