Can Phorm conquer data protection concerns?

Mouse%20searchAmid concerns about privacy, breaches of data protection legislation and another leap towards an Orwellian “surveillance society”, the British Government last week quietly declared the controversial Phorm ad targeting technology legal.

It was responding to concerns from European Union commissioner Viviane Reding over whether Phorm’s Webwise service complies with current laws governing data protection. But after consultation, the Government says there is no “inherent reason why Phorm shouldn’t be allowed to continue to operate” provided it had the “knowledge and agreement of the customer”.

But such endorsement is not shared by privacy campaigners and many thousands of UK internet users – a petition on the Downing Street website calling for Phorm to be dropped has attracted nearly 18,000 signatures so far.

Nicholas Bohm, general counsel at the Foundation for Information Policy Research, campaigned strongly against Phorm. “Intercepting internet traffic is yet another example of how we are living in a surveillance society. Brands may profit from this, but stand to lose out if the ad is seen by the wrong target audience,” he says.

Internet-use profile

Phorm takes account of all the websites a person visits, rather than just the content of a single web page. Data is used to create a profile of internet use and when someone visits a page where the ads are sourced from the Open Internet Exchange set up by Phorm, their browser will see ads targeted to their profile.

Wunderloop, a company that tracks consumer behaviour through relationships they have with website publishers, uses sim-ilar technology. However, UK managing director Donald Hamilton warns/ “Phorm could backfire tremendously because it hijacks everything a user does with its ISP and converts it into advertising, which may not be tolerated.”

Others point to Phorm’s inception as a spyware developer under the name 121Media, while its stock was also hit when it was revealed covert trials had been conducted by BT on customer data last summer. City of London police are investigating.

Another trial of the service was due to launch in August with BT, as well as Carphone Warehouse and Virgin Media, but has been postponed.

A fourth commercial partner, The Guardian, pulled out of the scheme in March this year. In a leaked email to a reader, Guardian advertising manager Simon Kilby said this was “in no small part” due to internal concerns over how Phorm sat “with the values of our company”.

Such developments have made many wary that the benefits Phorm promises outweigh the risks. Fred Burt, managing director of brand consultancy Siegel & Gale, says: “Brands enter into this at their own peril.”

Craig Walmsley, a consultant at digital agency AKQA, further cautions that Phorm’s Webwise would only be effective if people knew what they were signing up for. “If Phorm can enlist users to actively subscribe to their system it may become a viable, useful and precise ad targeting method, but people should not be drafted into such a sensitive commercial relationship without their explicit knowledge and consent,” he says.

Behavioural targeting

Few doubt that systems such as Phorm can be an effective tool for advertisers, if issues over privacy and data protection can be resolved. Dan Clays, managing director of BLM Quantum, says: “Behavioural targeting is not new, and neither are such concerns.”

Phorm says its technology “revolutionises” online advertising with higher standards on privacy and anonymity. It was designed with user protection and online targeting effectiveness as “equal priorities”. By monitoring users’ browsing, Phorm also protects against online fraud and phishing.

However, unless it can convince its critics otherwise, it may find marketers shy away for fear of consumer backlash by association.

Joe Fernandez

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