Phorm Shifts Focus to Brazil, Posts First Revenues

Chasing revenues, and escaping regulatory headaches, the company will move operations to Brazil.

clickz_ukandeu.gifPhorm will shift its attention to Brazil. The behavioral ad targeting firm that caused controversy with its ISP-level data collection methods in the U.S. and the U.K. will focus on the Brazil market following its first full launch there in March. In its annual earnings report published earlier this week, the company also reported its first ever revenue in the form of a $1.6 million invoice issued to Brazilian ISP Oi.

In an announcement, the company said it intends to move some of its operations to Brazil from its headquarters in London, bringing them closer to its only current customers and enabling it to access what it described as a “lower cost base.”

Phorm has raised over $70 million in funding since 2005, but CEO Kent Ertugrul said the firm is seeking more. Ertugrul said the company is seeking investment for its local subsidiaries, rather than in the parent company Phorm Inc. itself, which will remain headquartered in London. According to Ertugrul, local investment will allow the company to capitalize on greater appreciation of its local partnerships, and to compensate investors based on the performance of local entities alone, rather than the company’s pre-revenue operations in other markets.

So far this year Phorm said its global operations have incurred operating costs of approximately $2.2 million per month, and that on May 31, 2010, its cash position stood at $7.8 million. Those numbers suggest the company can only continue to operate at its current pace for around four months without securing further investment.

Phorm’s technology was met with hostility from privacy advocates in the U.S. and the U.K. after it announced partnerships with major ISPs in both markets over two years ago. That pressure led to the company effectively abandoning those markets, as its partner ISPs backed away from the technology.

Unlike other behavioral targeting services offered by established players like AudienceScience, Specific Media, and others, Phorm’s technology harvests information directly from ISPs, effectively tracking users’ behavior across all the sites they visit. Privacy advocates were vocal in their objection to such tracking – particularly in the U.K. – with many claiming the practice breached data protection laws.

U.K. authorities established that the technology could be implemented legally if it was presented to users on an opt-in basis, but the company had already conducted trials with customers without their consent. That subsequently led European regulators to take legal action against the U.K. government for failing to enforce EU privacy laws.

Beyond Brazil, Phorm said it has also completed successful trials of its technology in Korea. It announced a partnership with major Korean ISP, KT, late last year.


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