• by Wendy Davis , Staff Writer @wendyndavis, October 1, 2008

Behavioral targeting company Phorm, which just launched another test of its controversial Webwise platform in the U.K., still plans to enter other countries, including the U.S., the company reiterated in a new stock filing.

Although Phorm lost almost $26 million in the first half of this year, the company clearly expects a turnaround once its tests pick up steam. In its report, the company touts the concept of Web-based behavioral targeting for offering users more relevant ads.

The company also specifically hails its platform for allowing ISPs to gain a share of online ad dollars. "Phorm's approach is to bring into the market a critical element of the Internet landscape which has so far been largely absent: the Internet Service Providers," CEO Kent Ertugrul states in the report. "In many ways, they literally are the Internet itself. Consumers and the public have often thought of the Internet as being the websites which they visit, giving little consideration to how they actually connected to those websites."

Of course, the companies who publish all of those Web sites might have some thoughts on that.

ISP-based behavioral targeting has been criticized by privacy advocates, who are wary of the practice because ISPs have access to users' entire clickstream data. But Web publishers also have reason to be wary of ISP-based targeting. If Phorm's platform works as intended, the company will be able to harvest data from publishers without paying them for the information.

For instance, if a user searches for iPods on Google, Phorm can arrange to send that user an ad for a portable music player later, when the user is on some other site. While that site that served the ad would be a Phorm partner, and would presumably be able to charge a higher CPM for the targeted ad, it's hard to see what Google would get out of the transaction.

In fact, it wouldn't be surprising if Google -- or other publishers that serve as involuntary sources of data -- finds some way to challenge this type of targeting.