Advertising on mobile phones started modestly. A few years ago, campaigns were tied to TV commercials and required entering a code on the phone to receive a text message. Most early adopters were found in Europe where text messaging has always been more popular. Since those early days, multimedia-enabled phones that connect to the Web have become increasingly available, making jazzier advertising possible. MMS (Multimedia Messaging Service) can deliver rich graphics, audio and video which make for more compelling ads. According to figures released in November by CTIA/The Wireless Association, there are 227 million wireless subscribers and 57% of them use more than voice services. Mobiles are so widespread that advertisers can’t ignore this new way of reaching consumers.

“On a mobile, you have less than 15 seconds to tell a compelling story,” warns Diana LaGattuta, director of marketing at Enpocket, a mobile marketing company. “You can do banner ads on the mobile Internet, which is similar to Internet advertising on smaller real estate. You can also engage the consumer beyond clicking on a banner. For example, a banner can lead to a store finder and to a mobile coupon.”

LaGattuta describes a mobile campaign for McDonald’s in which her agency was tasked with increasing younger customers’ late-night traffic at the fast-food restaurant chain in the New York area. Enpocket ran an ad on the mobile version of dating site Targeting the recipients by zip codes and age, Enpocket sent them a coupon to entice them to stop for a late snack.

Sprint recently became the first American carrier to sell advertising on its mobile Web portal and others are scheduled to follow. As wireless carriers struggle financially, this new source of revenue is welcome and subscribers should expect to see more ads during their mobile surfing. “The carriers are sitting on tons of demographics and behavorial data about their clients,” anticipates LaGattuta.

She recalls another campaign for European wireless carrier Vodafone in the UK, one that demonstrates the efficiency of mobile advertising. “The click rate was 50% and the conversion rate was 30%.”

Tim Jemison is the CEO of Zoove, another mobile marketing company, which has developed a different approach. “Twenty years ago, ads carried a toll-free number and 10 years ago, they added a Web address. Now, ads will add a mobile response mechanism.” Zoove’s StarStar is a system that makes direct response easier. For example, the consumer enters “StarStar iPod” on his phone and gets a message back from the advertiser.

Both LaGattuta and Jemison are adamant that the scenario of a cell phone user walking down the street and getting targeted ads as he passes specific stores is a ludicrous idea. “It is technically feasible. But it is not being done because the constant interruption would be the worse possible user experience,” says Jemison.

What about free phone service in exchange for the user’s attention to advertising? Jemison doesn’t believe in this scenario either. “There is a small niche of people who are willing to be interrupted by ads. But the carrier would need 10 million subscribers to make it.”

A study conducted by Harris Interactive for Enpocket and released in October showed that mobile Internet users in the US, Europe and India are far more accepting of mobile advertising when it is made relevant.