06 July 2009 | Author: L. Sutherland Head of Media Content

BT's dropped Phorm following privacy rows

After longstanding complaints from internet users, BT has dropped a controversial tracking system from Phorm.

Phorm aimed to provide targeted ads based on tracking browser history but, despite the fact that this is hardly a new practice, the system attracted much criticism, which resulted in an EU investigation. Now Phorm faces tumbling shares due to the news that BT is disassociating itself from the company, with shares dropping 43.16 per cent to 270p today, the BBC reports.

BT's departure will deliver a significant blow to the company as it was a major player when it came to the development of Phorm's Webwise system. The telecommunications organisation carried out covert tests back in 2006 and 2007, as well as more extensive consumer trials last year. However, even though the results haven't been publically announced, BT will not be using Webwise and is cutting Phorm's access to in excess of 4.8 million broadband customers.

According to the Guardian, a spokesman for BT said: "We continue to believe the interest-based advertising category offers major benefits for consumers and publishers alike.

"However, given our public commitment to developing next-generation broadband and television services in the UK we have decided to weigh up the balance of resources devoted to other opportunities.

"Given these commitments, we don't have immediate plans to deploy Webwise today. However, the interest-based advertising market is extremely dynamic and we intend to monitor Phorm's progress ...before finalising our plans."

Consistent distrust from consumers towards the technology appears to be the main stay behind BTs decision and, with strong competition rife between broadband providers in the UK, it's not surprising the firm hopes to keep users on board. The market currently sees three quarters of users signed to Virgin Media, TalkTalk and BT - meaning competition is fierce among the big guns. The Guardian reports that Virgin remains interested in behavioural targeting while TalkTalk indicated it might consider Webwise although on an opt in basis.

The news of BTs withdrawal, along with the recent departure of Amazon from the project and reports that Google and Bebo are also considering opting out, doesn't bode well for Phorm, which is increasingly being perceived as a privacy invasion rather than the marketing tool it was designed to be.

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