In China, it often seems that mobile phones get more respect than people. The habit of routinely interrupting business meetings, dates, and even job interviews to answer a call or reply to a text message–a commonplace in China–might be considered unpardonably rude in Western countries. But for the growing number of companies who see mobile as the next great advertising medium, the cell phone’s ability to grab attention is just proof of concept. And that ring tone that some of us find so annoying? That’s music to their ears.

A raft of mobile ad-related startups has appeared in China in the last two years, vying to be the Third Screen Media, AdMob, or JumpTap of China. (These companies, in case you haven’t heard of them, are respectively two of the leading U.S.-based mobile ad serving companies, and one of the leading mobile search providers). In addition to mobile ad serving plays like MadHouse, WAPS, and CASEE, there are now several Chinese mobile search companies like mInfo, UUCun, and Yicha. China has also seen a handful of 2D barcode companies emerge: startups like Gmedia, Inspiry, Coolmark, and Hong Kong-based MyClick all hope to turn the camera phone into a conduit for advertising–and turn static print ads into truly interactive ones.

There’s plenty of cause for bullishness on mobile advertising: China’s subscriber base, as believers are fond of reminding us, is fast approaching half a billion, and growing by 5 million a month. Mobile subscribers outnumber Internet users in China by more than three to one. And mobile data culture–a facility and familiarity with SMS, MMS, and WAP–has clearly taken root among mobile users, especially younger subscribers.

Given time, there’s little doubt mobile advertising in China will take off, just as it has in Japan and Korea, the two markets that provide the best glimpse into China’s wireless future. On the device side, the promise of higher bandwidth that supports glitch-free video streaming, better battery life, increasingly powerful processors, and ever cheaper, ever higher-resolution displays will enable mobile devices to support richer and more compelling advertising. Ad providers will get savvier, too, applying much of what they’ve learned on the Internet to mobile–the ability to serve highly-targeted, context-sensitive and/or behavior-based ads–and adding to that mix a potent location-based capability that will let them serve the right ad to the right person in precisely the right spot.

But that’s all some ways off. Make no mistake: the mobile ad market in China is still in its very early stages, and today’s crop of startups faces substantial challenges despite the enormous potential of the market and the promise it holds out. 480 million Chinese mobile subscribers, sure–but of those, only 100 million who’ve ever even used WAP, with perhaps a third of those, generously, who use it on any regular basis.

The 30-odd million you’re left with is hardly a number to sneeze at: it’s nearly the population of the state of California. But not many of the ads they’re presumably being served are actual brand advertisements. Companies in this space–and this is true of both ad serving and most mobile search companies–tend to generate much of their revenue from mobile value-added service providers, who sell ring tones, games, screen graphics, and other mobile content. For most mobile ad compnies, brand advertising accounts for a small proportion of the revenue mix.

Note: Since writing this in April, I’ve spoken with Joshua Maa, CEO of MadHouse, who tells me that his company has moved to all brand advertising, foregoing all revenue from wireless value-added service advertisers.

Search and 2D barcode solution providers face another set of challenges. Client software needs to be installed for their applications to work–unless, of course, it comes pre-installed either by handset manufacturers or carriers. Not surprisingly, they’re all lobbying hard to get picked, but so far no game-winning deals have been struck.

Mobile data culture may well have permeated key demographic segments in China, but mobile marketers will find it nontetheless difficult to cut through the noise to reach those subscribers. Your average Chinese cell phone user is constantly bombarded with unwanted SMSs and WAP push links. One mobile ad executive says that 60% of spending in 2006 was on “push services”–what most of us simply call spam. And while China Mobile might do its best to crack down on spammers, central directives aren’t always followed to the letter among the operator’s provincial branches, where actual implementation happens.

Brand advertisers need to manage their expectations when it comes to mobile. Overzealous mobile ad providers–not just in China–have in some cases exaggerated their ability to target users, to generate click-through, and to measure return on investment. The result is not surprising: The same marketing officer who won’t bat an eye as she signs million-dollar checks to produce and place a TVC, and who can only guess what that ad might generate in sales, will suddenly become very involved in with the minutiae of metrics when it comes to a mobile campaign, however small that campaign might be.

The worry is that disappointed brand advertisers might prove once bitten twice shy, souring on mobile in numbers sufficient to really stymie the industry’s development. That would be a real pity, because the potential really is there. The onus is on mobile ad companies to resist overpromising, to be candid with clients about the still nascent state of the mobile ad market in China, and to grow the industry in a disciplined fashion–foregoing short-sighted revenues, and easing off on the scramble for big brand advertising clients.