In markets where 3G connections are widely available to allow user to have high-speed connections to the internet, video ads on cell phones are becoming a big business. The New York Times writes that Japanese think-tank Dentsu Communication Institute Inc. sees revenue for this form of advertising tripling in that country to $1 billion by 2011.

If the market for TV-type ads on phones is indeed growing that fast, it could have considerable benefit for U.S. carriers AT&T Wireless (NYSE: T), Verizon Wireless (NYSE: VZ), and Sprint (NYSE: S). Wireless revenue is the engine driving growth at these companies, especially as they lose landline service to VoIP products from the cable companies.

A look at Verizon's 10-Q shows that wireline revenue fell slightly to $12.6 billion. Operating income for the segment was also off a bit to $1.1 billion. But , wireless revenue was up from $9.2 billion to $10.8 billion and operating income moved from just over $2.3 billion in the June quarter of last year to $3 billion.

That revenue growth rate cannot keep the same pace without new ways to get money out of the wireless business. While Verizon Wireless has about 62 million customers, AT&T has about as many and Sprint has over 50 million. In a country with slightly over 300 million people, many of them not old enough to use a phone, the number of subscribers to wireless programs must slow.

An advertising model could help offset that. Marketers are hungry for new ways to reach customers, especially as they move away from TV. Even if Verizon could pick up several hundred million a year in ad dollars, most of that would be profit. The costs of delivering video ads is small.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Can AT&T (T) and Verizon (VZ) make money on cell phone ads? originally appeared on BloggingStocks on Sat, 18 Aug 2007 16:40:00 EST. Please see our terms for use of feeds.