So far, advertisers have been reluctant to engage in small screen advertising on mobile phones. However, the emergence of the iPhone and its superb video capabilities could change all that, according to the New York Times on Monday.

The industry in still experimenting with a business model for advertising on mobile phones. Warner Brothers recently created a six episode short video series based on the TV series Smallville. But it’s been just one small experiment in an industry that isn’t sure how to approach the market.

Only US$421M was spent on mobile phone advertising in 2006 compared to $48B in broadcast TV, according to a media agency called Universal McCann.

"If you think about what the market could be from an advertising perspective, it is a dream," said Linda Barrabee, an analyst with the Yankee Group. "That’s why you see a lot of companies playing with different concepts and ideas."

Even so, not many have figured it out, and serious growth is a long ways away. One technology that may actually accelerate the process is the Apple iPhone. With a 3.5-inch (9 cm) LCD screen, many believe that this product will start the revolution of customers watching a lot of TV and movies on a mobile phone.

"The iPhone is going to shake things up and make cellphone companies look like they are behind the curve," said Thomas Lesinski, president for digital entertainment for Paramount Pictures. "It is going to be good for us."

Lingering issues, however, cloud the picture. Content on a small screen has to be redesigned in space and time to fit customer needs. There is also a possible disconnect between what users want to pay and what the carriers want to charge. "It’s more like the Internet," Ms. Barrabee said. "People are going to want things for free. Studios will have to come up with advertising-supported business models."

Content suitable for a mobile phone may also have to change. Customers have shown an interest in clips from American Idol. Sony has entered into agreement with the Groundlings troupe which will develop comedy routines for their phones.

All in all, the business models and formats have so far proven elusive. But new products like the iPhone could present new opportunities.