Microsoft Corp. signed a deal with Global Hyatt Corp. to put hotel ads on Verizon Wireless phones, part of a bid to turn around its shrinking advertising business by expanding beyond personal computers.

The Hyatt ads will encourage people to sign up for a frequent-guest program, as well as letting them book rooms and check in using their phones, said Charles Johnson, Microsoft’s general manager for mobile media. The companies planned to announce the deal on Monday at an ad-industry conference in Cannes, France.

Microsoft’s advertising division, which mostly sells ads designed for viewing on PCs, is adapting the business to the faster-growing mobile-phone market. The Redmond, Washington-based company aims to narrow Google Inc.’s more than 8-to-1 lead in total Internet ad sales. Microsoft signed an exclusive deal to sell ads on Verizon phones earlier this year.

“They have to innovate around this, because the traditional branded display ads just don’t work on mobile,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. Instead of banner ads, product promotions and discounts for nearby stores are more effective, he said.

Johnson, who took over mobile advertising for Microsoft in March, said he got that same message from his wife. She told him mobile-phone ads were the same as spam.

“When I took this job, my wife said, ‘I don’t want any mobile ads. But if you can give me something that’s a coupon, like a discount for pizza when I’m on the way home with the kids—that, I want,’” Johnson said. “It’s about value to the customer. It can’t be about ads for the sake of advertisers.”

Hyatt, based in Chicago, runs more than 370 hotels in 44 countries. The Microsoft ads will direct users to a Hyatt Web site designed for mobile phones.

Advertising revenue on phones is rising at a 79-percent annual clip, according to Bernstein. The market will reach $7.2 billion by 2012, the firm said.

Lindsay expects the largest part of mobile ad revenue to come from search-engine ads, an area where Google has the advantage. Google’s mobile search software has more than seven times as much traffic as Microsoft’s, according to Reston, Virginia-based research firm ComScore Inc.

Microsoft’s online ad revenue dropped 16 percent last quarter as the recession pushed down the price of banner ads, the company said in April.

Microsoft fell 79 cents to $23.28 in New York time on the Nasdaq Stock Market on Monday. The shares have gained 20 percent this year.

The Verizon deal gives Microsoft the chance to gain market share. Verizon, the top US wireless carrier, is preloading Microsoft’s search engine onto phones as part of their agreement.

In the first 20 days after Verizon started that effort last month, Microsoft’s mobile search engine handled 19 million queries. That’s 10 to 15 times the previous rate, Johnson said.

Microsoft pays to have Verizon use its software. Yahoo! Inc., which ranks second in US Internet searches, has a similar arrangement with T-Mobile International AG, Lindsay said.

A program called Microsoft Tag is key to the company’s mobile-phone strategy. It lets phones with cameras scan bar codes. That allows the device to receive content such as coupons, business cards or even games.

The software is available for Apple Inc.’s iPhone, Research In Motion Ltd.’s BlackBerry and other phones, including models with Microsoft’s Windows Mobile operating system. The idea is similar to the QR, or quick-response, codes used in Japan.

Earlier this year, Microsoft and Wal-Mart Stores Inc. used Tag to promote the “Halo Wars” video game. Gamers could scan a tag from their Xbox screen with a phone and use it to get ring tones and a discount for preorders of the game at Wal-Mart. Procter & Gamble Co. has used Tag overseas and is interested in trying it in the US, Johnson said.

Johnson is a West Point graduate and Gulf War veteran who marketed a new kind of Spic and Span cleaner for Procter & Gamble. He also promoted cocktail mixes for Coca-Cola Co. before joining Microsoft in 2002. He aims to win over advertisers by making them see how mobile-phone promotions can improve their business.

To woo Toyota Motor Corp., Microsoft paid for research that showed how its mobile search engine and graphical ads could boost the carmaker’s brand awareness in France, Johnson said. Customers who viewed a mobile ad—in addition to one on the Internet—were more likely to remember Toyota’s brand.

Johnson declined to say if Toyota has hired Microsoft, only saying there was “extremely high interest.”