• by Wendy Davis  @wendyndavis, April 20, 2009

Controversial ad company Phorm suffered another blow last week when online encyclopedia Wikipedia opted out of the company's behavioral targeting platform.

"The Wikimedia Foundation requests that our Web sites including Wikipedia.org and all related domains be excluded from scanning by the Phorm/BT Webwise system, as we consider the scanning and profiling of our visitors' behavior by a third party to be an infringement on their privacy," the company said in an email sent to Webwise.

The move came just one day after retail giant Amazon also said it was opting out of Phorm's system.

Phorm serves ads to Web users based on information about their online activity gathered from Internet service providers. Privacy advocates view the platform as alarming because broadband providers have access to all Web activity, including queries at search engines and visits to noncommercial sites. Older behavioral ad companies only glean information from specific sites within a network. Phorm says that it doesn't store people's personal data or browsing histories.

Authorities in the U.K. cleared Phorm to operate, provided that it obtains users' consent. The Internet service provider BT Group, which is working with Phorm, is enabling consumers and Web sites to opt out via an online link.

Last month, the U.K. digital rights organization Open Rights Group urged major Web companies including Microsoft, Google, Facebook, AOL, Yahoo, Amazon and Ebay to opt out of Phorm. "You may have concerns of your own; that a third party will be processing the contents of your website, without asking your permission, in order to construct profiles of your customers," the group wrote in an open letter to the companies. "We strongly believe that it is clearly in your company's interest, it is in the interests of all of your customers, and it will serve to protect your brand's reputation, if you insist that the Phorm/Webwise system does not process any data that passes to or from your website."

The decision by Wikipedia and Amazon wasn't the only bad news Phorm received recently. European regulators said Tuesday they commenced legal action against the U.K. government for failing to enforce E.U. privacy laws. The Internet service provider BT and Phorm conducted secret tests of the company's behavioral targeting platform in 2006 and 2007, which arguably violated Europe's sweeping privacy laws.

Phorm, which has offices in New York, London, Moscow and Seoul, has not deployed its system in the U.S. yet. Rival ad company NebuAd conducted U.S. tests last year, but shelved plans to roll it out broadly in response to pressure from Congress.