As we reported on Tuesday, NebuAd has lost its CEO and, after facing Congressional scrutiny over privacy fears, the will to pursue ISP customers with its deep-packet inspection technology. But its UK rival, Phorm, apparently wants investors to believe it’s still in the game. While NebuAd told the Washington Post that it plans to get out of the business of selling its system to ISPs, Phorm is trying to make clear it’s not having any problems with its own plans to roll out advertising based on a consumer’s web surfing habits. A company spokeswoman says the company plans to could use its technology to branch out to track and offer ads on interactive television services as well — a type of offering we’d predicted.

The former adware company said this morning that its deal with BT is going ahead, while its deals with Virgin Media and TalkTalk will proceed later. From its filing with the AIM market on the London Stock Exchange:

Since that time, the Company has been working closely with BT to prepare its network for a trial. Whilst this has taken longer than originally anticipated, significant and accelerating progress has been made. The trial will commence as soon as these preparations are complete.

In addition, Phorm expects that Virgin Media and TalkTalk will commence consumer trials in due course. Following successful completion of these trials and an appropriate planning period, it is currently expected that Phorm’s platform will be rolled out across these networks.

It’s hardly a ringing endorsement of the firm’s success (and looks a lot like NebuAd’s statements when Congress initially started sniffing around its deals), but spokeswoman Stephanie Willerton said Phorm still plans to pursue ISP customers both in the UK and in the U.S. It has a New York office, which it opened earlier this year with an eye to North American expansion plans. Willerton also said the company has adapted its technology to address privacy fears, referring me to the opt-in page on the Phorm web site to learn more.

But the proposed opt-in plan suffers from some of the same problem’s NebuAd’s system did — namely that you opt out once on a machine, that the opt-out is only targeted at the machine, not the person. If I visit other computers that have been opted in, I’m still being tracked. Willerton didn’t dispute this but said that once someone opts out, Phorm doesn’t track anything further.

Despite the British government’s assurances of legality, the European Union hasn’t been as impressed and is asking its own questions as to how legal the Phorm web tracking is. Additionally, since Phorm still plans to market its services in the U.S. (currently is says it has no U.S. customers), Congress may have to be appeased as well. Meanwhile, BT customers should prepare for more scrutiny on their surfing habits, especially once “significant and accelerating progress has been made.”

In an effort to soothe privacy concerns related to its online ad insertion service — and help ease its entry into the North American market — British startup Phorm conducted a call today to explain exactly what user data it collects and how that data is stored. But after listening in, I’m less worried about privacy violations than I am cautious about Phorm from a business perspective.

Phorm’s deep-packet inspection equipment assigns a cookie to a web browser and inserts ads based on previous web site visits. The URL of a specific site is not saved, only keywords that match an advertising profile.

There was no indication given as to how well UK advertisers are responding to Phorm’s service. Furthermore, I don’t really buy CEO Kent Ertugrul’s argument that Phorm delivers better ads. The contention is that if you visit lots of auto and finance sites, you would be receptive to those ads, even when you’re on sites focused on other topics. However, if I’m on Glamour’s site and an auto ad pops up, I won’t pay more attention to it. I’m not thinking about cars, I’m thinking about shoes.

Letting ads follow people onto social networks could add value, but I’m not sure if the social networks will want to participate in Phorm’s program. As for privacy details, Phorm stores a random number assigned to the cookie, a history of categories generated by the web sites a person’s visited and a time stamp for those visits. Ads for adult sites, medical conditions and others that could lead to potentially embarrassing disclosures aren’t in the system. Phorm’s privacy infringements are less than the data aggregated by major search engines and easier to opt out of.

If Phorm doesn’t succeed, it’s not because it violates privacy, but because it’s selling something of questionable value.