Phorm

Phorm, formerly known as 121Media, was a digital technology company known for its contextual advertising software. Phorm was incorporated in Delaware, United States, but relocated to Singapore as Phorm Corporation (Singapore) Ltd in 2012. Founded in 2002, the company originally distributed programs that were considered spyware, from which they made millions of dollars in revenue. It stopped distributing those programs after complaints from groups in the United States and Canada, and announced it was talking with several United Kingdom Internet service providers (ISPs) to deliver targeted advertising based on the websites that users visited. Phorm partnered with ISPs Oi, Telefonica in Brazil, Romtelecom in Romania, and TTNet in Turkey. In June 2012, Phorm made an unsuccessful attempt to raise £20 million for a 20% stake in its Chinese subsidiary.

The company's proposed advertising system, called Webwise, was a behavioral targeting service (similar to NebuAd) that used deep packet inspection to examine traffic. Phorm said that the data collected would be anonymous and would not be used to identify users, and that their service would include protection against phishing (fraudulent collection of users' personal information). Nonetheless, World Wide Web creator Tim Berners-Lee and others spoke out against Phorm for tracking users' browsing habits, and the ISP BT Group was criticised for running secret trials of the service.

The UK Information Commissioner's Office voiced legal concerns over Webwise, and has said it would only be legal as an "opt-in" service, not an opt-out system. The European Commission called on the UK to protect Web users' privacy, and opened an infringement proceeding against the country in regard to ISPs' use of Phorm. Some groups, including Amazon.com and the Wikimedia Foundation (the non-profit organization that operates collaborative wiki projects), requested an opt-out of their websites from scans by the system. Phorm changed to an opt-in policy. According to Phorm’s website, the company would not collect any data from users who had not explicitly opted in to its services. Users had to provide separate consent for each web browsing device they used.

Due to increasing issues, Phorm ceased trading on 14 April 2016.

Company history

In its previous incarnation as 121Media, the company made products that were described as spyware by The Register. 121Media distributed a program called ''PeopleOnPage'', which was classified as spyware by F-Secure. PeopleOnPage was an application built around their advertising engine, called ContextPlus. ContextPlus was also distributed as a rootkit called Apropos, which used tricks to prevent the user from removing the application and sent information back to central servers regarding a user's browsing habits.

The Center for Democracy and Technology, a U.S.-based advocacy group, filed a complaint with the U.S. Federal Trade Commission in November 2005 over distribution of what it considered spyware, including ContextPlus. They stated that they had investigated and uncovered deceptive and unfair behaviour. This complaint was filed in concert with the Canadian Internet Policy and Public Internet Center, a group that was filing a similar complaint against Integrated Search Technologies with Canadian authorities.

ContextPlus shut down its operations in May 2006 and stated they were "no longer able to ensure the highest standards of quality and customer care". The shutdown came after several major lawsuits against adware vendors had been launched. By September 2007, 121Media had become known as Phorm, and admitted a company history in adware and stated it had closed down the multimillion-dollar revenue stream from its PeopleOnPage toolbar, citing consumers’ identification of adware with spyware as the primary cause for the decision.

In early 2008 Phorm admitted to editing its article on Wikipedia—removing a quotation from ''The Guardians commercial executives describing the opposition they have towards its tracking system, and deleting a passage explaining how BT admitted misleading customers over covert Phorm trials in 2007. The changes were quickly noticed and reversed by the online encyclopedia's editors.

Phorm currently resides in Mortimer Street, London, UK with staffing levels of around 35.

Trading in Phorm's shares was suspended on London's AIM market on 24 February 2016, pending "clarification of the company's financial position". According to Phorm, it had been "unable to secure the requisite equity funding..." and was in "advanced discussions with certain of its shareholders and other parties regarding possible alternative financing..." and that there was "no guarantee" that such discussions would "result in any funds being raised. Pending conclusion of those discussions the Company has requested suspension of its shares from trading on AIM."

Financial losses

The company made a loss of $32.1 million in 2007, a loss of $49.8 million in 2008 and a loss of $29.7 million in 2009. 2010 was by no means better, with a net loss of $27.9 million By the end of 2010 the company had lost more than $107 million, with no perceivable revenue stream. In 2011, Phorm reported losses of $30.5 million and conducted an equity placing of £33.6 million, which paid off the company's debt.

Cessation of trading

On 14 April 2016 Phorm's Board of Directors announced to the London Stock Exchange that the company was ceasing to trade and that shareholders were unlikely to recover any of their investments.

According to RNS Number : 2561Y FTSE 13 May 2016.

Changes in FTSE UK Index Series
FTSE AIM All-Share Index Effective From Start of Trading 18 May 2016

Phorm (UK): Constituent Deletion.

Proposed advertisement service

Phorm had worked with major U.S. and British ISPs—including BT Group (formerly British Telecom), Virgin Media, and TalkTalk (at the time owned by The Carphone Warehouse)—on a behavioral targeting advertisement service to monitor browsing habits and serve relevant advertisements to the end user. Phorm say these deals would have given them access to the surfing habits of 70% of British households with broadband. The service, which uses deep packet inspection to check the content of requested web pages, has been compared to those of NebuAd and Front Porch.

The service, which would have been marketed to end-users as "Webwise", (in 2009 the BBC took legal advice over the trade mark Webwise), would work by categorising user interests and matching them with advertisers who wish to target that type of user. "As you browse we're able to categorise all of your Internet actions", said Phorm COO Virasb Vahidi. "We actually can see the entire Internet".

The company said that data collected would be completely anonymous and that Phorm would never be aware of the identity of the user or what they have browsed, and adds that Phorm's advertising categories exclude sensitive terms and have been widely drawn so as not to reveal the identity of the user. By monitoring users' browsing, Phorm even says they are able to offer some protection against online fraud and phishing.

Phorm formerly maintained an opt-out policy for its services. However, according to a spokesman for Phorm, the way the opt-out works means the contents of the websites visited will still be mirrored to its system. All computers, all users, and all http applications used by each user of each computer will need to be configured (or supplemented with add ons) to opt out. It has since been declared by the Information Commissioner's Office that Phorm would only be legal under UK law if it were an opt-in service.

Implementation

Richard Clayton, a Cambridge University security researcher, attended an on-the-record meeting with Phorm, and published his account of how their advertising system is implemented.

Phorm's system, like many websites, uses HTTP cookies (small pieces of text) to store user settings. The company said that an initial web request is redirected three times (using HTTP 307 responses) within their system, so that they can inspect cookies to determine if the user has opted out. The system then sets a unique Phorm tracking identifier (UID) for the user (or collects it if it already exists), and adds a cookie that is forged to appear to come from the requested website.

In an analysis titled "Stealing Phorm Cookies", Clayton wrote that Phorm's system stores a tracking cookie for each website visited on the user's PC, and that each contains an identical copy of the user's UID. Where possible, Phorm's system strips its tracking cookies from http requests before they are forwarded across the Internet to a website's server, but it cannot prevent the UID from being sent to websites using

. This would allow websites to associate the UID to any details the website collects about the visitor.

Phorm Senior Vice President of Technology Marc Burgess has said that the collected information also includes a timestamp. Burgess said, "This is enough information to accurately target an ad in hefuture, but cannot be used to find out a) who you are, or b) where you have browsed".

Incentives

In 2008 Phorm considered offering an incentive, in addition to the phishing protection it originally planned, as a means to convince end-users to opt into its Webwise system. The alternate incentives, suggested in a Toluna.com market research survey carried out on behalf of Phorm, included further phishing protection, a donation to charity, a free technical support line, or one pound off opted-in users' monthly broadband subscriptions.

Following the decision by Wikimedia Foundation and Amazon to opt their websites out of being profiled by Phorm's Webwise system, and as an incentive for websites to remain opted into the Phorm profiling system, Phorm launched Webwise Discover. The Korean launch of this web publisher incentive was announced in a press conference in Covent Garden in London on 3 June 2009. A survey by polling firm Populus revealed that after watching a demonstration video, 66% of the 2,075 individuals polled claimed to either like the idea or like it a lot .

Website publishers are invited to upload a web widget which will provide a small frame to display recommended web links, based on the tracked interests of any Phorm-tracked website visitors (those whose ISP uses Phorm Deep Packet Inspection to intercept and profile web traffic). There would be no charge to the website, and Phorm do not stand to make any money from Webwise Discover; however, there are plans to display targeted adverts in the future.
/sup> The widget would only deliver link recommendations if the user was signed up for targeted advertising with a Phorm-affiliated ISP, the widget would be invisible to everyone else..
/sup> At the press launch Phorm spokespersons admitted that at present not a single UK ISP or website has yet signed up to Webwise Discover system,
/sup> although they emphasised it was part of the current Korea Telecom Webwise trials. Legal advice has been offered to websites considering signing up to the OIX system by Susan Singleton.
/sup>

Legality

The Open Rights Group (ORG) raised questions about Phorm's legality and asked for clarification of how the service would work. FIPR has argued that Phorm's online advert system is illegal in the UK. Nicholas Bohm, general counsel at FIPR, said: "The need for both parties to consent to interception in order for it to be lawful is an extremely basic principle within the legislation, and it cannot be lightly ignored or treated as a technicality." His open letter to the Information Commissioner has been published on the FIPR web site.

The Conservative peer Lord Northesk has questioned whether the UK government is taking any action on the targeted advertising service offered by Phorm in the light of the questions about its legality under the Data Protection and Regulation of Investigatory Powers Acts.

On 9 April 2008, the Information Commissioner's Office ruled that Phorm would only be legal under UK law if it were an opt-in service. The Office stated it will closely monitor the testing and implementation of Phorm, in order to ensure data protection laws are observed.

The UK Home Office has indicated that Phorm's proposed service is only legal if users give explicit consent. The Office itself became a subject of controversy when emails between it and Phorm were released. The emails showed that the company edited a draft legal interpretation by the Office, and that an official responded "If we agree this, and this becomes our position do you think your clients and their prospective partners will be comforted". Liberal Democrat spokeswoman on Home Affairs, Baroness Sue Miller, considered it an act of collusion: "The fact the Home Office asks the very company they are worried is actually falling outside the laws whether the draft interpretation of the law is correct is completely bizarre."

''The Register'' reported in May 2008 that Phorm's logo strongly resembled that of an unrelated UK company called Phorm Design. They quoted the smaller company's owner, Simon Griffiths: "I've had solicitors look at it and they say we'd have to go to court. horm areobviously a big player with a lot of clout. I'm a small design agency in Sheffield that employs three people."

Until 21 September 2010, Phorm's Webwise service also shared the same name as BBC WebWise.

Monitoring of the Phorm website using a Website change detection service alerted interested parties to changes on 21 September 2010. Phorm's website had been edited to remove references to the word 'Webwise'. Phorm's Webwise product had become 'PhormDiscover'.

The Office for Harmonization in the Internal Market (OHIM) Trade Marks and Designs Registration Office of the European Union website CTM-Online database lists Phorm's application for use of the 'Webwise' trade mark name. The British Broadcasting Corporation
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