Blog Post

BT Goes Cold On Phorm; UK Now Drying Up For Ad Company

After months of promises the deal would take place, Phorm’s biggest and most promising potential UK ISP partner BT (NYSE: BT) has said it will not deploy its Webwise behavioural targeting technology in the near future.

BT says in a statement (via Guardian.co.uk) that its hands are full spending millions on upgrading its ADSL network, though it says it still thinks the “interest-based advertising category offers major benefits for consumers and publishers alike,” and it will monitor Phorm’s progress, offering a glimmer of hope there can be a reconciliation in the future.

Phorm shares were down one third Monday morning to £3.30.

Phorm’s response: “Phorm’s activities remain ongoing and we look forward to creating the conditions necessary for UK ISPs to move to deployment. In parallel, we continue to focus considerable effort on faster moving overseas opportunities … we are engaged in more than 15 markets worldwide including advanced negotiations with several major ISPs … We remain very confident in our ability to deliver on the promise of this substantial opportunity.”

It’s a big blow for a company that seven years after its inception still has no revenue to speak of, gets through £1.1 million a month and has made headlines more for its clashes with privacy campaigners than its return for investors. And it only looks worse after years of assuring investors and journalists — often in very defensive terms, via a questionable PR strategy — that its plans to seal deals with UK ISPs were on track. CEO Kent Ertugrul told us in April that any suggestion ISP partners were getting cold feet “had no basis in fact“.

So it’s slightly odd that a Phorm spokesman would tell Guardian.co.uk: “it is not a great surprise to us, to be honest. It has been a long process and we have never had a definitive date on a launch”. Really? In February Ertugrul told Dow Jones the Webwise-BT project would “most definitely be online by the end of the year” and he’s said similar things since BT concluded a consumer trial in December. Perhaps serious doubt about the company’s deep packet inspection technology expressed by the BBC, Amazon (NSDQ: AMZN) and others has created a critical mass of negativity that commercial partners just can’t see past.

BT’s bailout is telling: at a time when telcos are consolidating their balance sheets, laying off staff and paying for some of the biggest and most expensive investments in broadband networks ever seen, now is not a time for them to be concentrating on advertising.