Un-fitting Phorm

Michael Hedges July 8, 2009 (Follow on Twitter)

For those in need of it, advertising’s golden-stream begins and ends with targeting. Media people are asked for more, better and quicker data on the people they reach. There is a point, arguably, where the means are simply over-reach.

Better targeting yields better results, say the ad people. It’s fundamental among media people that audience targets provide necessary efficiency. Technology has rushed forward to provide all this and more. With all that is possible, the open question is whether or not consumers can opt-out.

Targeted media is far from new. Publications, television channels and radio formats attempt to reach audiences defined by demographics, sociographics and even psychographics. Media buyers pour over audience research to fit media’s reach to an ad campaign. No media outlet on any platform chasing advertising goes without a sales story annotated with reams of data on their audience target. 

Old media has played by that rule.  Audience targeting, satisfying the ad people, has been taken to high art with a good slice of science thrown in. As computing power reached near universal accessibility media buyers took databases from different sources and created elegant models of consumer behavior and advertising effectiveness.

Rules were changing in the mid-1980’s as advertisers – those paying the bills – faced a recession, though minor compared to the current malaise. Accountability crept into the language of the media-marketing-advertising triangle. More numbers were crunched, fancier models created but research methods being what they were bridging the desire to predict product purchase as a result of ad money spent with the realities of samples and statistical models proved unsatisfying.

Choose your favorite cliché: where there’s a will there’s a way, necessity is the mother of invention. Media buyers glimpsed into the future and saw single source measurement. Metered television panels would also scan bar-codes of every purchase. Now those would be great numbers, yes? Of course, and to the delight of measurement services very expensive.

Fast forwarding through nearly two decades of easy credit and the internet explosion, advertisers poured their money into brand development, the soft side of advertising. Ad spending rocketed to 1% of GDP in many countries, more in bigger ones. Those days are over or, in the words of Microsoft’s CEO Steve Ballmer to the recent Cannes International Advertising Festival, media and advertising are “resetting.”

That “resetting” has been coming for most of this century. With the now burst credit bubble and the internet as media delivery platform of choice for billions advertisers have returned to the “accountability” mantra. It’s no longer good enough to “waste” 50% of that ad budget.

Google – arch rival of Microsoft – matched information collected from search users with ads targeted to hypothesized interests. Et Voila, as we say in French, Google’s ad selling model became the new standard. The Web provides something old media cannot, interactivity. Suddenly – not so suddenly, actually – the ‘click-though’ model resonated with advertisers like nothing they’d seen before.

But, said the media buyers, there could be so much more. Into that breach came dozens of technology-based start-ups hoping to take the new tools of the internet and find out everything possible about ads, media and purchase behavior. Nobody asked consumers if a little spying might be bothersome.

One of those genius companies is Phorm. It developed a product – WebWise - that steps generously beyond collecting search behavior. In fact, it uses many of the same internet tricks attributed to the unpleasant undercurrent of the Web.

None of that bothered BT, formerly known as British Telecom, when it signed up to trial WebWise with an eye toward highly targeted ad placement. Others signed up, too. This, they thought, would make the ad people very happy.

Privacy issues didn’t bother the ad people or UK media and telecom regulator OFCOM. When the European Commission expressed concern about BT’s trials with WebWise OFCOM told them to butt out. Phorm is based in the UK but incorporated in the US.

Internet founder Tim Berners-Lee, concerned with the broad effect on his baby, called the technology “snooping.”

Monday (July 6) BT gave up on Phorm, saying it had “no immediate plans” to have WebWise crawl all over its internet customers. The following day (July 7) Carphone Warehouse, proprietor of the TalkTalk ISP, followed suit. “We were only going to do it if BT did it and if the whole industry was doing it,” said Carphone Warehouse CEO Charles Dunstone to The Times (July 7).“We were not interested enough to do it on our own.”

Phorm’s share price dropped 40% Monday (July 6) and a further 12% Tuesday (July 7).

It goes without saying that Phorm lost the public relations battle. The company issued a statement about continuing to “focus considerable effort on faster moving overseas opportunities. In so doing we have already minimized our dependency on the deployment by any single ISP or in any particular market." One of its overseas opportunities is South Korea.

Phorm is not alone in developing technologies to ‘read’ consumers better, faster and smarter. The ad people – and others less benign – will push relentlessly for higher quality data. Privacy may be the major media/advertising issue in the coming years…or at least until the current ‘accountability’ cycle runs its course.

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