Blog / Phorm and the Open Internet Exchange

Phorm and the Open Internet Exchange

3rd February, 2008

I met a week or two ago with a couple of guys from internet technology company Phorm. They presented what struck me as an exciting proposition: a network of business relationships, of which phorm would be the administrators, named the Open Internet Exchange, or OIX.

Phorm's OIX will involve publishers, advertisers and, crucially, internet service providers in a way that will allow advertisers to target internet users whose behaviour on the internet identifies them as having relevant consumption interests. This is great: behavioural targeting identifies consumers who have actually started down a particular road to consumption (purchase, subscription, or whatever); rather than just identifying those who are only likely to start down this road, because, for example, of their demographic.

With behavioural targeting, once the user is identified as a target, they can be shown relevant advertising while they're viewing any internet page, not just pages whose content is relevant to the marketing proposition. The advantages here are that publishers can monetize all their content, even that which isn't easily categorised and wouldn't otherwise be valuable; and advertisers can avoid the clutter of competitive ads that forms on the pages whose content pertains to the advertising.

But behavioural targeting is something that advertising networks do already. So what makes the OIX different? Exisiting methods of behavioural targeting work like this:

  1. a user suddenly appears, browsing one of the sites in an advertising network
  2. he or she exhibits while on that site a degree of behaviour that identifies him or her as a potential target: he or she conducts a relevant search, clicks on a relevant ad, or looks at a relevant page
  3. when he or she next appears back on one of the sites in the advertising network, he or she gets shown a relevant ad

The limitation here is that the behaviour of the user is observed only while the user is in the advertising network. Some eighty or ninety per cent of the internet population might be reached at least once each month by traditional advertising networks, but only a fraction of a user's total internet behaviour is actually observed by any one network. This limits the volume of relevant users available, and the accuracy of their match to the advertising.

Phorm's OIX, which involves internet service providers, will make use of the ISPs' data on users' entire browsing histories: it will 'see' all the pages they visit, and all of the searches they make. This will allow adveritisers to define and successfully target a practically infinite number of behavioural advertising 'channels' - combinations of keywords and URLs that define specific behaviours.

Sounds good, doesn't it? - like a more highly evolved approach, that makes use of a massive resource that has been under our noses all along. But, while it employs one resource of the ISPs, for it to work Phorm's OIX must sustain another: the user. While the user won't have to download any software onto his or her computer, and no personally-identifiable data will ever be recorded, there will be cries of 'Big Brother is watching us!' Moreover, users will be generating a revenue stream for all those involved in the OIX. So what's in it for them?

Well firstly, we all see advertising anyway. What Phorm is proposing with the Open Internet Exchange is a way for us all to see more relevant advertising - advertising that might even be helpful!

Secondly, Phorm is in a position to provide the user with whatever services that can be derived by the monitoring of his or her internet behaviour. The obvious ones here are internet security services, like warnings against phishing websites.

Given how important it will be for them to preserve the ISPs' good relationships with users - to keep the user sweet - I wonder if Phorm will be able to come up with anything else ground breaking, by way of services for the user. Indeed, they may have to come up with something of this nature before the OIX will take off. Whether Phorm can provide something where ISPs have long had the opportunity to do so already will be interesting to see.