Media Forum: Does adland need Phorm?

It may be controversial, but is it necessary nonetheless, Alasdair Reid asks.

Oh, what a tangled web. Merely establishing the basic outlines of the Phorm controversy over the past couple of years is a mind-numbing task. The claim and counterclaim, the legal rulings and subsequent challenges, the spats between lobby groups and quangos, not to mention the various governmental squabbles at a national and European level - it's a tangled and, at times, very dirty business.

The cast of interested parties includes the European Union commissioner for information society and media, Viviane Reding, and UK government bodies including the Home Office and the Department for Business, Enterprise and Regulatory Reform.

Then there's the Open Rights Group and the Foundation for Information Policy Research, Privacy International and the expert witness Professor Peter Sommer; plus a host of the usual suspects with interests in the advertising sector - the Internet Advertising Bureau, the IPA, ISBA and Ofcom.

Along the way, we've seen the departure of Phorm's UK chief executive, Hugo Drayton, who is now with the video format company InSkin Media. And, back in April, the global boss Kent Ertugrul launched a combative website, Stop Phoul Play, to take on what he called the "privacy pirates" who, he claims, have been orchestrating a smear campaign.

So, if you want to start a punch-up at a digital dinner party, just ask a few people what they think of Phorm. For some, its products are no more and no less than spyware, a new take on the art of the wiretap.

The UK regulatory position has always been that Phorm's products are capable of being operated in a legal manner. The bottom line is that even if they are, Phorm has been failing to close the deals that matter. It hoped to sign up internet service providers such as TalkTalk, BT and Virgin Media, plus individual site owners such as Amazon and Guardian Newspapers.

All its prospects (save for Virgin, which is still pondering) have subsequently walked away, the most recent blow coming in the form of TalkTalk's decision announced last week.

So, its prospects are looking shaky - in the UK at least. But do advertisers really need Phorm? Yes, of course they do, Andrew Walmsley, the co-founder of i-level, says. "Behavioural targeting services like Phorm can benefit ISPs because of the revenue behavioural targeting can generate for them; they benefit brands because they can make advertising more effective; they benefit publishers because they allow publishers to monetise inventory they can't currently sell; and they benefit consumers because they help deliver content that matches people's requirements," he says.

But Greg Grimmer, a partner at the ad agency Hurrell Moseley Dawson & Grimmer, argues that, if Phorm were to fail in its ambitions of establishing a foothold in the UK, it would be no great tragedy. "The truth is that Phorm is offering less than is already being offered by the likes of Google, which collates more data than Phorm ever will. It just hasn't faced the public relations backlash that Phorm has. So my view is that the whole Phorm thing is a storm in tea cup," he adds.

However, Norm Johnston, the global digital leader of Mindshare, maintains that this concept isn't going to go away. "And it's true that everybody is dabbling in this area," he adds. "It wouldn't surprise me to see the likes of a Google trying to partner with an ISP in this area."

The bottom line, Kevin Murphy, the outgoing joint managing director of Zed Media, argues, is that advertisers will always want better performance from online display. He says: "If online technology can improve targeting and therefore relevance, then we must hope that companies that look to push technological boundaries keep heart and retain their vision. In the meantime, everyone in the industry must contribute to educating the public to ensure honest and transparent practice. It's an ideal, but one we must all strive for."

YES - ANDREW WALMSLEY, CO-FOUNDER, I-LEVEL

"Anything that makes ads more effective must be backed. Phorm made errors of judgment but if you look at what it does in targeting terms, it's less controversial than similar services in the market."

NO - GREG GRIMMER, PARTNER, HURRELL MOSELEY DAWSON & GRIMMER

"Price is the biggest differentiator in this market. Buying any old internet user cheaply is more effective than paying a premium to reach a selective audience. So we've yet to see it working."

YES - NORM JOHNSTON, GLOBAL DIGITAL LEADER, MINDSHARE

"ISP-based behavioural targeting is a good thing if done right - it's advantageous for everyone concerned. The way Phorm was trialled (in secret) fostered the perception that it was a sinister technology. But the history of the internet is full of examples of new technologies that weren't launched properly."

YES - KEVIN MURPHY, JOINT MANAGING DIRECTOR, ZED MEDIA

"Phorm's methodology seems sound. Compare its use of personal data with search engines, some of which keep personal usage records for up to 18 months."

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