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Type Public (AIM: PHRM)
Founded 2002[1]
Headquarters Delaware, USA[1]
Area served United Kingdom, United States
Key people Steven Heyer (chairman),[2] Kent Ertugrul (chief executive officer)
Industry Online advertising
Products PageSense, ProxySense, Open Internet Exchange (OIX), Webwise, PeopleOnPage, ContextPlus, Apropos
Revenue $688,843 in interest income (2007)[3]
Net income $-32,153,223 (2007)[3]

Phorm, formerly known as 121Media, is a Delaware, United States-based digital technology company known for its advertising software. Founded in 2002, the company originally distributed programs that were considered spyware, from which they made millions of dollars in revenue. It has since 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 visit.

The company's proposed advertising system, called Webwise, is a behavioral targeting service (similar to NebuAd or Front Porch) that uses deep packet inspection to examine pages. Phorm says the data collected will be anonymous and will not be used to identify users, and that their service would even include protection against phishing (fraudulent collection of users' personal information). Nonetheless, World Wide Web creator Sir Tim Berners-Lee and others have spoken out against Phorm for tracking users' browsing habits, and the ISP BT Group has been criticised for running secret trials of the service.

The UK Information Commissioner's Office has voiced legal concerns with Webwise as it is currently implemented, and has said it would only be legal as an "opt-in" service, not an opt-out system. The European Commission has 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 and the Wikimedia Foundation (the non-profit organization that operates Wikipedia and other collaborative wiki projects), have already requested an opt-out of their websites from scans by the system.


Company history

In its previous incarnation as 121Media, the company's products were described as spyware.[4] 121Media distributed a program called PeopleOnPage,[5] which was classified as spyware by F-Secure.[6] PeopleOnPage was an application built around their advertising engine, called ContextPlus. ContextPlus was also distributed as a rootkit called Apropos,[5][7] which used tricks to prevent the user from removing the application and sent information back to central servers regarding a user's browsing habits.[8]

The Center for Democracy and Technology, a United States-based advocacy group, filed a complaint with the US 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.[9]

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.[8] By September 2007, 121Media became known as Phorm,[10] and admitted a company history in adware and the closing down of a multi-million dollar revenue stream as people confused adware with spyware.[11]

In early 2008 Phorm admitted editing its article on Wikipedia. Phorm admitted removing a quotation from The Guardian's 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.[12]

In June 2009 a Wikileaks article raised suspicion about whether "Phorm is duping investors with misleading statements to the market" in a share sale via Astaire Securities.

Proposed advertisement service

Phorm had worked with major US[13] and British ISPs—including BT Group (formerly British Telecom), Virgin Media, and TalkTalk (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.[1][14] 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.[15]

The service, which would have been marketed to end-users as "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."[1]

The problem for newspapers is that a story headlined 'Two Dead in Baghdad' isn't very product-friendly, ... [b]ut if you know who is looking at the page, that's where the opportunity is.
—Kent Ertugrul, CEO of Phorm[16]

The company says that data collected would be completely anonymous and that Phorm will never be aware of the identity of the user or what they have browsed,[17] and adds that Phorm's advertising categories exclude certain sensitive terms and have been widely drawn so as not to reveal the identity of the user.[18] By monitoring users' browsing, Phorm even says they are able to offer some protection against online fraud and phishing.[19]

It is said that users will be able to opt out of Phorm's service. 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.[20][21] 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.[22] 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.[23][dead link]


File:Phorm cookie diagram.png
A diagram showing how Phorm's "Webwise" system creates copies of its tracking cookie in each domain the end-user visits, based on the report published by Richard Clayton.[24]

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.[25]

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.[25]

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 https. This would allow websites to associate the UID to any details the website collects about the visitor.[26]

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 [the] future, but cannot be used to find out a) who you are, or b) where you have browsed."[19]


Phorm is considering offering an incentive, in addition to the phishing protection it originally planned, as a means to convince end-users to opt-in to its Webwise system. The alternate incentives, suggested in a 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 subscription.[27]

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 IN to the phorm profiling, Phorm have launched Webwise Discover.[1]. The Korean launch of this web publisher incentive, was announced in a press conference in Covent Garden, London, UK, on 3 June 2009.[2] A poll conducted by Populus [3] on 2075 individuals revealed that 66% either liked the idea or liked it a lot, after being shown a demonstration video.

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.[4] The widget would only deliver link recommendations if the user was signed up for targeted advertising with a Phormed ISP, to everyone else the widget would be invisible. [5] 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, [6] 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.[7]


The Open Rights Group (ORG) raised questions about Phorm's legality and asked for clarification of how the service would work.[28] 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.[29]

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.[30]

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.[23] The Office stated it will closely monitor the testing and implementation of Phorm, in order to ensure data protection laws are observed.[31]

The UK Home Office has indicated that Phorm's proposed service is only legal if users give explicit consent.[32] 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."[33]

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. [Phorm are] obviously a big player with a lot of clout. I'm a small design agency in Sheffield that employs three people."[34]

Phorm's Webwise service also shares the same name as the BBC's Webwise service.

European Commission case against UK over Phorm

European Union communications commissioner Viviane Reding has said that the commission was concerned Phorm was breaching consumer privacy directives, and called on the UK Government to take action to protect consumers' privacy.[35] The European Commission wrote to the UK government on 30 June 2008 to set out the context of the EU's interest in the controversy, and asked detailed questions ahead of possible Commission intervention. It required the UK to respond to the letter one month after it was sent. A spokeswoman for the Department for Business, Enterprise and Regulatory Reform (BERR) admitted on 16 August that the UK had not met the deadline.[36]

On 16 September, BERR refused The Register's request to release the full text of their reply to the European Commission, but released a statement to the effect that the UK authorities consider Phorm's products are capable of being operated in a lawful, appropriate and transparent fashion.[18] Unsatisfied by the response, the European Commission wrote to the UK again on 6 October. Martin Selmayr, spokesman for Reding's Information Society and Media directorate-general said, "For us the matter is not finished. Quite the contrary."[37]

The UK government responded again in November, but the Commission sent another letter to the government in January 2009. This third letter was sent because the Commission was not satisfied with explanations about implementation of European law in the context of the Phorm case. Selmayr was quoted in The Register as saying, "The European Commission's investigation with regard to the Phorm case is still ongoing,"[38] and he went on to say that the Commission may have to proceed to formal action if the UK authorities do not provide a satisfactory response to the Commission's concerns.

On 14 April, the European Commission said they have "opened an infringement proceeding against the United Kingdom" regarding ISPs' use of Phorm:
If the Commission receives no reply, or if the observations presented by the UK are not satisfactory, the Commission may decide to issue a reasoned opinion (the second stage in an infringement proceeding). If the UK still fails to fulfil its obligations under EU law after that, the Commission will refer the case to the European Court of Justice.[39]

That day, in response to a news item by The Register regarding the European Commission's preparations to sue the UK government, Phorm said their technology "is fully compliant with UK legislation and relevant EU directives. This has been confirmed by BERR and by the UK regulatory authorities and we note that there is no suggestion to the contrary in the Commission's statement today."[40] However, BERR denied such confirmation when they responded to a Freedom of Information (FOI) request also made that day:

An examination of our paper and electronic records has not revealed any such material. To add further clarification for your information, BERR has never provided such a statement to Phorm and has never confirmed to the company “that their technology is fully compliant”.[41]


Cambridge University professor Ross Anderson (left) and World Wide Web creator Sir Tim Berners-Lee have raised concerns regarding internet privacy and Phorm.

Initial reaction to the proposed service highlighted deep concerns with regards to individual privacy and property rights in data.[42] Phorm has defended its technology in the face of what it called "misinformation" from bloggers claiming it threatens users' privacy.[43]

Most security firms classify Phorm's targeting cookies as adware. Kaspersky Lab, whose anti-virus engine is licensed to many other security vendors, said it would detect the cookie as adware. Trend Micro said there was a "very high chance" that it would add detection for the tracking cookies as adware. PC Tools echoed Trend's concerns about privacy and security, urging Phorm to apply an opt-in approach. Specialist anti-spyware firm Sunbelt Software also expressed concerns, saying Phorm's tracking cookies were candidates for detection by its anti-spyware software.[44]

Ross Anderson, professor of security engineering at Cambridge University, said: "The message has to be this: if you care about your privacy, do not use BT, Virgin or Talk-Talk as your internet provider." He added that, historically, anonymising technology had never worked. Even if it did, he stressed, it still posed huge privacy issues.[42]

Phorm has engaged a number of public relations advisers including Freuds, Citigate Dewe Rogerson and ex-House of Commons media adviser John Stonborough in an attempt to save its reputation,[45] and has engaged with audiences via moderated online webchats.[note 1]

The creator of the World Wide Web, Sir Tim Berners-Lee, has criticised the idea of tracking his browsing history saying that "It's mine - you can't have it. If you want to use it for something, then you have to negotiate with me. I have to agree, I have to understand what I'm getting in return." He also said that he would change his ISP if they introduced the Phorm system.[46] As Director of the World Wide Web Consortium, Berners-Lee also published a set of personal design notes titled "No Snooping", in which he explains his views on commercial use of packet inspection and references Phorm.[47]

Simon Davies, a privacy advocate and founding member of Privacy International, said "Behavioural advertising is a rather spooky concept for many people." In a separate role at 80/20 Thinking, a consultancy start-up, he was engaged by Phorm to look at the system.[48] He said: "We were impressed with the effort that had been put into minimising the collection of personal information."[49] He was subsequently quoted as saying "[Privacy International] DOES NOT endorse Phorm, though we do applaud a number of developments in its process." "The system does appear to mitigate a number of core privacy problems in profiling, retention and tracking... [but] we won't as PI support any system that works on an opt-out basis."[50] Kent Ertugrul later said he made a mistake when he suggested Privacy International had endorsed Phorm: "This was my confusion I apologise. The endorsement was in fact from Simon Davies, the MD of 80 / 20 who is also a director of privacy international."[19]

Ertugrul has set up a website called "", in reaction to Phorm critics Alexander Hanff and Marcus Williamson. Ertugrul called Hanff a "serial agitator" who has run campaigns against both Phorm and other companies such as Procter & Gamble, and says Williamson is trying to disgrace Ertugrul and Phorm through "serial letter writing". Hanff believes the Stopphoulplay website's statements are "completely irrelevant" to his campaign and that they will backfire on Ertugrul, while Williamson laments that Phorm "has now stooped to personal smears".[51]

When it launched on 28 April 2009, discussed a petition to the UK Prime Minister on the Downing Street website.[52] When originally launched the web page claimed, "The website managers at 10 Downing Street recognised their mistake in allowing a misleading petition to appear on their site, and have since provided assurances to Phorm that they will not permit this to happen again". That same day, the Freedom of Information (FOI) Act was used to request confirmation of the claim by Phorm and on 29 April Phorm removed the quoted text from the website and replaced it with nothing. The Prime Minister's Office replied to the FOI request on 28 May, stating they held no information in relation to the request concerning Phorm's claim.[53]

A day after the site's launch, BBC correspondent Darren Waters wrote, "This is a battle with no sign of a ceasefire, with both sides [Phorm and anti-Phorm campaigners] settling down to a war of attrition, and with governments, both in the UK and the EU, drawn into the crossfire."[54]

The site was closed down in September 2009 and now redirects to the main Phorm site.

BT trials

After initial denials, BT Group confirmed they ran a small scale trial, at one exchange, of a "prototype advertising platform" in 2007.[55] The trial involved tens of thousands of end users.[56] BT customers will be able to opt out of the trial—BT said they are developing an improved, non-cookie based opt-out of Phorm—but no decision has been made as to their post-trial approach.[57]

The Register reported that BT ran an earlier secret trial in 2006, in which it intercepted and profiled the web browsing of 18,000 of its broadband customers. The technical report states that customers who participated in the trial were not made aware of the profiling, as one of the aims of the validation was not to affect their experience.[58]

On 4 June 2008, a copy of a 52 page report allegedly from inside BT, titled "PageSense External Technical Validation", was uploaded to Wikileaks, a site that hosts anonymously-submitted sensitive documents. The report angered many members of the public; there are questions regarding the involvement of charity ads for Oxfam, Make Trade Fair and SOS Children's Villages, and whether or not they were made aware that their ads were being used in what many feel were highly illegal technical trials. The report also has data which shows over 18 million web page requests from customers had JavaScript embedded into the responses, which has again raised questions about the legal standing of those trials.[59]

FIPR's Nicholas Bohm has said that trials of an online ad system carried out by BT involving more than 30,000 of its customers were potentially illegal.[60] Channel 4's Krishnan Guru-Murthy interviewed BT's head of value added services, Emma Sanderson, about their trials.[61]

BT's third trial of Phorm's Webwise system has repeatedly slipped. The trial was to last for approximately two weeks on 10,000 subscribers, and was originally due to start in March 2008,[20] then pushed to April and again to the end of May; it has yet to occur. The company is facing legal action over trials of Phorm that were carried out without user consent.[55]

On 2 September 2008, while investigating a complaint made by anti-Phorm protestors, the City of London Police met with BT representatives to informally question them about the secret Phorm trials.[62] On 25 September the Police announced that there will be no formal investigation of BT over its secret trials of Phorm in 2006 and 2007. According to Alex Hanff, the police said there was no criminal intent on behalf of BT and there was implied consent because the service was going to benefit customers.[63] Bohm said of that police response:

Saying that BT customers gave implied consent is absurd. There was never any behaviour by BT customers that could be interpreted as implied consent because they were deliberately kept in the dark.

As for the issue of whether there was criminal intent, well, they intended to intercept communications. That was the purpose of what they were doing. To say that there was no criminal intent is to misunderstand the legal requirements for criminal intent.[63]

On 29 September 2008, it was announced in BT's support forum that their trial of Phorm's Webwise system would commence the following day.[64] BT press officer Adam Liversage stated that BT is still working on a network-level opt-out, but that it will not be offered during the trial. Opted-out traffic will pass through the Webwise system but will not be mirrored or profiled. The final full roll-out of Webwise across BT's national network will not necessarily depend the completion of the work either.[65]

Civil liberties campaigners The Open Rights Group urged BT's customers not to participate in the BT Webwise trials, saying their "anti-fraud" feature is unlikely to have advantages over features already built into web browsers.[66]

Subscribers to BT forums had used the Beta forums to criticise and raise concerns about BT's implementation of Phorm, but BT responded with a statement:

Our broadband support forums are designed to be a place where customers can discuss technical support issues and offer solutions. To ensure that the forums remain constructive we're tightening up our moderation policies and will be deleting threads that don't provide constructive support. For example, we have removed a number of forum discussions about BT Webwise.

If you do want to find out more about BT Webwise, we provide lots of information and the facility to contact us at We hope you'll continue to enjoy being part of the support community.[67]

According to Kent Ertugrul, BT will have completed the rollout of its software by the end of 2009.[68] The Wall Street Journal, however, reported in July 2009 that BT has no plans to do so by then, and is concentrating on "other opportunities". Phorm's share price fell 40% on the news.[69]

On July 6 2009 BT's former chief press officer, Adam Liversage, described his thoughts using Twitter: "A year of the most intensive, personal-reputation-destroying PR trench warfare all comes to nothing...". He end his comment with "Phantastic"[70]

Advertisers and websites

Advertisers which had initially expressed an interest about Phorm include:, The Guardian, Universal McCann, MySpace,[71] iVillage, MGM OMD, Virgin Media[72] and Unanimis.[73] The Guardian has withdrawn from its targeted advertising deal with Phorm; in an email to a reader, advertising manager Simon Kilby stated "It is true that we have had conversations with them [Phorm] regarding their services but we have concluded at this time that we do not want to be part of the network. Our decision was in no small part down to the conversations we had internally about how this product sits with the values of our company."[74] In response to an article published in The Register on 26 March 2008, Phorm has stated that MySpace has not joined OIX as a Publisher.[74] The Financial Times has decided not to participate in Phorm's impending trial.[75]

Concerns have been raised about the financial impact Phorm's system could have on businesses such as online shops: since Phorm uses the content viewed by visitors to build their profiles, competing stores can target advertisements at them based on products they have seen, and divert sales from shops the users previously visited.[76] The ORG's Jim Killock said that many businesses "will think [commercial] data and relationships should simply be private until they and their customers decide," and might even believe "having their data spied upon is a form of industrial espionage".[77] David Evans of the British Computer Society has questioned whether the act of publishing a website on the net is the same as giving consent for advertisers to make use of the site's content or to monitor the site's interactions with its customers.[78]

Pete John created an add on, called Dephormation, for servers and web users to opt out and remain opted-out of the system; however, John ultimately recommends that users switch from Phorm-equipped Internet providers: "Dephormation is not a solution. Its a fig leaf for your privacy. Do not rely on Dephormation to protect your privacy and security. You need to find a new ISP."[79][80]

In April 2009, announced that it would not allow Phorm to scan any of its domains.[81] The Wikimedia Foundation has also requested an opt-out from scans, and took the necessary steps to block all Wikimedia and Wikipedia domains from being processed by the Phorm system on the 16th of that month.[82]

In July 2009 the Nationwide Building Society confirmed that it would prevent Phorm from scanning its website, in order to protect the privacy of its customers.[83]

Internet service providers

The three ISPs linked to Phorm have all changed or clarified their plans since first signing on with the company. In response to customer concerns, TalkTalk said that its implementation would have been "opt-in" only (as opposed to BT's "opt-out") and those that don't "opt in" will have their traffic split to avoid contact with a WebWise (Phorm) server.[84] In July 2009, the company confirmed it would not implement Phorm;[85] Charles Dunstone, boss of its parent company, told the Times "We were only going to do it [Phorm] if BT did it and if the whole industry was doing it. We were not interested enough to do it on our own.”[86]

Business news magazine New Media Age reported on 23 April that Virgin Media moved away from Phorm and was expected to sign a deal with another company named Audience Science, while BT would meet with other advertising companies to gain what the ISP calls "general market intelligence" about Phorm. NMA had called the moves "a shift in strategy by the two media companies".[87] A day later, the magazine said both companies' relationships with Phorm actually remain unchanged.[88]


  1. Full transcripts of these interviews can be found at


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