• by Wendy Davis  @wendyndavis, December 2, 2008

In a shakeup for controversial behavioral targeting company Phorm, four board members are exiting due to disagreements with CEO Kent Ertugrul about the company's direction.

The departing board members are Stephen Heyer, former Coca-Cola executive; David Dormon, chairman of Motorola; Christopher Lawrence, an executive with investment banking firm Rothschild; and Virasb Vahidi, who also served as chief operating officer.

At the same time, the company has named four new replacement board members. The new appointees are Norman Lamont, former U.K. Chancellor of the Exchequer during the Margaret Thatcher administration; Kip Meek, a former board member of the U.K.'s Office of Communications; Stefan Allesch-Taylor, chief executive of Fairfax investment bank; and investment banker Stephen Partridge-Hicks.

Phorm spokesperson Alex Laity said the shift will allow the company to react more quickly to new developments because all directors will now be based in the U.K. Some of the previous members were based in the U.S.

"With the board in London, strategic decision-making will be faster," he said. He added that the company still intends to try to partner with U.S. Internet service providers. "The United States remains an important market for us," he said.

Phorm said in a statement that the departures were due to differences with Ertugrul about the company's "management and future direction."

Currently, Phorm is testing its Webwise platform with BT Group in the U.K. But other Internet service providers have been backing away from the company. Orange, for one, recently said it was not going to deploy Phorm's platform due to privacy concerns.

In the U.S., AT&T, Time Warner and Verizon have said they won't work with behavioral targeting companies unless users consent in advance.

Phorm's Webwise gleans data about users' Web activity from their broadband provider and then serves ads based on sites visited or searches performed. Phorm says it does not collect information unless people have opted in, and that it does not store IP addresses or other data that could be used to determine users' identities.

But this type of ad platform still alarms privacy advocates who say it is too intrusive. One concern is that the platform has access to all Web activity, including searches and behavioral at non-commercial sites. Some advocates say that the sheer volume of material available make the platform more of a threat than older behavioral targeting systems, which typically collect information from a limited number of sites that are in a network.

A potential Phorm rival in the U.S., NebuAd, retreated from plans to serve ads based on information from broadband companies after Congress launched an investigation into whether the platform violated users' privacy.

Separately, reports recently surfaced that the U.K.'s Crown Prosecution Service is investigating whether a prior trial by BT broke any laws in the country. In 2006, BT tested Phorm's platform with around 18,000 subscribers, without notifying them of the project or allowing them to opt out.

BT declined to comment about the report of the new investigation.

The E.U. also has been pressuring the U.K.'s Department of Business, Enterprise and Regulatory Reform to state whether it intends to take action regarding that test. Earlier this year, the U.K. authorities cleared Phorm for further testing, saying the platform was legal because the company promised to notify users about the system and obtain their consent before deploying it.