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Phorm's 'burn rate' gives it a year to succeed
21 Sep 2009 | 10.46 Europe/London
By its own figures, released today, Phorm would appear to have a year left to either convince a major ISP to roll out its controversial personalised advertising service or re-invent itself as a content recommendation service for publishers.
Figures for the first half of 2009 show the company lost $15m and now has just over $30m in the bank. Elementary mathematics would suggest this gives the company until this time next year to generate revenue.
The company had raised £32m last year and then a further £15m this year on the basis of very optimistic roll out figures of its advertising technology. It has been controversial from the outset because it tracks users’ browsing habits, on an anonymous basis, so adverts fitting those interests can be served at premium rates.
Forecasts far too optimistic
Phorm’s financial predictions did not bear up to scrutiny in the end and its technology would not appear to be set for a successful UK roll out across any, let alone several, ISPs. Soon after the £15m was raised, BT announced it has no plans to use the technology, following two sets of trials, which has prompted other UK ISPs linked to the technology to distance themselves from potential trials or further evaluation.
This has left the company talking up its prospects of the technology catching on abroad where it claims to be in discussions with several ISPs as well as participating on a trial with Korea Telecom.
The advertising platform has been reinvented to appeal to publishers, rather than advertisers. Webwise Discover tracks opted-in web users anonymously and then suggests stories that publisher also has which the viewer may enjoy, based on their proven interests, in the hope they will stay on the site longer.
Gloomy outlook
Although the first half shows losses have narrowed from $24m to $15m, year on year -mainly due to cost savings including reducing head count - the writing is very clearly on the wall for Phorm.
Having used encouraging figures about UK ISP take up to gain £15m earlier this year, in predictions that were far too rosy, it is unlikely the company will be able to raise more money through financial institutions until it signs up some customers.
Within a year Phorm has to move from burning $30m a year (the value of its current cash holdings) to generating serious revenue.
The omens are not good. Its core proposition has not taken off in its original United States home nor its adoptive base of the UK. The company has not only been the target of a very vocal campaign by online privacy protesters but it has also started a spat between the UK and EC over data protection laws and it could also be embroiled in an OFT investigation in to online advertising practices.
Figures for the first half of 2009 show the company lost $15m and now has just over $30m in the bank. Elementary mathematics would suggest this gives the company until this time next year to generate revenue.
The company had raised £32m last year and then a further £15m this year on the basis of very optimistic roll out figures of its advertising technology. It has been controversial from the outset because it tracks users’ browsing habits, on an anonymous basis, so adverts fitting those interests can be served at premium rates.
Forecasts far too optimistic
Phorm’s financial predictions did not bear up to scrutiny in the end and its technology would not appear to be set for a successful UK roll out across any, let alone several, ISPs. Soon after the £15m was raised, BT announced it has no plans to use the technology, following two sets of trials, which has prompted other UK ISPs linked to the technology to distance themselves from potential trials or further evaluation.
This has left the company talking up its prospects of the technology catching on abroad where it claims to be in discussions with several ISPs as well as participating on a trial with Korea Telecom.
The advertising platform has been reinvented to appeal to publishers, rather than advertisers. Webwise Discover tracks opted-in web users anonymously and then suggests stories that publisher also has which the viewer may enjoy, based on their proven interests, in the hope they will stay on the site longer.
Gloomy outlook
Although the first half shows losses have narrowed from $24m to $15m, year on year -mainly due to cost savings including reducing head count - the writing is very clearly on the wall for Phorm.
Having used encouraging figures about UK ISP take up to gain £15m earlier this year, in predictions that were far too rosy, it is unlikely the company will be able to raise more money through financial institutions until it signs up some customers.
Within a year Phorm has to move from burning $30m a year (the value of its current cash holdings) to generating serious revenue.
The omens are not good. Its core proposition has not taken off in its original United States home nor its adoptive base of the UK. The company has not only been the target of a very vocal campaign by online privacy protesters but it has also started a spat between the UK and EC over data protection laws and it could also be embroiled in an OFT investigation in to online advertising practices.
Giving Phorm a Year is very Optimistic, that assumes that The Major Investors & Shareholders (large & small) continue to support this Company.
It has no other "visible" income or support.?
Phorm needs to rapidly reinvent itself & find a method of Ad delivery which is "not" illegal & acceptable to both Websites & Web Users!
21 Sep 2009 | 12.11 Europe/London
perhaps a year is optimistic, but their burn rate means they have a year's worth of cash in the bank. Just to be clear, Phorm is not illegal under UK law. The Information Commissioner's Office has approved it so long as it's opt in, with the ability to later opt-out. However, you're right about acceptability. Clearly ISPs have calculated their subscriber levels would suffer if they offered Phorm to their users.
So, it's acceptability, not legality, which is the crucial issue.
21 Sep 2009 | 13.03 Europe/London
@Sean
The EU infringement proceedings seem to be at odds with your conclusions over legality, to make it clear I too agree with the EU's decision.
The Information Commissions Office is there to refer possible infringements over the "DATA Protection ACT" to the Police & the Courts BUT it has NO powers to investigate or proceed against offenses stemming from the RIPA Act.
In short it is not in the remit of the ICO to make a decision over the legality of Phorm & interception, that is what the Legal Courts & other bodies "should" be doing & the EU infringement proceedings stem from this inaction.
21 Sep 2009 | 13.34 Europe/London
sure, if you're thinking of the first set of BT trials, it's quite likely that Phorm and BT acted illegally without explicit informed consent. However, as the platform is opt in and would need a further opt out for anyone who's opted in... my understanding is that it remains legal - of course that's yet to be tested by the EU and the courts. i think it's unfair to label Phorm as illegal when it's complied with what the UK authorities have asked it to comply with. i don't think we should muddle the first BT trials with Phorm now. it probably did act illegally in those first trials but i think the platform it is taking to market now deserves to be viewed as innocent until proven guilty.
21 Sep 2009 | 17.21 Europe/London
@Sean
I suggest your read the EU Infringement & the RIPA Acts when it is stated as being "Users" it does not only mean Web Users it means "the Two parties involved in the communication".
Since in most cases it would be impossible to ask the Website for permission to "trawl" their Database, Copyright,Patented material, how is it possible to state that only the first two trials may have been illegal?
A Unicast communication is from Web User to Website & Phorm (or any other such DPI equipment) would & has intercepted communications between Two Parties on numerous occasions in 2006 2007 & 2008 without "lawful authority from both parties & or a warrant!"
The giveaway in all this is Phorm's & other such DPI venders keep mentioning this as a "personalized experience", this would not be possible in an "anycast" or "broadcast" system.
They are therefore deliberately intercepting & MODIFYING "personal" one to one communications for their own purposes.
21 Sep 2009 | 18.12 Europe/London
@Sean
An Example "if" phorm were on my connection (they have been in the past) all the information present on this webpage & in this Web form is available to them, including yours & anyone else's post!
In this case it is unlikely to be sensitive material but how can Phorm tell?
Promising to "ignore" some data after the fact is irrelevant when they do not have the required permissions in the first place!
21 Sep 2009 | 18.36 Europe/London
my understanding is that phorm operates at the ISP level, that's how they know what you're looking at as this is the gateway through which you surf. hence the problems it has encountered.
as i say, though, i think you need to separate the early trials with BT where the law may well have been broken to the current service Phorm offers (or would like to offer if anyone took them up on it). it is an opt in service, so if you don't want it, you don't sign up for it - hence no ISP is offering it as they realise very few people would sign up for it.
There's nothing in it for consumers to get better adveritising. Hence the company is trying to shift focus on to web sites and offer people who sign up more relevant links... ie they're interesting in apt content, not so bothered about apt adverts.
It's all fairly pointless as the company has no customers and i can't really see it getting any in the UK - not on the advertising side, anyway.
23 Sep 2009 | 18.43 Europe/London
@Sean
The Website is NOT opt-in it is OPT-out &only if a registered domain, ie not through Dynamic DNS
So once again how can this "ever" be called an opt-in service for Users, BOTH Websites & Web Users.
Phorm/ISP do not have permission to "trawl private personal or commercial data" from the Website.
The Web User does NOT have the any Authority to give Phorm/ISP permission to do so!
25 Sep 2009 | 08.32 Europe/London
Just looking for more information I came across this.
Another blow to Phorm I think, what a rat race all these Businesses pinching other Peoples private & business data!
https://nodpi.org/forum/index.php/topic,2054.msg22861.html#msg22861
25 Sep 2009 | 09.21 Europe/London