Phorm gets the all-clear from the UK Goverment (kinda)

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[Update 10/1/08: BT has announced that it will commence a new trial with Phorm to start September 30 in the UK. The trial, in accordance with the conditions below, is opt-in]


phorm_logo Beleaguered behavioral targeting outfit Phorm appears finally to have caught a bit of a lucky break – the UK Government has (belatedly) responded to the EU’s queries about Phorm’s business practices by saying that Phorm does not break EU data collection/retention laws. But the Department for Business, Enterprise and Regulatory Reform (BERR) – the Government department tasked with assessing Phorm’s business and responding to the EU – has placed the following conditions on its approval (from an excerpt of the full letter sent to the EU which is reproduced on The Register – my highlighting added):

  • The user profiling occurs with the knowledge and agreement of the customer.
  • The profile is based on a unique ID allocated at random which means that there is no need to know the identity of the individual users.
  • Phorm does not keep a record of the actual sites visited.
  • Search terms used by the user and the advertising categories exclude certain sensitive terms and have been widely drawn so as not to reveal the identity of the user.
  • Phorm does not have nor want information which would enable it to link a user ID and profile to a living individual.
  • Users will be presented with an unavoidable statement about the product and asked to exercise a choice about whether to be involved.
  • Users will be able to easily access information on how to change their mind at any point and are free to opt in or out of the scheme.

The two key bullets here are the last two – Phorm will be required to operate this service as an opt-in service only, with clear language and functionality enabling even opted-in users to opt out at any time. And  BERR states that it will be keeping a close eye on Phorm to ensure that it continues to comply with these conditions.

The news may do a little to shore up Phorm’s deflating stock price, which has lost about 80% of its value since the heady days of March. But it’s hard to imagine Phorm building much of a sustainable business on the back of an opt-in only system – it’s going to be an incredibly hard sell for the ISPs that Phorm partners with (BT, TalkTalk and Virgin Media being the only ones mentioned so far). The only model I can think of is that the ISPs offer reduced rates in exchange for opting into the targeting system; but that negates the very purpose of implementing the system in the first place – to shore up sagging ISP revenues in the wake of the last few years’ broadband price wars. I fear that Phorm is not out of the woods yet – especially if the recent happenings at its competitor NebuAd are anything to go by.

1 thought on “Phorm gets the all-clear from the UK Goverment (kinda)”

  1. It’s hard to see how the government could decide anything else really – let the customers decide seems reasonable enough. The problem is the ‘unavoidable consent’ and what will constitute that. Could it be buried in terms and conditions which users must accept to become a broadband customer, for example? That would be unavoidable, but hardly fair. Perhaps the full guidelines go into more detail on that.
    It is possible that ISPs could make more money from targeted advertising than they can from subscriber fees, particularly with price competition hurting subscription revenues. It might even be possible to discriminate between customers and offer such a deal only to those who would be more profitably served that way, although that approach does imply at least a trial period of data collection first to identify high value customers.

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