The plans of behavioural targeting firm Phorm for spying on what people do online look to have taken a terminal hit as The Guardian reports.

The announcement today of BT’s pull-out suggests it could be hard for Phorm to continue in business, let alone further develop its Webwise Discover targeted ad technology.

BT drops Phorm targeted ad service after customers cry foul over privacy

BT has quietly ditched a controversial system that tracks the internet habits of its customers, developed by the technology firm Phorm, which has been attacked as online snooping by privacy campaigners. BT was a key player in the development of Phorm’s Webwise system, which uses information about which sites an internet user visits to target them with relevant advertising on subsequent pages.

It carried out secret tests of the technology in 2006 and 2007 which are now the basis of a European commission investigation into the UK government’s failure to protect its citizens online. Last year BT carried out a proper consumer trial of Phorm’s technology. The results have been keenly awaited, not just by management at Phorm – whose chairman is former chancellor Norman Lamont – but by its other two potential partners, Virgin Media and TalkTalk.

But BT has decided not to proceed with rolling out Webwise to its 4.8 million broadband customers, dealing a heavy blow to AIM-listed Phorm.

As I write this post, I see that Phorm’s share price has plummeted by more than 38 percent since BT’s announcement.

I asked Virgin Media in a tweet whether they would also drop Phorm (Virgin is my ISP). Their reply pointed me to a page on their website about behavioural advertising which includes an encouraging text:

[…] We recognise some consumers have significant concerns about the potential implications of interest-based advertising for their privacy. Virgin Media is committed to ensuring that any future deployment complies not only with the relevant legal requirements but – as an absolute minimum – the best practice guidelines contained in the Internet Advertising Bureau’s recently published code of practice.

In all, a small victory for ethical business practice.

Related post:

• Nice concept, Phorm, pity about the execution