• by Wendy Davis  @wendyndavis, September 30, 2008

Controversial behavioral targeting company Phorm will launch another test of its platform Tuesday with U.K. Internet service provider BT Group.

Unlike the case in previous trials, BT will only deploy the platform, "Webwise," with subscribers who have affirmatively agreed to receive targeted ads. For the initiative, BT intends to intercept 10,000 users with a Web page asking whether they wish to sign up for Webwise, which it touts as offering "more relevant" ads. The company also promises that it will help protect users from online fraud by alerting them when they land on suspected malware sites.

Phorm is one of a small number of behavioral targeting startups that partners with Internet service providers to serve ads to subscribers based on their Web activity. Privacy advocates worry that this type of system is especially intrusive because Internet service providers see every site visited and every search query entered. Older forms of behavioral targeting only tracked users across sites in a network.

Phorm and other behavioral targeting companies say that all data collection is anonymous, because they don't know subscribers' names or e-mail addresses. But privacy advocates say that clickstream data can in itself provide clues to people's identities.

In the U.S., pressure from Congress led Phorm rival NebuAd to suspend plans to purchase data about people's Web use from their Internet service providers. The Senate and House held hearings on the plan, and lawmakers including Rep. Ed Markey (D-Mass.) said they believed that broadband provider-based targeting platforms required users' opt-in consent.

Last week, three major Internet service providers--Time Warner Cable, Verizon and AT&T--told the Senate that they also supported opt-in consent for behavioral targeting.

Although BT says it will seek users' consent for the test starting today, some advocates say they still have concerns. One problem, says Center for Democracy & Technology chief computer scientist Alissa Cooper, stems from the fact that more than one person sometimes uses the same computer.

"If there's a family all using one computer, and the 5-year-old walks up to the computer and hits the big green button, then everyone's been opted in to this, and the adults in the household don't even know it."

It recently came to light that BT previously conducted a two-week test of Phorm without notifying users, which some consumer advocates say might have violated Europe's strong data privacy laws. Regulators in the U.K. nevertheless cleared Phorm for further testing based on promises that the company would not test its system again without first obtaining users' consent.