Blog Post

After UK And Korea, Phorm’s Now Touting For Funding In Brazil

It’s had to raise money from share issues or investment every year since 2005. Now it’s that time of year again

Behavioural ad targeter Phorm says it’s moving operational activities to Brazil, where it has its solitary customer and is seeking local equity investors for yet another fundraising.

The controversial company has raised a total £51.96 million since July 2005 but, in annual earnings published Wednesday, recorded its first ever income – an invoice for $1.6 million from Brazilian ISP Oi, which is now using Phorm’s Webwise Discover service to monitor users’ browsing and serve them targeted ads through UOL, Terra and IG portals.

Annual losses slimmed from 2009’s $49.8 million to $29.7 million in 2009 but, in absence of any big pay day, this is mostly due to last year’s cost cuts, which included losing 13 percent of staff.

So far this year, the company is is still spending $2.2 million a month and has $7.8 million in the bank (ie. enough to make it to autumn). It says moving to Brazil will cut costs significantly…

In the latest funding, Phorm aims to protect its London holding company from further stock dilution by attracting funds only to the Brazil division – a tactic it says it will also use in any future overseas markets. In other words, Phorm’s off to Rio, baby!

Some background…

The company, whose service uses anonymised ISP customer logs to track users web visits and to serve accordingly targeted web ads via web publishing partners, had initial test agreements with BT (NYSE: BT), VirginMedia and TalkTalk in its native UK. BT completed a trial but consumer privacy concerns kiboshed hopes of a UK launch, leaving Phorm to go to Korea for a trial with local ISP KT.

Despite having overturned its directors board to put more Brits on the team, Phorm then shifted its gravity toward Asia – but the KT talks have also come to nothing.

The company acknowledges: “2009 was a difficult year …, given the postponement of our UK launch and the delays experienced in Korea. Nevertheless, we have learnt a number of important lessons from our experiences…”

1) The technology has to be opt-in. Phorm has had to rejig its products to make that enticing, so turned its technology in to Webwise Discover, a product that still includes the ad targeting but which leads on personalised content discovery.

2) It’s had to improve privacy control. The improvements mean “technical trials such as those undertaken by BT in 2008 are no longer necessary“, Phorm says.

3) It’s started courting multiple ISPs at the same time, having found that KT took “considerably longer to launch than originally predicted … due to a number of external factors beyond our control”. Surprising that they weren’t pitching to multiple candidates simultaneously already.

Phorm’s funding to date (stock and investment)…

Jul 05 – £1 million
Feb 06 – £2.4 million
Feb 07 – £2.56 million
Mar 08 – £32 million
Jun 09 – £15 million

The future

Wednesday’s earnings announcement also contains the usual promises of signatures around the corner… “we have a number of additional publisher contracts pending in Brazil” … “we are at the final approval stage with a number of ISPs worldwide” … “contracts for deployment signed this year with deployments to commence over the course of the next twelve months” … “we continue to receive a steady flow of advertiser briefs for campaigns that will go live in the coming months”.

But all of this is strangely familiar and, once again, Phorm has decided to raise money to keep itself afloat for what, if it ever does succeed, could be a genuinely big ad opportunity that may also give publishers a shot in the arm.