Wednesday, 8 April 2009

Phorm TownHall Meeting

An interesting night at the London School of Economics (LSE) with presenters including: Lord Norman Lamont (non-executive director), Kent Ertugrul (founder & CEO of Phorm), Kip Meek – Phorm & Digital Britain (non-executive director), Sarah Simon (Finance and Strategic Development Officer/self-declared ex banker) and Mike Moore (Global Commercial Director) who described moving traditional media online. Mark Burgess (Senior Vice-president of Technology) joined for the panel discussion.

The session was split into two halves with the first consisting of presentations by the speakers about where Phorm are now, implications for Digital Britain, thoughts about the potential for newspapers and how the traditional media section can derive revenue from behavioural advertising, and also how Internet providers themselves need more revenue for their services.

This was set against a backdrop of weariness of having to deal with privacy questions and concerns, and Kent leading off with a discussion of how critics from privacy groups try to stir public interest and concern via high profile legal cases. Kip Meek described that Phorm can address some of the big five issues in the Digital Britain report – especially poor business model regarding broadband investment [UK consumers pay fixed rate for BB, so no incentive for players to invest in extra infrastructure and speed]. In addition, Phorm can also improve economics of traditional content creators and for advertisers and would be-advertisers.

Sarah Simon described that most consumers (74% of web users) won’t pay for content services (The State of the Media Democracy Survey 2009, Deloitte) and there’s not enough ad revenue to go round to fund all web sites (esp. free content ones), and how small websites are being forced to sell their ad through ad networks rather than direct to user. Result: Display ad is declining in 2008.

Mike Moore explained how print newspaper circulation is in decline. Many print newspapers are set to close in future in US and UK. Newspaper circulation online however is up a lot. E.g., The Daily telegraph ( Feb 08-09) +113%. But ad revenue has not increased. Why? In newspapers advertising revenue is spread across serious journalism and peripheral elements (e.g. jobs, travel, autos and property) but online serious news does not get as many readers [appraisal]. He then showed a slide from Alan Rusbridger of the Guardian that was tantamount to stating that this the greatest threat to journalism and the public sphere we have ever seen.

The questions were remarkably tame although they were asked why they have been so coy about opt-in/opt-out? Kent answered that ‘We deal with large no of ISPs who make their own choice re how to present this to consumers. They will each consider what is best for their consumer’. Interestingly many of the potential benefits to consumers were also those that can be found in contextually based systems, e.g. relevance and a better experience for the user. Similar points can be made about the concerns over journalism. Sarah also said that we can expect growth in display market [not so good for users]. Further, there is a current disparity in pricing between display and search: search revenue may go to display.

I asked about users and deep-packet inspection, users’ perceptions of privacy and whether users care about having a choice to opt/in or out? Kent answered that users care about privacy. There’s been an attack on deep-packet inspection – but privacy is about practice and not technology. There was no time for follow-up.

One questioner asked about the letter from the Open Rights Group, sent several weeks ago asking people/Google to boycott Phorm [Google say they are now considering it] and are Phorm being portrayed as evil – a scapegoat to industry.
Kent answered: ‘Phorm are more open than any other player in advertising industry. If we are proposing something commercially irrelevant, we will fade away. But if commercially relevant, you can expect disruption, [I’m] quite struck about resistance of people to understanding what the system does – [we] have been explaining this for a year now.

They were also asked about whether their PR spend is value for money, having spent a fortune on PR employing five companies, yet still much opposition remaining [21000 people signed petition asking government to protect privacy regarding online advertising].

Kent: ‘There’s a Cycle. Create a story. Report on it, Stoke the flames. We have been accused of many things in past e.g. will break internet, Russian connection, etc. We need to move on from these’.

Other question include:

Q. How will you address mobile platforms and IPTV?.
Kent: 'Mobile gives a real privacy issue, because you can’t deny that you know who the user is on a mobile platform. But in mobile, the need for relevance is even greater than elsewhere […] IPTV – [there is the] assumption that people should be captive in front of TV and you must watch ads regardless of interest. Phorm offers ability to make the ad so relevant an useful that you should be able to skip it if it isn’t useful to you rather than being captive in front of TV. Business model will change […] Will say more about this in future'.

Q. Development now complete. Rollout?
Kent: ‘lots of preparation before going public with anything. ISPs don’t want to damage their relationship with their customers.

People are upset about the position Phorm occupies in the system – i.e. at the ISP level rather than in the opt-in system like Facebook or Google. Users see ISP level as sacrosanct. Surely everyone is pro-choice’.

Mark [the Phorm technologist]: 'You can be pro-choice in theory/abstract – but are Google allowing this in practice? Regarding ISP-level – yes it’s novel and people don’t expect ISPs not to be neutral set of wires. But a long time ago ISPs stopped being neutral in this way, as they must identify their bandwidth and those who are hogging it. You have a relationship to trust with the ISP – so ISPs need to be able to say that what they are doing is better than what exists regarding privacy online. Data will go through neutral black-box – automatic – and random no assignation to the data'.

Q: Can you prove this?
Mark: ‘we have made invitations in past for a Hans Blix character for external people to audit us’.

Kip: ‘it is an understandable concern. I share the surprise as to how this situation regarding online privacy was allowed to happen. But Phorm is trustworthy and has been scrutinised over past year. Today’s presentation is about saying that privacy is an important issue but we should also look at the benefits of Phorm’.

Kent also added later: ‘You are probing because we are talking about the ISP and ISPs are held to a higher standard because they have such a central part in the internet operations. We are making valuable contribution by allowing you to ask us these questions – but they really should be asked to the thousands of websites [that collect IP/cookie data]’.

In summing up the meeting Kent commented:
'It was seven years ago that we started working on this technology. Have seen the value of patience, engagement, communication, problem-solving, speaking to people who don’t like us. Regarding privacy – we will continue to listen but it has been a long time since anything new and factual has been brought up. This is about more than privacy – it’s about introducing a profound change to people who publish free content'.

ClickZ's account of events here.


mark said...

Given what you teach, I can appreciate the slanted perception, but you do seem to have taken the phorm PR blurb a bit too seriously.

The current controversy over phorm has nothing to do with advertising and everything to do with how the targeting data is collected.

One for your students : "Is it worth crossing the line and compromising private communications in order to ensure 'better' adverts" Discuss in 1000 words.

Andrew McStay said...

Interesting you describe the post as slanted as I really haven't made my mind up yet. The PR team are certainly doing a good job, particularly given their earlier incarnation as 121Media. Given that much of this hangs on the privacy question, I admit I was impressed by the degree of anonymity involved.

In regards to your question for my students, where do you think the "line" is?

altus said...

Mark seems to have gone away so I'll attempt to answer.

For businesses, Phorm's way of collecting information means they are gathering commercially sensitive information on a business's communications with its customers. e.g. A bank would not tolerate someone listening in to conversations with customers about products either in branches or via calls to call centres and then effectively selling that information to competitors. Why would they be happy, as Phorm wants them to be, about somebody doing the internet equivalent of the same thing?

From a personal point of view, I wouldn't want someone following me around with a clipboard noting where I go, what I look at, who I talk to and about what in the physical world. Why would I be happy about someone doing the internet equivalent of that? If I do give information out on the internet, I want to be in control of what I give out, when and to whom. I don't expect those people to share it with other people but if they are going to, I want to know about it in advance so I can decide whether to let them have information. Ultimately, I must be in control of information about me and nobody should be allowed to do anything without my explicit expressed permission.

Some people are happy to be profiled in this way and that is their choice - assuming the people/websites they want to talk to are also happy about it. The default position should be no profiling until after explicit informed opt-in by both parties to communication.

Blog Archive

My photo
I am director of the Media and Persuasive Communication (MPC) network at Bangor University where I also lecture on political-economy of the media. I am currently working on a book provisionally titled Deconstructing Privacy for Peter Lang and leading two empirical projects in connection with privacy perception and the use of new media for smoking cessation. I am author of Creativity and Advertising: Affect, Events and Process (Routledge, 2013); The Mood of Information: A Critique of Behavioural Advertising (Continuum, 2011); and Digital Advertising (Palgrave-MacMillan, 2009). Please contact me at if you are interested in Ph.D supervision or consultancy services.