NebuAd Faces Class Action Suit, Phorm’s ISPs Drop Like Flies

This week a class action lawsuit was filed against behavioral targeting company NebuAd and 26 internet service providers (ISPs) that tested the service.

Those named in the suit include CenturyTel, WOW, CableOne, Embarq, Knology, and Bresnan Communications, as well as 20 unnamed ISP defendants, referred to as “John Does,” that purportedly also worked with NebuAd.

Using a technique called deep-packet inspection (DPI), NebuAd’s technology is able to inspect and sort data as it travels across the internet. The company partners with ISPs to serve advertising against internet users’ web activity.

16 plaintiffs charged NebuAd and the ISPs with committing privacy and computer security breaches while conducting trials of NebuAd’s behavioral advertising platform earlier in the year. Claims were filed on behalf of future class members in all 50 states.

Defendants stand accused of violating the national Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Invasion of Privacy Act and the Computer Crime Law (CA-only). The charges are supplemented with claims of aiding and abetting, civil conspiracy, and unjust enrichment.

In July, both the House and the Senate scrutinized the practice of behavioral advertising after several groups criticized NebuAd, comparing its methods to those of browser hijacks. At the time, NebuAd had just signed a deal with Charter Communications to provide targeted advertising across the ISP’s 2.8 million clients. Charter later balked, causing a chain reaction amongst other ISPs.)

NebuAd argues it is safer than search engines because it does not save identifiable information — unlike Google or Yahoo, which keep track of search behavior for at least 18 months. By early fall, however, it opted to change its ad practices in response to the Congressional hearings and continued pressure from privacy advocates.

Across the Atlantic, NebuAd’s UK counterpart Phorm is also losing clients. Media pressure is driving Virgin Media, a major UK-based ISP, to reconsider working with the behavioral targeting firm.

For the most part, Phorm has suffered a less tumultuous battle than NebuAd. The media storm and consumer distrust surrounding it have subsided, and Virgin began a trial of the service last month.

It is unclear what straw broke Virgin’s resolve. “[W]e do not have any timescales on when, or if, we will progress to trial or full launch,” a spokesperson told ClickZ.

Phorm claims both Virgin and Talk Talk, another UK-based ISP, will “commence consumer trials in due course.” Another ISP, Orange, decided not to participate due to concerns about consumer privacy.

In April, Phorm appealed to the UK authorities by submitting a third-party assessment of its tracking and behavioral ad-serving technology that reportedly deemed it legal under reasonable interpretation of the law. It also announced plans to introduce opt-out forms on top of banner ads.