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.

For the first time ever online advertising spend has overtaken spending on TV advertisements in the UK. This is a sure sign that companies are really taking the power of internet marketing campaigns seriously.

A report from the Internet Advertising Bureau (IAB) found that £1.75bn was spent on online advertising in the first half of 2009, which represents a 4.6% increase compared to the second half of 2008.

The report also shows that ad expenditure online is up £82m to a record market share of 23.5%. The UK has the highest online percentage spend.

Guy Phillipson, chief executive of the IAB, said:

‘Internet advertising has beaten all expectations to achieve growth in the most challenging market conditions.

‘Online display has performed notably well against its peers in TV, print and radio despite more than £1.5bn being wiped off the advertising industry.’

The increased number of Channels available over the last ten years has diluted the power of TV advertising and the joy of online advertising is that it can be so specific and targeted.  Behavioural marketing, although sometimes controversial, enables companies to trace user behaviour and target campaings that are more relevant.

Additionally, Perhaps the recession has encouraged more online advertising with its cost effective return on investment.  Guy Phillipson, chief executive of the Internet Advertising Bureau, said:

‘Internet advertising has beaten all expectations to achieve growth in the most challenging market conditions. Online display has performed notably well against its peers in TV, print and radio despite more than £1.5 billion being wiped off the advertising industry. We have a rollercoaster of a year ahead but even in tough economic conditions marketers still recognise the value, accountability and measurability of online advertising.’

According to a research poll conducted by KPMG , only 16% of Britons would prefer to pay for online content that was free of advertising. In contrast two thirds of UK consumers said that they would watch online ads if they could get free digital content.

In theory this adds weight to those who believe that the way forward is to continue to have free access to online services rather than rely on subscription to find revenue.

Trying to implement subscriptions in the current climate however might be tricky anyway. People are feeling the pinch and after all, we are now used to amazing, free sites. How would we feel if we had to pay for something that we now consider to be normal to access for free? Would we be prepared to do it?

So, currently, free sites with advertising seem to be a win-win combination. And infact, we are actively encouraged to see this as a model for success in search engine rankings no matter how big or small our business is. Search engines will rank our sites better if we have regular free and useful content and we can use, Google Adsense, for example to earn a potential income. The more useful our site, the more visitors, the more revenue we can get from advertising. We are not just talking about the big guns here – it applies to all.

Some people just ignore the adverts or don’t even notice it.  On the other hand, there is great potential now for specific targeting. Facebook, for example are honing in on people’s stated interests which can enable them to really provide value for money for their advertisers: catching those who are receptive with goods and services they are most likely to engage with.  Facebook, also however, claim legal rights to people’s information and this has been the subject of much controversy.

The poll found that consumers were most receptive to advertisements when they were shopping (47%) and using social network sites (35%) and least receptive when on a phone call and using navigation tools which is understandable considering the focused and active nature of these tasks.