Matt Bell was a Stanford University undergraduate in 2001 when he started tinkering with what would become the basis for his company, Reactrix Systems. “I created this program for people to play with flames projected on a wall. I thought it might be good for raves,” recalls the now 25-year-old Bell. The project might have retained its digital-toy status were it not for a trip Bell took to London that spring. “I saw ads projected onto the street,” he says, “and thought, ‘Wouldn’t it be neat if I could “play” with the ad I just walked through?’”

So Bell decided to leave his job at Google and, along with fellow twenty-somethings Jon Friedberg and Mike Schaiman, raise $400,000 to launch Reactrix, a company specializing in “immersive interactive displays.” By the end of 2002, the company had its first commercial deployment, an interactive floor at Toys R Us that let children chase the company’s star-shaped logo; each time a kid stepped on a logo it would “pop” and transform into the store’s mascot, Geoffrey the giraffe. This was soon followed by an installation at Las Vegas nightclub Tabu that let people dance with images projected onto tables.

Each installation includes an infrared camera, a computer, and a projector. As a person interacts with the projected image, the camera tracks his or her movements and feeds that information to the computer; the computer adjusts the image to make it appear to react to the person. Bell says the way in which the software processes information from the infrared camera enables the Reactrix system to operate in the dynamic environments of the real world, whereas earlier interactive projection systems could track users only against white backgrounds or in situations where the lighting conditions were tightly controlled.

Indeed, Reactrix is not the only company developing interactive displays. IBM’s Everywhere Displays project makes use of mirrors and cameras to produce similar effects, while a system from Austin, TX-based artistic collective Mine-Control tracks people’s shadows instead of the people themselves. But Reactrix’s most direct competition may come from Toronto-based Gesturetek, which has created interactive floor displays for clients such as Coca-Cola and Krispy Kreme.

But where Gesturetek is focusing on selling or licensing its technology for a variety of applications, including gaming, virtual-reality-based rehabilitation, and museum kiosks, Reactrix aims instead to build and operate a global network of advertising installations. Linking each installation to the Internet would allow the company to upload new ads and track their usage statistics. Former Yahoo CEO Tim Koogle is a major investor in Reactrix and serves on its board of directors; he says the company would make the bulk of its money not by selling its technology, but from advertising revenue, which it would share with the venues that host its installations.

In order to establish this new sort of advertising platform, Reactrix will have to line up both venue owners willing to install its system and advertisers interested in its form of brand messaging. It’s already taken the first step: this January it began to install systems in AMC movie theaters as part of a 12-city deal. Norm Chait, a vice president of New York City-based MediaVest, a major media buyer, feels Reactrix’s technology helps him get a particular kind of advertiser noticed. “The ones with the deeper pockets are the ones doing this,” says Chait. “It’s an add-on, a cherry-on-top kind of experience, because it’s the kind of stuff that gets talked about.” Reactrix is also finding interest outside the United States. In May, the company launched a partnership with South Korea’s RK Media to install 20 systems throughout the country; LG and Hyundai agreed to advertise on the system.

Whether the novelty of ads you can play with in real time is robust enough to sustain long-term business interest remains an open question. But with consumers increasingly resistant to traditional forms of advertising, Reactrix’s technology has both retailers and advertisers intrigued enough to try to find out.