In a perfect world, wouldn't it be great if everything were on-demand? We're getting closer with television, movies, and even shopping any time you want. This week, advertising took another step toward joining that group.

AT&T (NYSE: T) is rolling out location-sensing text ads called ShopAlerts in a relatively small-scale test in New York, Los Angeles, Chicago, and San Francisco. The AT&T program will use advertising firm Placecast to run the system, but the power comes from AT&T knowing where you are at all times. Retailer Sears Holdings' (Nasdaq: SHLD) Kmart chain is one of the first to sign up for ShopAlerts, hoping the service will help boost its sales.

Location-based advertising isn't exactly new, but AT&T is one of the first telecommunications companies to move into this space. Smaller private firms like foursquare have been offering local location-based deals, and Facebook has added its own ability to "check in" to different locations; targeted ads may not be far behind. If AT&T can succeed with location-sensing text ads, just imagine what Google (Nasdaq: GOOG), Groupon and Facebook could do with the technology.

The possibilities are almost endless -- which could be either a boom or bust for the advertising world. Location-based ads could be a great way to find a great deal on exactly the item you're looking for when you head out shopping. Heading to the mall for some shoes? Get a coupon for DSW, and you may stop by to see what they have.

But this could also turn into a concept worse than email spam if it isn't done correctly. If I'm going shopping for shoes at the Mall of America, I don't want to get a text with coupons for air travel just because the airport is across the highway. And retailers like Kmart could offer deals on all kinds of things you don't find useful. Consumers could opt out just as fast as they opt in to ShopAlerts.

For AT&T, this is a cool announcement, but it doesn't seem to provide the carrier with much of a sustainable advantage. Verizon (NYSE: VZ) could easily add the same service, and the potential is there for Google, Facebook and others that control their own software platforms to do that same.

For AT&T, Google and anyone else trying to tackle this form of advertising, there's a fine line between providing a valuable service and bugging the heck out of customers. I think location-based ads have a lot of potential, but only if they're done right.

Interested in reading more about AT&T? Click here to add it to My Watchlist, which will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Google is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.