[BetBlowWhistler]

(Adds further details on Information Commissioner decision, CEO comments)

LONDON (Thomson Financial) - Advertising technology company Phorm Inc. said it is in advanced talks with a number of British and international internet service providers over its online advertising platform, and has moved into the trial phase with some of them.

In February, the company, which categorizes web-surfing habits in order to target online advertising, said it had signed exclusive agreements with major United Kingdom ISPs BT Group PLC., Carphone Warehouse Group PLC.'s fixed-line subsidiary Talk Talk, and Virgin Media Inc. to adopt its OIX platform and consumer internet feature Webwise.

Chairman and chief executive Kent Ertugrul said the company will begin a pilot with around 10,000 BT customers in the next few weeks, and a roll-out should not be far behind.

The platform enables targeted advertising based on the search and browsing habits of the service providers' customers and has attracted heated media interest, with press reports of a potential compromise of users' privacy prompting Phorm to issue a statement in March saying it will "never store any personal information, or anything that can identify a user".

"The only information stored is an anonymous random number assigned to a user's browser, the advertising categories that match their areas of interest and a time stamp," Phorm said, adding that users would be able to switch the Webwise product off and that its technology complies with UK law, including the Data Protection Act.

The Information Commissioner who is responsible for enforcing the Data Protection Act (DTA) and Privacy and Electronic Communications Regulations (PECR) has said Phorm products [b]will need to be 'opt-in' [b]for them to comply with PECR regulations, which means each ISP customer will need to explicitly consent to having their web use tracked.

Ertugrul told Thomson Financial News that the company will deploy an unavoidable notice, which is a full web page detailing consent for its service that will be displayed when the user first comes online and the system is deployed. The user will then have the option to opt into the service.

Ertugrul said the contents of the page will easily meet the requirements for valid consent on the part of the users.

The ICO said its views are based on the current understanding of the Phorm products before the trial or roll-out at the ISPs, "which should provide more information about their use in practice".

Phorm said it has started dialogue with the Information Commissioner's Office, "who are pleased with the way that we have engaged with technical experts and concerned individuals following the announcement of the service". It also said it has met with other online privacy stakeholder and has had with encouraging results.

Phorm no longer generates advertising revenues since it moved its focus tp its online platform. Without sales and with the costs of investments, pretax losses in the full year widened to $32 million from $11.5 million last year.

Looking ahead, the company said: "We have built an excellent team and a market leading technology platform and, as a result, we look forward with great optimism to the opportunity that lies ahead for our company."

My emphasis.