Behavioural advertising: a Phorm in a teacup?

Phorm uses an 'opt out' rather than an 'opt in' clause

Online advertising firm Phorm, founded in 2002, has sparked a number of privacy concerns in recent years, after experts argued that its technology breaches data protection legislation.

The frenzy surrounding its technology only seems to be deepening as the time for Phorm's deployment nears, having been stalled by EU proceedings.

Phorm has maintained that it works above board, and sets the highest standards on internet privacy, describing the huge amount of negative publicity it has received as "a smear campaign". The company launched a defence of its practices on Tuesday with a web site called Stop Phoul Play, where it accused "dedicated privacy pirates" of misrepresenting its technology to the press.

Given the opposing views, who should web users believe? How harmful is Phorm, if indeed it is harmful at all?

Phorm uses browsing information to serve accurately targeted advertisements, and is soon to be rolled out under a brand called Webwise by internet service providers BT, Virgin Media and TalkTalk.

The technology works by loading a cookie on a user's computer that contains a random identifying number, which then tracks the web pages viewed and compares them against product category definitions.

Phorm has said that no records are kept of individuals' browsing history, and that it does not log IP addresses. It has also promised that individuals will be able to undo their previous participation with the service if they so choose.

But the principal controversy surrounding Phorm is that it uses an 'opt out' rather than an 'opt in' clause, giving users limited rights over their web use data.

Viviane Reding, the European Union's Commissioner for Information Society and Media, believes that UK laws need to be strengthened to ensure that users give their consent before web data is intercepted. After the Phorm technology was cleared by the UK Information Commissioner, a series of complaints to the European Commission prompted it to start legal proceedings against the UK in April, citing a clause in the Data Protection Act.

This has not helped Phorm's reputation, nor did news that BT had trialled the technology on its customers between 2006 and 2007 without informing them. Further public upset was caused this week when emails sent between the company and the Home Office were made public.

The emails showed the government asking Phorm what it thought of the advice it issues on behavioural targeting, further deflating public confidence that Phorm had been adequately assessed.