Phorm (www.phorm.com) believes it can rewrite the way Internet advertising is planned, bought and sold. However, Phorm needs the co-operation of its ISP partners to succeed. In return, Phorm’s plans give these ISPs a share of fast-growth Internet advertising for the first time. This said, the user/ISP relationship is fragile due to privacy issues which may hold up progress, and Phorm needs to gain support of all the major ISP’s to ensure success.
Phorm has developed a platform, the Open Internet Exchange, which enables display advertisers on the Internet to target individual users based on their web browsing history (including, but not limited to, current page views). The business model is based on a revenue-sharing partnership with Internet service providers (‘ISPs’) and the company has exclusive arrangements with the top three in the UK, covering 70% of broadband users.
In the US the value of behaviourally targeted online advertising (BTOA) is expected to double to US$1bn during 2008 and then to almost quadruple to US$3.8bn by 2011. According to eMarketer.com (June 2007), this positions behavioural targeting as one of the fastest-growth segments of the expanding online advertising market. In the UK, BTOA could reach 12% of total Internet advertising by 2010, i.e. £528m, according to Andrew Walsh, Media Research Analyst at Landsbanki Securities (www.landsbanki.com).
Whether Phorm has the impact that the research suggests may well depend primarily on ISP’s validating the financial benefits of a revenue-share model. However, with the top 3 ISP’s already ensuring that the majority of the broadband market is under “exclusive arrangements” with Phorm, it seems the biggest question remains how the consumer proposition will be defined by the ISP’s so as to reassure users and how the ISP’s will seek a competitive advantage in the way they present this relationship as part of their offer (e.g. lower prices, more relevant advertising, etc.).
My guess is the ISP’s will cooperate and as a result consumers will need to use their collective “voice” to ensure they benefit from this intrusion on their privacy.
