VentureBeat

Reactrix Systems, a company specializing in interactive projected advertisements in malls and movie theaters, has folded despite $75 million in venture backing. Last month, the Redwood City, Calif. company spent what remained of a $45 million fourth-round of funding received in 2006, and has so far been unable to sell off its technology and other assets, reports VentureWire.

This is a shame, considering how downright cool its premise seemed to be. Ads served by Reactrix (most often cast on the floor by overhead projectors) responded to consumers’ gestures, allowing them to literally jump right into what they were selling. In one example, an advertisement for the Sci-Fi Channel’s hit “Battlestar Galactica” allowed those who stumbled upon it to learn about the show’s plot and characters by touching spaceships flying by. Another let “users” kick around a virtual soccer ball that reacted to their movements in real-time.

The Reactrix projector’s zany games always produced crowds at Sony’s Metreon mall in San Francisco. People would smile and take videos or pictures as their kids kicked around soccer balls and laughed at the interactivity. When was the last time you saw that with other advertisements?

Even more exciting than that was its new WAVEscape service, using two infrared cameras to give consumers the ability to manipulate ad images and messages on a TV screen with just their body motions from up to 15 feet away. Ok, so they aren’t exactly addressing you by name, but this is probably the closest we’ve gotten to Minority Report-style ads infiltrating and responding to our daily lives. Back in January, when the Wii-like system debuted at the Consumer Electronics Show, Reactrix was riding high with 160 installations nationwide and impending deals with big names like Hilton Hotels, AT&T, eBay, RIM and Universal Studios.

So what happened? The company’s crash has been attributed to the depressed advertising market brought on by the economic downturn — it simply didn’t conserve enough cash to cushion the blow. And it’s probable that its offerings were considered too futuristic and experimental for clients to gamble their shrinking advertising budgets.

We expressed skepticism last year when Reactrix raised its large financing round, wondering whether it would be able to generate the sort of return that make such an investment profitable.

The good news is that several other companies pursuing the same goals have remained afloat. The major example is Catchyoo, a Japanese company that projects massive interactive ads on floors, walls and surfaces. It’s products dwarf Reactrix’s efforts. And other players like GestureTek (from whom Reactrix licensed technology) and Israeli 3DV Systems are poised to pick up where their fallen rival left off. There are also lots of companies, such as Danoo, that are putting up flat-panel displays at places such as Starbucks. The videos and other ads on the screens can entertain people while they’re waiting in line.

Sherwood Partners has been retained to manage the assignment for benefit of creditors process for the company and its investors, reports VentureWire. This alternative to bankruptcy takes an average of five months. Its unlucky backers included Menlo Ventures, Mobius Venture Capital, Thomas Weisel Venture Partners, Worldview Technology Partners and D.E. Shaw & Co. (which led the ill-fated $45 million round two years ago).

Next Story: Downturn of many faces: How to survive depends on who you are
Previous Story: Sony takes micro-transactions into a whole new world with launch of Home

Tags: co:3dv systems, co:Catchyoo, co:gesturetek, co:reactrix, inv:D.E.-Shaw-&-Co., inv:Menlo-Ventures, inv:Mobius-Venture-Capital, inv:Thomas-Weisel-Venture-Partners, inv:WorldView-Technology-Partners