Phorm Launches Commercial Operation in Brazil

Phorm, the ISP-level behavioral ad targeting company that provoked a privacy backlash in the U.S. and the U.K., has finally announced a commercial launch, partnering with five Internet service providers in Brazil including EstadÃo, iG, Oi, Terra, and UOL.

In a notice to investors this morning, the company said it has already secured $5.6 million worth of pre-booked ad revenue from local advertisers. It declined the opportunity to speak with ClickZ, but CEO Kent Ertugrul said in a statement that it “reflects the many lessons learnt from experiences in other markets,” adding, “We’re very pleased to be moving into a new phase where our system is being operated on a commercial basis and scale.”

Phorm’s technology was met with hostility from privacy advocates in the U.S. and the U.K. after it announced partnerships with major ISPs in both markets two years ago. That pressure led to the company effectively abandoning those markets, as its partner ISPs backed away from the technology.

Unlike site-level behavioral targeting services offered by established players like AudienceScience, Specific Media, and others, Phorm’s technology harvests information directly from ISPs, effectively tracking users’ behavior across all the sites they visit. Privacy advocates were vocal in their objection to such tracking – particularly in the U.K. – with many claiming the practice breached data protection laws.

U.K. authorities established the technology could be implemented legally if it was presented to users on an opt-in basis, but the company had already conducted trials with customers without their consent. That subsequently led European regulators to launch legal action against the U.K. government for failing to enforce EU privacy laws.

From an advertiser perspective, Phorm’s proposition is an appealing one. As the use of behavioral data and related targeting methods becomes more widespread, advertisers and agencies crave richer profile data on which to base their media buys. In theory, Phorm’s technology can provide a more complete picture of a user’s interests and intent, as it encompasses all of their online activity, as opposed to that collected across selected sites.

Phorm argues its model can also increase publishers’ ad yield as a result, with advertisers paying a premium for such detailed data. ISPs also benefit from an additional revenue stream, with Phorm effectively paying for access to their users’ data within their networks.

Beyond Brazil, the company said it has also completed successful trials of its technology in Korea. It announced a partnership with major Korean ISP, KT, late last year, and Ertugrul said he expects to update the market on the company’s position there “in due course.” He added that Phorm “expects to make more announcements regarding revenue and further deployments,” and that it is “active in almost every other major Internet market worldwide.”