Kiosks on crack? Live Ad's cutting-edge stations can engage and profile consumers.

THE company Web site describes it as technology that "allows advertisers and agencies to measure consumer traffic and data patterns and determine the effectiveness of marketing and advertisements in consumer environments."

But its 30-year-old creator, Chenoa Smith, calls it "a retail kiosk on crack."

"It" looks like a high-tech video arcade game, but it allows consumers to interact with new products. Marketers and development executives can profile consumers while they are sampling and critiquing new products.

Live Ad Inc., the Venice company behind the devices, is hoping the kiosks will show up in mall or retail stores near you soon. Live Ad plans to have dozens of kiosks operating by the end of the year. It is projecting $6.5 million in revenue.

"This is the biggest thing I've seen in my more than 30 years in this business," said Mark Hooper, vice president of East Rutherford, N.J.-based Trans World Marketing. Of course, he has a vested interest in its success: his company makes the kiosk cases and displays for Live Ad.

"It's the first system I've seen that brings together the consumer, retailer and advertiser with a technology that actually works. This is going to change everything."

Madison Avenue has been clamoring for a means of measuring consumer engagement on new advertising platforms. How, for example, do you know if someone read a banner at a store? Live Ad is hoping to fill that void.

"We're seeing literally billions of dollars being funneled away from broadcast media and to more live ads, and there will need to be tools to measure their effectiveness," said Mike Danaher, a partner at Wilson Sonsini Goodrich & Rosati, which represents the company. The Palo Alto law firm also guided Google's $1.6 billion IPO in 2004 and represents Apple Computer Inc., Netflix Inc. and Pixar Animation Studios.

"Plus, Chenoa is such a force that we're also betting on her to succeed," Danaher said.

Revving up

The kiosks are typically located in a shopping mall or high-traffic retail outlet. They contain state-of-the-art monitors, software and graphics technology to showcase products. They're customized with components unique to that product. A kiosk featuring a video game based on car racing, for example, will sport a steering wheel, gas pedal and gear shift.

When customers enter the kiosk, they're asked a series of questions. The car race kiosk might ask which car an individual would like to drive, where the course should be, what music ought to be on the radio. All of that data is then aggregated, interpreted and delivered to the development company where it is analyzed.

The questions are not only targeted, but nuanced as weil. A participant might be asked, "How old do you see yourself?." That's different than "How old are you?" And that, Smith believes, is critical.

"It's not what you ask, but how you ask it," Smith said. "It's not about finding out who your user is, it's about finding out who they perceive themselves to be, which essentially will say what products they look to buy."

Most consumers stay at one of Live Ad's kiosks between two minutes and 10 minutes--a lifetime in the world of advertising interaction and data collection. Consumers seem far more apt to virtually test a new surfboard, for example, than to stop for a canvasser with a pencil and clipboard.

"The best thing about this is that the CEO and the director of marketing for a company can actually see what their ROI was on an in-store advertisement or campaign," said Cheo Jackson, the director of product development for Live Ad.

Data dabbling

Smith conceived the idea for Live Ad's kiosks six years ago while working for a Studio City theme park development firm called Ecity. Smith, who moved from Kansas City, Mo., to L.A. hoping to become a screenwriter and graduated from USC's film school, was looking at Web sites trying to expand Ecity's capability to gather data on its customers. A gaming Web site she came across particularly impressed her with the specific nature of the questions it asked visitors.

"I was captivated by the amount of data they effortlessly acquired from willing participants," Smith said, "and I wanted to find a way to incorporate that into a system that could function offline, in a brick and mortar environment."

When Ecity folded in 2001, she teamed up with Carey Schroeder, a colleague from another firm. They began to work on kiosk design and software while they sought backing. They convinced Virginia-based Mills Corp., which had a reputation for taking on offbeat tech projects, to build and test their first modules, which were interactive entertainment kiosks.

The initial reaction was tepid, and it wasn't until sports statistic expert Bud Goode suggested shifting the focus to an advertising and data-collecting vehicle that things took off.

"After we incorporated what Bud had to say, and saw the reaction after the Mills tests," said Smith, "it clicked."

Smith had been pitching to ad industry representatives and venture capitalists during the development period. Many seemed intrigued, but none enough to pony up investment capital.

"We've been organically funded from the start," Smith said, "not totally by choice. But it ended up working out perfectly."

Video games were an obvious choice for a product that could be marketed on Live Ad's stations, and the company worked out an agreement with producer GameWorks, which has since been purchased by Sega International.

"This was huge for us because it validated our existence," Smith said. "It was the first market acceptance of the technology."

Last year, Live Ad teamed up with iGames, a Mountain View-based company that backs video game cafes, in a deal that generated the bulk of the company's $1.5 million in revenue last year.

"Being hip and cool in our sector is a must," Mark Nielsen, the executive director of iGames, said. "The Live Ad systems are much cooler than a poster or a static display and seem to have a way of reaching our customers in a way nothing available now can."

The firm has just opened a San Francisco office, but remains headquartered in a simple storefront without a sign in Venice.

"It's so amazing to finally see traction in the market after working on this for almost six years," Smith joked. "I still remember the first check. It was so great to see the technology actually turning into a business."

Live Ad

Core Business: Providing advertisers with data on consumers who test products on interactive stations

2005 Revenues: $1.5 million

Projected 2006 Revenues: $6.5 million

2005 Employees: 3

Projected 2006 Employees: 100

Goal: To place its kiosks in malls and retail outlets throughout the world

Driving Force: Advertisers seeking data on young consumers