Virgin Mobile USA to use AOL mobile ad service

NEW YORK (Reuters) - Virgin Mobile USA VM.N said on Tuesday it would use AOL's mobile advertising system exclusively to deliver banner ads to its customers who surf the Web on their cell phones.

The agreement with AOL, the Internet division of Time Warner Inc (TWX.N), marks Virgin Mobile USA's first entry into to delivering ads to cell phones over the Web, a market that is expected to boost carrier revenues but has so far been slow to take off.

Dan Schulman, chief executive of Virgin Mobile USA, said offering Web ads on cell phones is an experiment and carriers and sponsors have to be wary of alienating customers if advertising becomes too intrusive.

"Mobile advertising is something you have to be quite careful with," Schulman said at the Reuters Global Technology, Media and Telecoms Summit in New York.

"A cell phone is an intimate device. We pay a service provider to have that service and we don't want to be spammed quite frankly," he said.

Virgin Mobile USA, which is partly owned by Richard Branson's Virgin VA.UL and Sprint Nextel Corp (S.N), rents space on Sprint's network to sell mobile services, targeting customers aged between 14 and 34 years old.

Virgin Mobile has recently been suffering from weak growth as many of its customers have given up their mobile phones or used them less due to economic concerns.

In 2006 Virgin launched Sugar Mama, a mobile marketing program that lets its customers recoup some of the cost of their phone calls if they view Web ads on their desktop or via text messages on their phones.

It said that over 700,000 Virgin Mobile USA customers have opted to use Sugar Mama since its launch, earning more than 26 million minutes of free airtime. Virgin Mobile USA has more than 5 million subscribers.

AOL's Platform-A advertising division will be the exclusive display advertising and sales partner for Virgin Mobile USA's banner ad inventory.

(For summit blog: summitnotebook.reuters.com/)

(For more on the Reuters Global Technology, Media and Telecoms Summits see <ID:nL20680726>

(Editing by Tim Dobbyn)