In Brazil, Phorm is emphasizing customized content on partner websites if people agree to opt in. For example, users visiting a sports website might see articles about their favorite teams (gleaned from an analysis of their surfing habits), providing an online experience different from other people.
"Receive your favorite content in an easy and practical way and without spending money!" says Oi's main opt-in screen for the Phorm service, called Navegador. "We guarantee your privacy! No personal information is input in the program, so your privacy is guaranteed!"
Oi's Mr. Ripper says more than half the subscribers offered the service in the initial launch have opted in to date. "We were very happy with it," he says. He says two outside auditors verified Phorm's privacy-protection settings.
Until 2007, Phorm was known as 121Media Inc. It delivered targeted ads, particularly pop-ups, to users who downloaded free software. The ads were "based on an anonymous analysis of their browsing behavior, which is likely to indicate their commercial and lifestyle interests," according to corporate filings.
Several Internet security companies, including Symantec Corp., flagged part of 121Media's adware system as "spyware." Microsoft's Malware Protection Center called it a "trojan," or malicious software disguised as something useful.
Facing "a combination of public perception and legal and technological challenges," 121Media said it shifted its focus in 2005 from the desktop-adware business to ISPs.
It eventually shuttered its adware business and renamed itself Phorm. The company is led by Mr. Ertugrul, a Princeton-educated, former investment banker who in the early 1990s formed a joint venture with the Russian Space Agency to offer joy rides to tourists in MiG-29 fighter jets. The venture was later sold.
The three ISPs eventually bailed out. "Phorm was bad news," says David Smith, deputy commissioner of Britain's Information Commissioner's Office, which oversees data protection. He says he's not surprised Phorm is looking for clients abroad. "It was pretty clear that no one was going to touch them in the UK."
Kindsight's roots trace to an in-house project known as Project Rialto at Alcatel-Lucent, where Mr. Gassewitz once worked as a vice president of strategic planning.
A 2007 job posting on Project Rialto's website described the company's work as developing "systems that can handle [a] massive volume of data for in-depth analysis of user behavior to enable targeted advertising."
Project Rialto eventually became Kindsight, a spinoff. At an Alcatel-Lucent conference held in September 2008 in Beverly Hills, Mr. Gassewitz spoke at a session called "Merging Technology and Advertising." A summary of his comments, posted on Alcatel's website, reads in part: "Through technologies like deep packet inspection," Internet service providers "can gather even more information about consumers" than rivals such as Google or Facebook.
Mr. Gassewitz also talked about "significant privacy concerns," the summary says, and stressed that ISPs must find a way to provide measurable value to consumers "to avoid backlash."
To win over Internet users to its services, Kindsight plans to offer what it has described as a "free, always-on, always-up-to-date security service."
"Say hello to your new best friend…" it said on its redesigned website in 2008. The company later dropped the slogan. "That was early days," says Mr. Gassewitz.
Before giving away the security service free, Kindsight plans to display an opt-in screen to ISP users that explains how its technology analyzes "web sites visited and searches conducted to assign a numerical value to various interest categories." The "score" is used to deliver relevant ads.
In market-research tests in North America, France and the U.K., Kindsight found that about 60% of users were willing to take the service free in exchange for receiving targeted ads, he says. Another 10% were willing to pay for it.
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