How the Recession May End Consumer Privacy; Phorm Waits in the Wings

(MoneyWatch)  The decline in Q1 adspend reported this week may put pressure on clients to demand more invasions of consumer privacy with online behavioural targeting. This could be the big break the notorious Phorm has been looking for.

Thus far, companies have shied away from behavioural targeting, in which tracking cookies left on consumers' computers tell advertisers what topics the consumers are interested in, based on their web surfing history. Ads are then served based on that information in the hopes that they're more relevant.

The problem with behavioural targeting is that many regard it as an invasion of privacy, and few advertisers want to be accused of that. But as client budgets shrink they will become less squeamish about using a form of advertising that is probably more effective than display or banner ads.

Consider:

• Publicis boss Maurice Lavy predicted an 8 percent global decline in ad spending, with recovery later in the year. That's the optimistic view.
• Spend fell 14 percent in the U.S., led by autos and financial services.
• Procter & Gamble, long the nation's largest spender, reduced its budget by 18 percent. Worse, small advertisers collectively cut their budgets by 22.3 percent.
• And Interpublic CFO Frank Mergenthaler said signs of a recovery were thus far greatly exaggerated.

He told Reuters:

Any signs that the economy is improving "have not manifested in people pulling the trigger on ratcheting up spending," he said. "We are seeing signs, but those signs are more anecdotal than companies actually willing to spend."

Waiting in the wings is Phorm, the much-criticized online targeted ad provider that is hoping to persuade British advertisers that tracking users' online behavior is the way to go. It has previously been accused of running spyware operations.

Currently, Phorm has "no ISP ?€" and hence no web users, advertisers or publishers on board," according to the Guardian. It exists because it has venture funding that followed interest from telecoms giant BT. The Guardian gives the shop six months to roll out its new model. Phorm is already describing critics of its model as "a vocal minority."

Likewise, ValueClick launched predictive behavioral targeting last year. And lobbyists have already made an assault on Capitol Hill to head off any regulation that might offer consumers more privacy from advertisers.