Plans now abound for turning that phone screen into a tiny mobile billboard flashing come-ons for everything from coffee shops to dog food. Most campaigns are just in the testing phase and ads likely won't be widespread on cell phones until the end of the year at the earliest. Still, Websites, advertisers and Internet ad companies such as DoubleClick Inc. and Engage Inc. are scrambling to figure out how best to pitch products without making consumers so annoyed that they chuck their phones in the trash.

The companies face some vexing issues. Navigating the Web by using the little buttons on a cell phone is cumbersome - even when users want to find the information. Few click on those ubiquitous banner ads on Websites while using a desktop computer - why would they bother to view an ad on a phone? And since most people pay for the minutes they use their cell phone, consumers are put in the odd position of having to spend money to view ads.

Wireless advertising also has the potential to cause even more privacy problems than regular Internet advertising. Unlike the relative anonymity of surfing the Web on a PC, wireless service providers know their customers' names, cell phone numbers, home or office addresses and the location from where they are calling. This information - if the providersdecide to share it with advertisers - is a marketer's dream.

Despite the hurdles, the prospect of marketing via cell phones excites advertisers. "The fact that people have their phones available at all times is fantastic," says Bruce Mello, senior vice-president for wireless, broadband and emerging media at 24/7 Media Inc., an Internet advertising company in New York. "You're reaching people in a way you never have before."

And there are a lot of people to reach. International Data Corp., a research firm in Framingham, Mass., estimates that there are 75 million cell phone users in the US, compared with 35 million households that have Internet access via a PC. Early tests of wireless ads have been promising, too. In a trial that 24/7 did in Britain of an ad for a soccer Website, people clicked on the ad between 5 per cent and 10 per cent of the time it was shown. Compare that with the dismal, less than 1 per cent "click through" rate for the typical banner ad on a Website viewed on a PC.

A system aimed at making Websites more usable on cell-phone screens, called wireless application protocol or WAP, is just becoming widely available. Companies from Yahoo! Inc. to Amazon.com Inc. have invested heavily to build their WAP sites. Many have paid providers like Sprint Corp. to get their content, such as news and sports scores, on the menus of users' cell phones. Now they are looking for the return, and advertising fits the bill.

The wireless carriers are looking at selling their own advertising space, too. "If we do it in a way that customers appreciate, it [advertising] could represent a significant amount of money," says Charles E. Levine, the chief sales and marketing officer for Sprint PCS, Sprint's wireless-phone division. Levine says that consumers could benefit, too. Sprint is considering offering discounted calling plans to people who agree to receive ads. Such plans are already available from companies in Europe.

But before advertising fattens anyone's bank account, ad agencies have to figure out how to build effective pitches on such a tiny piece of real estate.

During a recent afternoon at Lot21, a small advertising agency in San Francisco, four company executives hunched over a NeoPoint 1000 phone to look at an ad they created for Intraware Inc., an Orinda, Calif.-based company that provides information technology wonks with news about hot software. "Intraware is giving away $75,000 - about double the average IT salary - and one deserving IT pro will be the winner. You can be that winner!" the ad says.

There are no jazzy graphics, no funky fonts and no colour except for that eerie green glow still used for most cell-phone screens. "What we can do is pretty limited," says Kate Everett-Thorp, Lot21's president and chief executive. The agency also has no control over what its ad ultimately looks like to a particular user, since there are dozens of types of cell phones. Some have screens that display 11 lines of text, some show only four. Some can display bold letters and crude graphics, others can't.

Unlike a lot of banner ads on PCs, the Intraware ad doesn't ask for an e-mail address or any other information from the consumer. "No one wants to have someone fill out a form on a phone," says Lot21's Kevin Sherman, the black-clad lead designer for the ad. You can't even click on the ad to get more information. Instead, you are prompted to go to your PC and look up Intraware's site to sign up for the $75,000 prize. The reason? Like a lot of companies, Intraware doesn't yet have its own specially formatted wireless site.

Meanwhile, the Websites that plan to sell the space for these kinds of ads next to their content have their own issues. Across town at CNET Networks Inc., a producer of technology Websites that tested the Intraware ad, a group of young executives worry that their desire to make money from advertising will backfire and annoy customers. "We have to make sure users come back," says Lisette Konya, CNET's manager of industry marketing.

For companies like CNET, ads on phones threaten to blur the line between editorial content and marketing. The problem is already widespread on Websites. But it is exponentially tougher on diminutive cell phone screens.On CNET's News.com wireless site, it is almost impossible to tell that the Intraware ad is an ad. The line "Double Your IT Salary" is in the same typeface as CNET's content. It is placed directly below the headline for CNET's News.com service and right above the News.com menu options. The only distinguishing mark is a bracket. "There is no room to write 'advertisement,' '' says Charles Barzun, product manager of CNET wireless. Barzun says CNET is still trying to find a way to make it clear what is an ad and the Intraware spot hasn't yet been sent to any users.

The issue that causes the most hand wringing is consumer privacy. Advocates are concerned that wireless service providers know where a user's phone is. "The potential for tracking people is enormously greater than it is on the wired Web. This could be like DoubleClick on steroids," saysJason Catlett, president of the privacy-advocacy group Junkbusters Corp. DoubleClick recently got into trouble for its now-postponed plan to match up people's names and addresses with logs of what Websites they visited.

Advertisers and wireless providers envision using a cell phone's ability to track a user's location to pitch people targeted services. "Imagine that I get off the plane in San Francisco and I'm hungry," says Sprint PCS's Levine. "I would love to get a message telling me where the nearest Chinese restaurant is." But Levine and others in the industry are careful to say that they wouldn't send such ads or track people's location without their consent. Still, companies like Montreal-based Profilium Inc. are already cropping up to target advertising at people based partly on their location.

At a recent meeting in San Francisco convened by the Internet Advertising Bureau, an industry trade group, executives from companies such as Women.com Networks Inc., a producer of Websites for women, and International Business Machines Corp. wrestled with the privacy question. "We're going to know where people are. How do I get permission to use that?" asks Todd Watson, a digital brand manager at IBM. Holding up his own cell phone, Watson adds,"No one is going to put a 10-page privacy policy on this."

And phones have tracking devices that make those controversial cookies - the little programmes that sites send to a user's hard drive to track activity on a site - look like kid's stuff. Each phone has a unique identifier, a permanent tag that marks it and can record where in the physical world someone travels while using the phone. Wireless providers will soon be able to pinpoint people more precisely, thanks to a new FCC rule, called E911, aimed at locating people who use their cell phones to dial 911 in an emergency. Some companies are considering selling tracking information to marketers, but only in the case of customers who agree to have their data shared. "I think we'll be gathering preferences on users so they can ask for stuff to be delivered to them," said Jim Sullivan, manager of business development at Sprint PCS. "We'll want to look into profiling them for advertising, too."

Engage, a company that already creates anonymous profiles to target advertising to specific users, is looking into ways to build a "global cookie" that would be married to a phone's unique identifier and allow Engage to build profiles of phone users. But Engage and the executives at the IAB meeting agree that, somehow, consumers must be able to choose whether or not they want to have this kind of information used.

The danger, they think, would be to ignite a consumer backlash even before they have a chance to run ad campaigns. As Lot21's senior media strategist, Brett Galimidi, says, "The last thing we want is to create public hysteria."

-- The Wall Street Journal