Phorm, the controversial software company that has been rejected by the UK after much consumer concern, now appears to be doing well in Brazil.

The company was criticised for providing a service that interferes too much with privacy. Their software enables ISP providers to track consumer behaviour which then enables online advertising to be very targeted. Although large companies showed an initial interest, UK backing fell away when the controversy hit the mass media. Even Sir Tim Berners-Lee, one of the internet’s founders, attacked the business for intruding on privacy too much.

Phorm has managed to gain a strong foothold in Brazil with many companies signing up to their service. There is also speculation that they are in talks with the news and entertainment website Terra which is owned by Spain’s Telefonica which does business across South America and the US.

Consumers fear that Phorm may try to enter the UK again via the back door: Telefonica owns the O2 telecoms business. This is highly unlikely. Even if Phorm were to be exonerated in the UK, PR and marketing departments are unlikely to engage with a company that has been so publicly ousted from the UK marketplace.

Tracking online consumer behaviour is a lucrative and effective way to gather data that allows internet marketers to target audiences with products that are honed to their tastes and needs. What consumers are not aware of is that this is happening all the time when they are online. Amazon, for example uses software that suggests products for you based on your previous choices. Google adapts its response to your search queries depending on your previous online behaviour. Facebook advertises to you based on the analysis of what you do and write on their site.

Last August the Office of Fair Trading said they would be investigating online advertising including software that tracks consumer behaviour. It remains to be seen whether the results of this study will have an impact on how UK marketing can go about their business.

The controversial behavioural marketing company Phorm has been under constant criticism for several months. The latest reports suggest that they may be pulling out from the UK altogether.

A spokesperson from Phorm said:

‘Phorm remains fully committed to its operations in the UK.

‘We continue to be active in the market and are confident of the opportunities domestically. Meanwhile, Phorm is also making substantial operational progress internationally.’

Speculation comes after two of the internet service providers that it intended to work with have pulled out. BT, who were involved in the controversial ’secret’ trials of Phorm on their networks have ‘no imediate plans’ to continue with Phorm. Talk Talk have pulled out and Virgin Media ‘continues to examine behavioural advertising technologies, including Phorm.’

Phorm claim that they: ‘…remain in ongoing discussions with a number of UK ISPs and remain optimistic about our longer term potential in this market.’ It is unknown who these providers are.

The companies latest figures show a loss of $15m in the six months preceding June. However after raising $24m to tide it over it is undertaking its latest trials with the largest internet provider in South Korea, KT. Despite is current failure in the UK it is involved in 15 other markets across the world.

Phorm has been lambasted from opponents of behavioural marketing who say that it is an invasion of privacy. In the United States a recent study from the University of Pensylvania said that most Americans (66%) were not happy with the idea of receiving targeted advertisements.

The European Commission has been monitoring the developments in behavioural marketing. Viviane Reding, commissioner for information, society and media said that they are receiving many complaints about targeted advertising. On Tuesday at a lunch debate in Brussels she said that the situation was being closely monitored:

‘European privacy rules are crystal clear: a person’s information can only be used with their prior consent. Transparency and choice are key words in this debate… I will not shy away from taking action where an EU country falls short of this duty.’

Social media is a very important aspect of online marketing at the moment but as with any sector there are downsides that a business must be aware of.

Technical Issues
As reported by Propero Digital, social networking site Facebook has been experiencing technical difficulties in its advertising. Customers have been charged for more click-throughs than they have actually received. As with any business service its important to keep an eye on the figures. Human error is part and parcel of the business world so keeping an eye on things is useful.

Social Conscience
Many early teens sign up to accounts that are intended for older users and recent evidence shows that parents are very uninformed as to what their teenagers get up to on social networking sites. The survey showed that 22% of teens check their networks more than ten times a day, although only 4% of parents thought that they did this.

James Steyer, CEO of Common Sense Media who conducted the survey said:

‘In today’s digital environment, parents have less time to supervise their kids’ behavior,” . “Communication and socialization in our kids’ world is increasingly moving from face-to-face to face-to-cyberspace, and parents vastly underestimate the amount of time that kids spend on their networks. That makes it more challenging for parents to actually parent in the crucial areas of social interaction and development, and, in a digital world, parents need to play a more important role than ever in ensuring that kids get the best of these technologies and are using them safely.’

Business needs to have an awareness of these online issues.

Privacy
There have been concerns over online privacy issues where social media is concerned. Facebook for example has received much controversy as it uses the information you write in your profile, messages and infact everywhere on its site, to inform the kind of advertising that users get. Whilst this kind of search marketing is very useful to business some users have complained that this is an intrusion into their privacy.

From a business point of view, how will you keep your privacy and confidentiality issues intact? You need a policy and employees need to be very clear of what the rules are when they participate online.

Reputation
Your online reputation is important so any communication via social media must be well thought through. Its easy for bad as well as good publicity to spread like wild-fire. Also this kind of ‘passing on’ of information is a little bit like Chinese Whispers: the real facts can alter as the info gets passed along.

Time Wasting
In any business activity its important to get a return on your investment and working with social media is no different. Interacting online can take up a lot of time. The most important advice here is to develop a social media strategy. What are your objectives? How will you meet them within the time you have available? A recent US survey found that social networking costs employers 1.5% in lost productivity.

Facebook is in the centre of a controversy as it has been accused of clickthrough fraud for the second time in one month. A case against Facebook has been filed in the US by Unifed ECM who are accusing them of charging for ‘non-existent, fraudulent or invalid clicks.’

Earlier on in the month RootZoo, a sports forum, sued the social networking site for charging for clicks that did not materialise. Their data showed that on one day Facebook had generated 300 clicks but they had been charged for 804. RootZoo had advertised on Facebook from November 2007 to June 2008.

Facebook is a social networking site that is increasing in popularity both in the UK and all over the world. This, combined with the way that it uses very target behavioural marketing techniques, makes it a very attractive prospect for companies wanting to advertise online. Done well, advertising with Facebook can be very successful.

However, this latest complaint will be concerning to those who advertise with Facebook and companies are advised to check their own analytics figures carefully with those of Facebook.

Facebook, who are obviously keen to maintain their reputation, responded in an email last month to bnet:

‘The goal of our advertising programs is to deliver value to advertisers and, as a result, we take click quality very seriously.  We have developed a series of sophisticated systems to detect anomalous activity and ensure advertisers are not charged for this activity.  In addition, we analyze tremendous amounts of data to discern larger click patterns and, in rare cases where this research, other analysis, or advertiser questions reveal charges for invalid clicks, it is our practice issue credits to impacted advertisers.  While we’re pleased at the opportunity to shed some light on the systems and policies we’ve established and continue to improve to protect advertisers, this litigation is unnecessary and baseless.’

There is certainly no evidence that Facebook has deliberately defrauded anyone but it is well known that they are still a fairly new and developing company who are obviously still getting their act together. It remains to be seen whether this new law suit will adversely affect their reputation and whether any more companies are angry enough to take their click through complaints further.

Nationwide building society is the latest company to pull out of the services that Phorm has to offer. As previously reported Phorm’s targeted behavioural marketing service has been called into question after consumer groups complained that the service invaded people’s privacy.

Phorm’s service works via internet service providers recording their client’s browsing history. This information then creates a ‘profile’ of customers possible needs which is used to target them with very specific marketing and sales information. For marketeers it sounds like a dream and in theory consumers should be receiving information about products and services that could be very useful to them.

Complaints from consumer groups and an investigation into the Government’s endorsement of Phorm has meant that many companies who were interested in the new service have pulled out. These companies include: Amazon and Wikipedia and Talk Talk. Even BT, who allowed Phorm to conduct several controversial trials on their network said they no longer wanted to work with the company.

The latest company to reject Phorm is the Nationwide building society. Nationwide said that it is pulling out because of concerns over privacy. In a statement posted on a pro-privacy site they said:

‘We have had discussions with our online advertising agency on Phorm and as a result of this review we have decided to contact Phorm and ask them not to scan the Nationwide website. Investigating the service that they are looking to offer, we do not see the benefit to our customers or to us of allowing them to scan the Nationwide website in this way. We will be getting in touch with Phorm over the next few days, though we are unfortunately unable to confirm how long it will take for them to action our request.’

Phorm has not commented on this particular situation although they have been robustly rejecting claims that their business compromises privacy and even have a website dedicated to their rebuttal.