(FORTUNE Magazine) – Imagine you're a guy standing at a urinal. You look up and see the words NICE PACKAGE.

Salem cigarettes have your attention.

The message was put there by InSite Advertising, a New York City-based company that places ads in the bathrooms of bars, restaurants, and nightclubs across the U.S. Started by Marc Miller, 23, InSite has nabbed big-name clients like ABC, R.J. Reynolds, Atlantic Records, and Procter & Gamble.

InSite has a couple of strong selling points: For one thing, the ads reach the audience most coveted by advertisers--21- to 35-year-olds who like to go out and spend money. For another, bathroom goers are as captive an audience as an advertiser could hope for. (This is especially true for males, for whom etiquette dictates an extremely narrow range of vision. "Obviously, if you look to the left or the right while you're standing at a urinal, you turn into a liability," says Miller.)

Restroom ads also allow companies to target a gender with 100% accuracy. Procter & Gamble's bathroom campaign for Noxzema baits women with in-her-face messages like IT'S NOT THE LIGHTING and LOOK AS GOOD AS THE WOMAN YOUR DATE IS HITTING ON. These ads are printed in reverse type, then placed across from a bathroom's mirror, where women see them as they freshen up.

While dozens of local and regional companies sell bathroom ads, when it comes to targeting the urban youth market, InSite's only direct competitor is a Montreal-based company called Zoom Media. Having already conquered Canada, Zoom is expanding into the U.S. (InSite has a slight edge on price: It charges $200 per frame, while its Canadian nemesis' rates are in the $235 to $255 range.)

Since it was founded just over a year ago, InSite has earned over $2.2 million in revenues; Zoom says it has raked in $2 million from its U.S. ads in the past 12 months. Nightspot proprietors seem to love the idea, and no wonder: InSite hands over 15% of the ad revenues generated by their restrooms. But some advertisers would rather die than hawk their products amid the smell of disinfectant. "We know we're never going to have Cartier or Rolex above our urinals," says David Dorfman, InSite's 27-year-old co-founder. "It's just not going to happen." He's right. Both companies were so horrified by the notion of bathroom ads that they wouldn't even discuss them with us.

--Ed Brown