Phorm Still Looking For A Large-Scale Deployment, Still Finding Investors
from the why-do-they-bother? dept
As a search through the Techdirt archives shows, Phorm's behavioral advertising service based on watching your Web activity was beset by problems in its early days. One of the last Techdirt posts on the company from a couple of years ago explained how Phorm was planning to expand overseas, and here's some news on how that's been going:
Despite Phorm softening the service in response to privacy concerns, three UK ISPs who trialled it decided not to go deploy it. Phorm moved operations to South Korea but the same happened. So it moved to Brazil.
With this record, Phorm could certainly use with a few more big new markets; its financial results so far have been dismal:
Now operating on an opt-in basis, Phorm has finally gained actual commercial roll-out with Brazilian ISPs Oi and Telefonica and with Romania’s Romtelecom. With them, Phorm says opt-in rates have met or exceeded targets, advertiser prices have been “significantly higher than forecast” while publisher costs have met or undermet targets.
The company had never recorded any revenue until the first half of this year, just $17,336. (£10902.53) In 2010, Phorm lost $28.6 (£17.99) million.
Despite that track record, it is predicting big things:
"The potential scale ... of the Brazilian business could be £7.03 ($11.13) million... The (value) of Romania could be £78 ($124.03) million," Phorm itself forecasts modestly to investors. These targets are based on Phorm scaling up from small, post-trial deployment to large-scale adoption.
It also has high hopes elsewhere:
Phorm says discussions with other global ISPs have also continued for the last three years. It plans to roll out in China and a southern Europe country early in 2012. It also says it is due to deploy in a southern Europe country it values at £483 ($768.01) million and a south-east Asian country it values at £82 ($130.39) million early next year.
Those are rather a jump from this year's six-month sales of $17,336. Undeterred by that fact, investors still seem to be piling in:
This time, it is raising £30 ($47.7) million, which will be used partly to repay a £16 ($25.44) million convertible-notes loan it took out this March and partly “to provide sufficient working capital to get to positive operational cash flow”. It is planning a cash burn of £1.1 ($1.75) million per month for the next year.
That's pretty incredible: nearly $160 million for a service that has yet to prove itself in any large-scale deployment. There's something very strange about this persistent belief by investors that what the world is really waiting for is a service that watches your every move online to serve up targeted ads and content.
At this point, you could be forgiven for having lost track of how much money Phorm has raised and how much equity it has given out to finance its ongoing hefty losses. But paidContent has previously reported Phorm took a total £53 ($84.28) million between 2005 and 2010. The recent loan and latest funding bring that total to nearly £100 ($159.01) million.