As Doug McIntyre posted this morning, The Wall Street Journal reports that Google, Inc. (NASDAQ: GOOG) is pushing a special cell phone [subscription required] that will help it grab a share of the small, but rapidly growing wireless advertising market. Specifically, Google may not only be pushing handsets customized to Google products, but eventually also developing its own handsets (it has developed a few prototypes already), thus facing conflicts with Apple Inc. 's (NASDAQ: AAPL) iPhone.

The wireless ad market is relatively small now but forecast to grow fast. In 2006, global spending on mobile-phone advertising, including placement of ads in text messages, Web pages, video and all other content, was only $1.5 billion -- growing at a 56% compound annual growth rate to $14 billion by 2011, according to eMarketer.

Not only that, but those revenues are likely to be more profitable than the typical online ad. Google CEO Eric Schmidt noted, "What's interesting about the ads in the mobile phone is that they are twice as profitable or more than the nonmobile phone ads because they're more personal."

How will Google grab its share of this lucrative and growing market?

Google's specifications include cameras for photo and video, and built-in Wi-Fi technology to access the Web at hot spots such as airports, coffee shops and hotels. Google wants the phones to work on the fast 3G networks, to ensure that Web pages can be downloaded quickly. Google suggests the phones could include Global Positioning System (GPS) technology that identifies where people are.

Unlike the iPhone, Google's prototype is intended to work with multiple carriers such as T-Mobile USA and Verizon Wireless. The competition between Apple and Google could get complicated because four of Apple's eight directors also serve as directors or advisers to Google with Schmidt, Google's CEO being one of them. Those with ties to both companies might find it difficult to avoid conflicts of interest.

The competition for wireless ad revenues could annoy consumers unless those ads provide information that consumers really want. On the other hand, I welcome any effort to increase the quality and coverage of the U.S. wireless network and to widen the usefulness of the wireless phone.

I think the competition between Apple and Google on this front could achieve both of these benefits. What do you think?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.