• by Laurie Sullivan  @lauriesullivan, October 8, 2008

Adzilla.com has become the latest casualty in the behavioral targeting meltdown, with the company liquidating assets and shutting down operations, Online Media Daily has learned.

An "Excuse the construction" note on the ISP ad targeter's Web site suggests that the Canadian-based company, which supports "opt-out" ad targeting services, has briefly stepped out "to develop new solutions and services to delight users and enhance the online ecosystem experience." But well-placed sources say pressure from congressional scrutiny and telecom operators, as well as the sudden departure of Adzilla CEO Toby Gabriner, left the company with few options besides laying off its workforce and shutting down.

Gabriner acknowledged Online Media Daily's email request for an interview, but did not follow through to comment on company changes that follow a similar move by NebuAd's CEO Bob Dykes, who stepped down as the company refocuses on conventional media channels.

NebuAd made the decision to delay further roll-outs of its ad targeting platform, which serves up advertisements directly to ISP broadband subscribers. The company will wait to complete the rollout until Congress sorts through rulings.

Even the "opt-in" business model has been tarnished, forcing Front Porch to shut off its behavioral targeting feature, says Zach Britton, Front Porch founder and CEO. "It's kind of like saying, 'I'm a used car salesman, but I'm a good one,'" he says. "A little water needs to flow under the bridge and people need more understanding on how this technology works."

Britton believes behavioral targeting can work and make the Internet economy keep ticking, but Front Porch might walk away from the business model.

There's too much chatter about a nascent business model whose benefits have not been proven, yet companies offering the service would tell ISPs that they could make $3, $4 or $5 per month per subscriber, Britton says.

Making it work means offering consumers the service as opt-in, not opt-out; serving up ads without a cookie; and bundling it with valuable services, such as increased bandwidth, free Internet access or video on demand services.

"These companies offer opt-out options in very vague terms, but who is going to read through all the fine print?" says Gigi Sohn, president at Public Knowledge, who testified before the U.S. Senate Committee on Commerce, Science & Transportation on Broadband Providers and Consumer Privacy in Washington on Sept. 25. "Companies cross the line every time your ISP tracks your every move on the Internet, and that's a bridge too far traveled."

Traveling to the United Kingdom to offer the service might be one option for companies offering ad targeting. A source requesting anonymity says Adzilla plans to pull up stakes in the U.S., move to the U.K., and use whatever capital they have left to refocus the technology on a more conventional business model.

Phorm has been somewhat successful in finding big-name brands to participate in tests. In late September, British Telecom reported inviting broadband subscribers to voluntarily participate in a third trial of Phorm's advertising targeting platform, which supports opt-out features. Customers selected would participate anonymously via a special Web page that appears when they open their web browser. The trial will gauge the effect that behavioral targeting has on ad click rates.