The tracking of consumer behavior on the Web for advertising purposes took another hit as one of the most enthusiastic proponents of the process, BT, suspended such activities in the U.K.
BT had been working with Phorm, one of several companies trying to apply behavioral modeling to the Web and the TV. BT has ceased working with Phorm, as originally reported by the British newspaper The Guardian. At least temporarily.
Two other broadband providers, Virgin Media and TalkTalk, have expressed interest in Phorm’s system but have no immediate plans to adopt it.
Behavioral modeling is a technique that has become fairly common among marketing specialists, and because of its utility, there is great interest among advertisers to apply it to Web users and television viewers.
The general approach is to track consumers’ Web activity or TV viewing choices, draw conclusions about the types of products that individual consumers might want to see based on the content of the sites they visit or the shows they watch, and deliver ads appropriate to their presumed interests.
Many companies like Phorm try to allay the privacy concerns of consumers by setting up a system whereby consumers’ identifying information is separated from their behavioral data – and kept from the advertiser. In this manner, the advertiser cannot identify individual consumers, so individual privacy is purported to be preserved.
Consumer groups in the U.S. have not been satisfied that these controls are adequate. Last year, American consumer groups objected strongly enough to attract government attention to the work of NebuAd, a U.S. start-up essentially in the same business as Phorm. NebuAd had been working with Charter Communications, Bresnan Communications, Cable One, CenturyTel, Embarq, WideOpenWest and Knology, among others.
NebuAd eventually was sued over questions about the legality of its techniques.
Phorm is said to be somewhat different from other companies that apply behavioral modeling, in that its system not only tracks consumer behavior but also correlates that data with consumer information contributed by the Internet service providers (ISPs) it works with.
British consumers are now voicing some of the same misgivings of their American counterparts and have forced BT to back off from its work with Phorm.
At least for now. BT insists its decision was entirely economic and not a response to consumer objections.
In a statement, quoted from The New York Times’ story (article here; registration required), BT said: “We continue to believe the interest-based advertising category offers major benefits for consumers and publishers alike. However, given our public commitment to developing next-generation broadband and television services in the U.K., we have decided to weigh up the balance of resources devoted to other opportunities.”
Meanwhile, shares in London-based Phorm were down 4.4 percent in morning trading on London's AIM market at 270 pence, after falling by 40 percent on Monday.
Phorm said it looked forward "to creating the conditions necessary for U.K. ISPs to move to deployment." However, it said it was trying to move faster on opportunities in other countries.
"In addition to making excellent progress in South Korea, we are engaged in more than 15 markets worldwide, including advanced negotiations with several major ISPs," the company said.
– Associated Press writer Robert Barr contributed to this report