• Ars Technica, Monday, March 10, 2008 11:17 AM

Phorm wants to use your clickstream data to serve you ads. The company plans to track everything users do on the Web by striking deals with their ISP. Its technology then segments users into "channels" interpreted by the Web sites they visit, the content of the pages they consume, and the search terms they use. These channels would be sold to advertisers that need targeting informatiion.

Users might not be so grateful. Phorm, which has secured deals with British ISPs BT, Talk Talk and Virgin Media, claims there's a win-win involved for everyone: ISPs can add ad revenue to their coffers, advertisers get better targeting, Phorm can become the next AdSense, and users can be secure in the knowledge that everything they're doing is being tracked by one company. Oh, they also get free phishing alarms.

The company has so far been very open about its business practices, inviting the scrutiny of consumer watchdog groups like Privacy International. Phorm claims its system is more privacy friendly than AdSense, analyzing data that's stripped of all identifying information. But, how you can run an advertising service and store nothing? Nevertheless, Phorm passed the PI sniff test. Its bigger challenge will be passing the consumer sniff test. And the biggest red flag is the idea that ISPs would automatically opt all of their users into the scheme. Otherwise, who would sign up for such a thing?

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