Privacy Isn’t Phorm’s Biggest Problem

In an effort to soothe privacy concerns related to its online ad insertion service — and help ease its entry into the North American market — British startup Phorm conducted a call today to explain exactly what user data it collects and how that data is stored. But after listening in, I’m less worried about privacy violations than I am cautious about Phorm from a business perspective.

Phorm’s deep-packet inspection equipment assigns a cookie to a web browser and inserts ads based on previous web site visits. The URL of a specific site is not saved, only keywords that match an advertising profile.

There was no indication given as to how well UK advertisers are responding to Phorm’s service. Furthermore, I don’t really buy CEO Kent Ertugrul’s argument that Phorm delivers better ads. The contention is that if you visit lots of auto and finance sites, you would be receptive to those ads, even when you’re on sites focused on other topics. However, if I’m on Glamour’s site and an auto ad pops up, I won’t pay more attention to it. I’m not thinking about cars, I’m thinking about shoes.

Letting ads follow people onto social networks could add value, but I’m not sure if the social networks will want to participate in Phorm’s program. As for privacy details, Phorm stores a random number assigned to the cookie, a history of categories generated by the web sites a person’s visited and a time stamp for those visits. Ads for adult sites, medical conditions and others that could lead to potentially embarrassing disclosures aren’t in the system. Phorm’s privacy infringements are less than the data aggregated by major search engines and easier to opt out of.

If Phorm doesn’t succeed, it’s not because it violates privacy, but because it’s selling something of questionable value.