Because the product does not yet have significant traction, and they believe enough bad press could kill the product completely. Facial recognition is something that they fear would invite bad press.
Honestly, I think the product has been on borrowed time since the first person thought up the term "glasshole".
> I don't understand why Google has banned face recognition apps on Glass.
In ten years from now, everybody will probably wonder as well since by then, this technology (Glass + facial recognition) will most likely be mainstream.
But right now, it's prudent from Google to make a theoretical stand against that while Google Glass gains traction.
It seems to me that putting that technology in the hands of everyone would make more sense than restricting it to a few.