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The ad industry could soon be using mobiles for a lot more than gossiping about who they have spotted together in The Ivy. A host of agency start-ups and divisions are focusing on mobile phone advertising and the number of major brands taking notice is growing by the day.

So, will mobile one day sit alongside TV, cinema, radio, press, online and outdoor in brands' media schedules? The industry consensus seems to be: "Yes, but it is still early days."

Luca Pagano, the vice-president of Buongiorno UK, the mobile content specialist that owns the Blinko ring-tones-to-wallpaper brand, puts the emergence of "a real market" for mobile advertising no sooner than "next year or even 2008". He says: "What's out there at the moment I don't even consider advertising, to be honest. But I would be bullish enough to say we will see campaigns this year."

Simon Pont, the marketing director at Media Planning Group, agrees that "in many regards, mobile phone marketing is still in its early years; only just crawling, never mind walking". He adds: "For many brands, advertising within the mobile medium is not without associational risks. The mobile phone is arguably the most private medium there is. Any commercial message, particularly an unsolicited one, is likely to be deemed intrusive, met with suspicion and, quite possibly, ignored. Brands want to feel welcome, not resented and met with distrust."

Mark Iremonger, the head of digital at Proximity London, also warns that "mobile can be high-risk. It can be the quickest and easiest way to piss people off if you get it wrong."

Perhaps this explains why mobile phone companies have been reluctant to open up their networks for commercial exploitation by brands until recently (page 37). "Traditionally, the operators have been very cagey about letting advertisers near their customers," Pagano says. "They lose about 30 per cent of their customer base every year, so a key objective is to retain customers. Advertising has always been perceived as the typical thing that would alienate customers and push them away to competitors."

Operators are so fearful of the impact of commercial messages that they even limit their own communications to customers to two per month, Pagano adds. No wonder this has been a no-go area for other brands.

But things are changing with third-generation networks and their ability to stream video and audio to customer handsets. Suddenly, operators are on the lookout for content and advertisers may be able to help them out.

"From the user's perspective, it's free content. From the operator's perspective, it's an added service. And for advertisers, it's a way to get to the audience," Pagano says.

Right now, the audience is primarily a young one. Pont says: "The highest usage in terms of phone minutage, particularly in levels of interactivity, is among teens. Teens are more likely to text, download, play games, respond to discount incentives and opt-ins.

"The medium becomes an obvious point of access for music and film advertisers, but has less immediate logic for upscale brands. Added to which, the majority of opt-in lists advertisers can buy are produced and supplied by ringtone and SMS companies."

Iremonger adds: "Most upmarket advertisers see mobile primarily as a youth medium, although some of the car brands, such as Audi and Volvo, are starting to do interesting things, such as being able to configure your car and keep the specs on your phone."

One problem for quality brand advertisers, though, is the technology.

Much has been made of the potential of location-based services, for example.

But Niek van Veen, a telecom and mobile researcher at the IT analyst Forrester, says because of the wide area covered by mobile base stations, "the location is still uncertain. It hasn't been very successful."

Barry Lee, an account director at Zed Media, adds: "3G needs to be a little more stable. The signal quality and bandwidth isn't there all the time. If I'm a premium brand with premium content but it ends up pixellating, it has a negative impact on the perception of the brand."

There are other challenges. The small size of mobile phone screens poses a problem not only for ads that require detail to get their message across, but for those with lengthy terms and conditions, such as financial advertising.

The maximum duration for MMS video clip files is about ten seconds, hindering viral marketing.

Add to this that you can only market to users who have gone through a double opt-in procedure, that not all mobile systems can admit clickable links in MMS and that the medium has tracking issues, and you begin to wonder why brands would bother at all.

Perhaps the most obvious reason is the level of personalisation that can be achieved. "We can be much more specific about our advertising," Steve Griffiths, the managing partner of Iconmobile UK, a mobile services and applications specialist, says. "You can deliver to a person, not a computer."

Another advantage is the reach of the medium. Last year, the Mobile Data Association confirmed mobile phone penetration in the UK had exceeded 100 per cent (with many people owning more than one mobile).

And while not everyone has a 3G phone yet, Wayne Arnold, the managing director of the digital marketing agency Profero, predicts they will soon.

"3G has about eight million users out of the total UK population of 60 million," he says. "Most mobile phones now have 3G capability and, with people changing their phones every 14 months or so, by Christmas 2007 we should be up to 60 or 70 per cent penetration."

Arnold adds: "If you put an ad on the homepage of Vodafone Live!, the reach is very high."

Response rates are good, too. Arnold cites an unnamed client campaign in which 10 per cent of the entire 3G audience responded. "But there is an element of novelty value here," he concedes. "Also, you are pretty much standalone."

Iconmobile also reports high response rates in a three-month mobile advertising pilot in Germany, involving six advertisers. "We served one million ad impressions per month," Griffiths says. "The response rate was initially 6 per cent then reached a plateau at 2 per cent."

What is clear from these early experiences, however, is that if brands finally conquer the mobile medium, it will not be with advertising as we know it.

Nick Lane, the principal analyst at the IT research company Informa Telecoms & Media, says: "A TV model on mobile wouldn't work. If you're going to watch television on a mobile phone for five minutes, will you want two or three of those minutes to be ads? Not really."

Arnold believes the key questions that advertisers need to ask are why would you want to get a marketing message on the phone and what unique content are you going to provide to the user?

This challenge is forcing brands to rethink their communications for an environment where marketing messages need to offer something useful or entertaining to be seen in the first place. And those in search of a recipe for success need look no further than Jamie Oliver.

Profero's branded-content venture Inventa helped the TV chef make the record books with the first UK made-for-mobile series, which gives subscribers simple recipe suggestions relating to the weather or time of year, for instance.

"The audiences for some of these are bigger than for Radio 4," Arnold says. "We have had 90,000 or 100,000 people downloading them."

Given these audiences, Arnold predicts the made-for-mobile content market could easily spawn a social phenomenon similar to Little Britain, which started out on Radio 4, in the next 12 months. And with the right kind of content, there is no reason why advertisers might not be a part of it.

Ogilvy & Mather recently produced a 90-second piece of branded content for the ±±¾©Èü³µpk10 Against Living Miserably, a Department of Health initiative aimed at depressed young men, which ran on Mobuzz, a European multiplatform TV channel for mobile, to an audience of more than one million.

And in Germany, McDonald's sponsors a mobile soap opera, which is delivered twice daily using WAP images with captions and accompanying MSN Messenger video streams. Not all mobile advertising needs to feature complex video, though.

One of Arnold's favourite mobile marketing campaigns to date, for example, is Allergeeze's simple idea of getting users to sign up for text alerts that tell people of impending high pollen counts and remind them to stock up on Allergeeze.

Indeed, text messaging continues to be the dominant force in mobile marketing, with the research company Jupiter estimating a total spend of x111 million across Europe by the end of this year. But there is a major event that could change things in the coming months.

"The big one this year will be the World Cup," Arnold says. "Big games will be watched on television but a lot of the games will be at 4pm, when people can't see them. So it will be the first real test of whether mobile TV will really kick off."

If it does - and both T-Mobile and Virgin Mobile have promised to offer their customers World Cup highlights on their mobiles - then Lee believes the emergence of mobile as a major advertising channel could be just around the corner.

"I think mobile will develop truly to become the 'third screen'," he says. "Although I personally struggle to see someone sitting down to watch Coronation Street on their mobile."

JAPAN CALLING: THE WORLD'S MOST ADVANCED MOBILE MARKET

What might the UK's mobile advertising market look like in a couple of years' time? One answer is only half-a-day away. In Japan.

There, according to Dave McCaughan, the executive vice-president and director of strategic planning at McCann Erickson Japan, nearly half of all phones are 3G and 85 per cent of housewives have a camera phone. "A camera phone is mass-media," McCaughan states.

The prevalence of camera phones has helped Japanese advertisers overcome a problem faced by their UK counterparts: how to get phone users from the mobile portal to brand sites without having to go through a laborious search and navigation process on the handset.

The answer is a small barcode called the Quick Response code (in the bottom-left corner of the picture opposite), invented by the Japanese corporation Denso-Wave in 1994. Originally intended for tracking vehicle parts, QRs are now commonly used to store web addresses in a format that can easily be read by camera phones.

"If you are flicking through the latest Playboy or Elle, 80 per cent of the ads would have a QR code," McCaughan explains. "You take a photo of the code and it directly links you to the promotional site."

He cautions about presuming that QR codes could take off in the UK, though.

"I've worked in ten countries and the Japanese read the back of a packet more than any other people I've come across," he says. And the country is no more advanced than Britain in terms of video content.