Earnings: Phorm Losses Triple, ‘Advanced Talks’ With More ISPs

Controversial behavioural ad targeting network Phorm‘s losses trebled to $32.8 million (£16.6 million) in 2007 as it invested in its much-derided browser-tracking infrastructure. It burned through $22.4 million cash, up from $8.3 million the previous year, in “a year of building the foundations”.

Unlike common web ad networks, which rely on participating sites placing cookies on users’ machines, AIM-listed Phorm’s Open Internet Exchange (OIX) integrates with ISP networks to access all a user’s browsing habits. Based on those patterns, it assigns profiles to a user that are stored in an anonymous cookie and are interrogated by participating publisher sites to serve more relevant ads.

Phorm confirmed its trials with BT (NYSE: BT), Virgin Media (NSDQ: VMED) and TalkTalk – which power 70 percent of UK broadband customers – will begin in the “near-term“, said “advanced talks” are taking place with other UK and international ISPs and claimed to have made “significant progress made with the advertising and publishing community”.

Despite concern amongst individual online privacy advocates, it said it had received “an enthusiastic response to date”. Perhaps they haven’t been reading The Register lately, or maybe it missed Guardian.co.uk pulling out of the programme on ethical grounds. Other publishers include FT.com and iVillage; the government’s Information Commissioner effectively cleared Phorm on privacy grounds this week. Phorm: “There is still a lot of work that needs to be done before we reach critical mass in the UK market.”

Phorm said it was funded by $5 million from Morgan Stanley Principal Investments in February 2007, a $30 million share placing in June 2007 and raised a further $65 million last month, boasting: “In these current times of uncertainty in the financial markets, the fact that we were able to raise significant funds is testament to the strength and potential of our business model.” It’s now got $16.6 million in the bank.