Phorm posts $15m loss in H1 2009

Phorm, the controversial ISP-based behavioural targeting company, has revealed operating losses of $15m (£9.28m) for the first half of 2009.

Phorm – which has endured setbacks in the UK this year with ISPs BT, Virgin Media and TalkTalk moving away from deploying the service – said losses for the first six months to 30 June 2009 fell from $24.7m (£15.3m) in the same period last year.

This year BT said it had no immediate plans to deploy the technology, Carphone Warehouse cancelled its contract and Virgin Media said it was delaying use of the technology (nma 8 July 2009).

Kent Ertugrul, CEO of Phorm, said the company remains optimistic about its progress in the UK. “We’re in discussions with a number of UK ISPs and remain optimistic about our longer term potential in this market,” he said.

However, he added the company sees South Korea as its next growth market. “We’re in the final stages of a large-scale market trial in partnership with KT, the country’s leading ISP, the results of which are now being evaluated,” said Ertugrul. “The trial involved the participation of leading local ad agencies and publishers, with targeted advertising being served to participating Korean internet users.”

The statement followed the resignation of chief technical officer Stratis Scleparis, who was responsible for developing Phorm’s technology. Before Phorm he held the same role at BT Retail. A spokesman said Marc Burgess, senior VP of technology, will now lead its technology development.

The company has also closed its Stopphoulplay.com website, launched to “hit back at the ‘privacy pirates’ smear campaign against Phorm”. It has also closed the dedicated sites for its behavioural targeting products, Open Internet Exchange and Webwise, and has redesigned Phorm.com.

Ex-BT tech chief quits Phorm

Stratis Scleparis, the former BT Retail chief technology officer who joined Phorm after overseeing secret trials of its web monitoring and profiling system, has quit the firm.

Phorm is expected to reveal further heavy losses when it announces its half year financial results on Monday.

A spokesman for Phorm said Scleparis had resigned earlier this month as CTO "to pursue other interests". Marc Burgess, the firm's senior vice president of technology, will take on his responsibilities.

In a statement, Scleparis said: "I am proud of the contribution that I and my team have made in the development of Phorm's unique online content and advertising personalisation technologies.

"I wish the Company every success with its current market trials and the roll out to full deployment of its innovative service."

Phorm CEO Kent Ertugrul thanked him and wished him well.

Scleparis played a central role in the covert trials of 2006 and 2007, when tens of thousands of BT subscribers' web browsing was intercepted and profiled without their consent. He joined Phorm in October 2007, weeks after the second trial finished.

During his tenure, The Register understands the system has been subject to major reengineering, including development of a network-level opt-out in line with UK ISP demands.

None of these now has any plans to use the technology, however. The secret trials led to deals with BT, Virgin Media and TalkTalk in February 2008, but following a customer outcry, all are now moribund. Scleparis' departure will be seen as a further blow to Phorm's earlier hopes of UK deployment.

The firm has recently repositioned itself as a provider of targeted content as well as advertising, and is concentrating on ISPs overseas. It has conducted small scale testing with Korea Telecom and claims to be in talks in several other markets.

Meanwhile, the European Commission said this week it is still considering the UK government's response to a formal notice of legal action. In April the Commission said the lack of enforcement action over the secret trials showed the UK had not properly implemented European privacy laws.