Chairman's Statement
Phorm, Inc Chairman's statement, from the annual report, April 2008
During the year under review, Phorm made significant progress, both in terms of its corporate development and in executing the Company's Internet Service Provider (ISP) relationship strategy, providing a solid foundation on which to take the business forward to the next stage of its development. As a result of our hard work, I am extremely happy to report that on 14 February 2008, we announced exclusive agreements with BT, TalkTalk and Virgin Media, further details of which I have provided below.
PeopleOver the course of 2007, a number of high profile executives joined Phorm. On 21 May 2007, we announced three senior board appointments; Firstly, David Dorman joined us as a NonExecutive Director having been an advisor to the Company since July 2006. He is currently senior adviser and partner at global private equity house Warburg Pincus and was previously Chairman and Chief Executive Officer ofAT&T Corp. Before that, he was Chief Executive Office of Concert, the global venture created by AT&T and British Telecommunications. David serves as Non Executive Chairman on the Board of Motorola Inc., and serves on the Boards of CVS Corporation, LLC, and YUM! Brands, Inc.
Christopher Lawrence also joined us as a Non Executive Director. Christopher is currently Co-Head of Investment Banking, Rothschild Inc. (North America), and was previously Chief Strategic Officer of Credit Suisse Group as well as a Vice Chairman of Credit Suisse First Boston.
We also announced that Virasb Vahidi had joined the Board as Chief Operating Officer. Virasb is an international business executive with a distinguished career encompassing senior finance, strategy and planning roles in global companies including AT&T Corp. and American Airlines, Inc.
On 1 October 2007, we announced another senior appointment to our Board. Stephen J Heyer joined the Board as a Non Executive Director. A seasoned and innovative leader, operator, marketer, brand builder and strategist, Steve is currently the Co-Chairman and CEO of Fathom Studios and Vice Chairman of Mistral Acquisition Company. Steve was CEO of Starwood Hotels & Resorts Worldwide, and joined Starwood from The Coca Cola Company, where he served as President and COO. Prior to joining Coca-Cola, Steve was president and COO of Turner Broadcasting System, Inc., and a member ofAOL Time Warner Inc's Operating Committee. Previously, Steve was President and COO ofYoung and Rubicam, Inc. Steve is a member of the Board of Directors of Lazard Ltd and Lazard Group, Mistral Acquisition Company, the National Collegiate Athletic Association and the Special Olympics.
At the same time, we announced the hiring of Stratis Scleparis as Group Chief Technology Officer (CTO). Stratis has over 20 year's experience in communications, IT and emerging technology and joined us from BT Retail, part of BT Group pic, where he was CTO. Furthermore, on 15 January 2008, we appointed Greg Meyer as Senior Vice President, Global Product Development, who joined from Atlas, a division of aQuantive, where he was Senior Vice President Product and Technology.
The expertise and experience that these people have brought to Phorm is proving invaluable as our business gains further traction throughout the markets in which we operate and underlines our commitment to employing the best possible people to deliver upon our strategy.
Strategy and business update2007 can be characterised as a year of building the foundations for our future success. In May we completed the reorganisation of the Company from 12lMedia, Inc. to Phorm, Inc. We also invested considerable time and funding in our technology and key infrastructure as well as internal processes that will enable us to deliver a first class and highly scalable platform, in addition to significantly strengthening our team.
I am delighted that the hard work and dedication of the team was rewarded soon after the year end, when on 14 February 2008, we announced exclusive agreements with three major UK ISPs
- BT, TalkTalk and Virgin Media, which represent nearly 70% of the UK internet market, to adopt our online advertising platform, the Open Internet Exchange (OIX), and a consumer internet feature, Webwise. Implementation is on track and consumer trials are expected to begin in the near term, followed by roll-out across these networks.
Furthermore, we continue to be in advanced discussions with a number of other ISPs, both in the UK and internationally, and following extensive due diligence we have moved into the trial phase with a number of them. It is worth noting that we believe we are selected as the preferred partner by leading ISPs over our competitors based on the capabilities of our technology, our team and our approach to privacy. We will provide an update on these discussions in due course, when appropriate.
In addition, since announcing the launch of OIX and Webwise on 14 February 2008, Phorm has continued to make significant progress with the publishing and advertising community and is delighted with the enthusiastic response it has received to date.
A key differentiator of Phorm's technology is our ability to dispel the myth that in order to provide relevant advertising on the internet you need to store data. The fundamental principles behind our platform support the highest standards in user privacy and anonymity:
- Phorm will not and cannot ever store any personal information which can identify a user;
- Users will have a clear choice whether to switch Webwise on or off; and
- Our technology complies will all relevant data protection and privacy laws including RIPA (Regulation of Investigatory Powers Act) and the Data Protection Act.
It is very pleasing to see that our commitment to these principles, and to open and transparent disclosure, has been recognised by leading privacy advocate Simon Davies, Managing Director of privacy consultancy 80/20 Thinking and director of Privacy International. Mr Davies and 80/20 Thinking recently conducted a Privacy Impact Assessment of our technology. Also, as part of our commitment to the privacy of Internet users, we commissioned Ernst & Young LLP to conduct an independent examination of our systems and assertions. The following components of our privacy programme were examined:
- Phorm's privacy policy, controls and procedures;
- Phorm's compliance with its stated privacy policy;
- Phorm employees' privacy policy training and compliance; and
- Data retention, integrity and security policies and procedures.
The resulting attestation report we received from Ernst & Young LLP confirmed that our systems have been designed specifically to protect the identity and other sensitive information of consumers - a great validation of our offering.
Furthermore, we have initiated a dialogue with the Information Commissioner's Office who are pleased with the way that we have engaged with technical experts and concerned individuals following the announcement of the service. We have also met with many other leading stakeholders in the area of online privacy, to share details of our technology and the response to date has been very encouraging.
Finally, during the course of 2007, we appointed leading global professional services firm Deloitte & Touche LLP as auditor to Phorm.
OutlookWe have made an exceptionally positive start to 2008 with the announcement of agreements with three key UK ISPs, but there is still a lot of work that needs to be done before we reach critical mass in the UK market. We will work closely with our ISP partners to ensure a smooth and timely roll out of our platform whilst continuing discussions with other potential partners at the ISP, advertiser and publisher level as well as developing our international programme. We have built an excellent team and a market leading technology platform and, as a result we look forward with great optimism to the opportunity that lies ahead for our company.
Kent ErtugrulChairman and Chief Executive
