After BT said it didn’t have plans to roll out the technology, Carphone Warehouse and Virgin dropped their plans too. BT cited its “commitment to developing next-generation broadband and television services”, and said it didn’t have the resources available to roll out Phorm too. So it’s not ruling it out altogether, but its a blow for Phorm, who are pouring money away without any sign of revenue being generated on a large scale, and who (now embarrassingly) announced that BT would be moving forward with the technology back in December. The FT reports that Phorm are now looking overseas for other ISPs to hop on board.

They must be wondering what went wrong. They made friends in high places, got Ofcom on board, and got shedloads of investment (with their latest £15m turning up less than a month ago). If Phorm does go down the tubes, it’ll be down to a few small but crucial errors – the testing of BT customers without their permission, their paranoid and ranting Stop Phoul Play site.

But they’ve also been hampered by the hazy general distrust from the public of anything that follows what you do online, even if it doesn’t store the information or identify you, as Phorm claim. Tim Berners-Lee was a high profile example of this lack of faith, saying: “To allow someone to snoop on your internet traffic is to allow them to put a television camera in your room, except it will tell them a whole lot more about you than the television camera”. This is quite an unfair comparison if Phorm’s technology works in the way they say it does – at no point can you be identified as you remain an anonymous number throughout the process.

But the ISPs and sites realise how much privacy means to their customers, and how toxic it would be to be thought of as untrustworthy spies – Amazon cut ties with Phorm after just one customer complaint. The resistance from the like of NoDPI and the Register has been pretty formidable too.

So it looks like a victory for the privacy campaigners, but for how long? BT still essentially have faith in targeted advertising – they didn’t postpone the rollout because of privacy issues. If Phorm manage to last long enough, they could be back, but it’s hard to shake the feeling that if it’s not them, it’ll be someone else in a few years time.

But according to NoDPI, an anti-Phorm site, the statement that “BT’s expectation is to move towards deployment” comes from Phorm alone, not Phorm and BT as reported in the FT and others. And it doesn’t take a genius to read between the lines and work out that BT haven’t actually said yes yet. Nice way to jumpstart those share prices though!

We’ve had a look at Phorm recently, as they’ve been trying to beef up their legitimacy by adding the likes of Norman Lamont and Ofcom founder Kip Meek to their board. Their website is nice and clean and curvy, like posh smoothie packaging, and it all seems above board. They say they don’t keep any records of who you are or where you surf, and that you can opt in or out of the program at any time.

But according to NoDPI, they don’t meet legal standards for opting in or opting out: “Phorm break the law by intercepting every unencrypted web communication by a customer of a participating ISP - AT THE ISP LEVEL.  There is no way to avoid this interception and the Opt-In requirements under the law are not being met.” Moreover, Phorm has never really recovered from the revelation and PR nightmare that BT customers were secretly monitored by the technology in early tests.

It’s uncertain whether other broadband providers are up for Phorm. Orange ruled themselves out last month, saying “Privacy is in our DNA, so we need to be honest and clear about what we are doing. We have decided not to be in Phorm because of that… The way it was proposed, the privacy issue was too strong”, while Tiscali and Sky have both also said no. Virgin Media are a bit more confusing – CEO Neil Berkett once said their advertising ”would not be with the Phorms of this world”, but now he’s saying: “There will be a point in time when we use the intelligence of our network for targeted advertising, will it be with Phorm, will it be with a modification of their product? I think it is a technique, but it is not something I want to rush into. We have got a fantastic brand and we want to take our customers with us”.

Even if BT is totally up for Phorming, it doesn’t look like the company’s share price is going to hit the £35 highs it once commanded. And from the comments of broadband providers, they don’t seem to think their customers are going to be convinced by Phorm’s cute explanation of its technology, with little Flash animations of hats and incinerators; the fact that BT didn’t reveal the figures of how many signed up during its latest test seems to suggest that their customers aren’t convinced either.

Being part of a media company affected by low ad revenues, part of me almost wants it to work and create higher ad premiums, but the total-privacy argument just doesn’t convince. And as astute commentor “oldghosts” mentioned in our last Phorm post, packet-based information delivery may not even have a future in a cloud-computing environment, so Phorm’s technology could become redundant. While Phorm gets exasperated at the refusal of people to sign up to something that would revolutionise revenue generation online, the public isn’t ready for total surveillance just yet, and that’s heartening.

Norman Lamont, the former Tory chancellor so memorably characterised as a complete ignoramus on ITV’s Spitting Image, was yesterday announced as a non-executive director of the advertising technology firm Phorm, following a boardroom dispute that has seen three US-based directors ousted from the company.

Lamont, who is presumably enjoying the current financial crisis on account of it making Black Wednesday – which happened on his watch – look like a gentil tea party, has been drafted in by Phorm to help slime the wheels of their ongoing campaign to persuade the government that their company’s working practise doesn’t actually constitute a Big Brother-style snooping service, where users’ private web habits are recorded and monitored for the purposes of big business clients (which, funnily enough, is pretty much an exact description of what they do). In his company’s press announcement, Kent Ertugrul, Phorm’s CEO and a former seller of joyrides on Russian fighter jets, was fairly explicit about Lamont’s role:

“I welcome Lord Lamont, Kip [Meek, former executive at Ofcom], Stefan [Allesch-Taylor, co-founder of the Fairfax investment bank] and Stephen [Partridge-Hicks, MD of Gordian Knot, an investment management company] to the Board. They bring extensive experience on government, business, regulatory matters and financial markets.”

Phorm, which offers brands a targeted advertising system based on “deep packet inspection” of web browsers’ behavioural habits, needs all the help it can get, as it has come in for heavy criticism from privacy campaigners and most sane thinking citizens. One of these is Sir Tim Berners Lee, the man who founded the world wide web, who told the BBC in March, “I want to know if I look up a whole lot of books about some form of cancer that that’s not going to get to my insurance company and I’m going to find my insurance premium is going to go up by 5%.” Apart from the legal issue of privacy infringement, Berners Lee also pointed out that there’s also the question of Phorm’s collection of cookie data from web browsers, which is arguably theft; “If you want to use it for something, then you have to negotiate with me. I have to agree, I have to understand what I’m getting in return.”

ABOVE – HOW PHORM'S ADWARE SERVICE WORKS

In mid-September, the Department of Business, Enterprise and Regulatory Reform concluded that Phorm’s activities did not contravene EU laws on data protection. However, the government advised that any service would have to be “opt-in” to satisfy British law – i.e. sites using Phorm services would need to present customers with an option to exercise choice about whether they’d like to be involved.

‘Opt-in’ is a slippery term though: would anyone apart from a hardened simpleton knowingly sign up to a service that exposes their private Internet data (i.e. every site you visit and all your transactions) to multinational corporations, for free? It’s not exactly an easy sell, so presumably the questions will be massaged to some degree, assuming they are immediately visible at all. And what constitutes ‘opting-in’? Subscribing to BT or Virgin services? So far, several media companies who initially expressed an interest in Phorm’s services have backed out – including the Guardian (who stated “… our decision was in no small part down to the conversations we had internally about how this product sits with the values of our company”),  the FT, and the BBC – after their consumers expressed deep-seated anxieties, but surely not all other companies will be so scrupulous. 

The government’s Information Commisioner Office (ICO) has claimed it will closely monitor Phorm’s activities to make sure they comply with data protection laws, and the Crown Prosecution Service is currently investigating whether secret BT tests of Phorm’s adware system on customers in 2006 and 2007 breached wiretapping laws. 

Still, with Lamont’s help Phorm are hoping to achieve their stated ambition of turning their data pimping gaze on over 70% of Britain’s broadband users.

With the weakening pound causing all sorts of bother elsewhere, it’s not hurting Pearson thanks to the strengthening dollar bringing greater returns on its US education business. And despite saying that the business will inevitably take a dip in the next year or so, chief financial officer Robin Freestone said that they were well positioned to weather the storm, having lessened the amount they’re relying on advertising. He also said this week’s 30p price rise of the FT to £1.80 still made it “very good value”, and that it might be increased further. I suppose the moral of the story is that if you’re a media company in a recession, you better be selling something people need, rather than merely want – since the beginning of the shit-hitting-fan period of the financial crisis in September, the FT’s circulation has risen over 5%. 

So far, it seems to be the “Shareholder Reassurance Conference”, as advertising giant WPP said they’d be surprised if ad budgets shrank (good luck with that one!), TomTom said everyone still loves sat-navs, and Vodafone said they would hang onto their Verizon stake, and were looking to expand into Nigeria (which is officially the safest place in the world to invest right now). Today there’s chat from ITV, Virgin Media, and dinner at the National Maritime Museum! Jealous!

But hang on. A Morgan Stanley conference in Barcelona? The same Morgan Stanley that had to be bailed out, become an ordinary bank, and cut jobs thanks to the crisis? Are they doing an AIG and hanging out by the pool while the world burns?

Actually no. In fact rather than grating truffles over their eggs in the morning, no one even had eggs. Or bacon. Just pastries and fruit apparently. “Clearly some concessions must be made”, said a Morgan Stanley rep at the start of the conference. Oh, the humanity!