By Darren Waters
Technology editor, BBC News website
Phorm is a controversial system of internet advertising
Online advert system Phorm could make the net less secure and breaches human rights, the service's creators have been told.
Phorm's bosses met with members of the public in London to discuss concerns around its controversial deployment.
Kent Ertugrul, Phorm's chief executive, defended the service, saying it would be a crucial revenue source for ISPs and website owners.
BT, Virgin and Carphone Warehouse have signed up to trial Phorm.
Phorm works by connecting a users' web surfing habits to a series of advertising channels in order to target adverts.
Keywords in websites visited by a user are scanned and connected to advertising categories, and then matched to particular adverts.
It means a user who has been visiting web pages with lots of references to cars, for example, could then see adverts for cars when visiting a website that has signed up to Phorm's service.
But concerns have been raised about privacy implications.
Dr Richard Clayton, treasurer of the Foundation for Information Policy Research and a professor at Cambridge University, told the meeting the architecture of Phorm made the internet potentially less secure.
"I don't think it improves the stability of the internet," he said.
Dr Clayton carried out an assessment of the architecture of Phorm following an invitation from the company.
He explained that in some cases a user's attempt to visit a webpage resulted in the request bouncing back and forth between Phorm's service and the website three times before completing.
The Phorm system does this in order to connect a user to a particular website when visiting for the first time.
Phorm's senior vice president of technology Marc Burgess said this type of redirection would happen in less than 1% of browsing, would be invisible to the user and would not affect the online experience.
But Dr Clayton said this redirection was open to potential abuse and mis-use, potentially by criminal gangs online seeking to connect a Phorm user to his or her web surfing habits.
He said Phorm's system was illegal in his view because it relied on the interception of data - both the user's data and data from websites it trawls.
But he also praised the service for its data protection policies in that no personal information about a user was stored or processed by Phorm.
Mr Ertugrul told the meeting that the firm had taken months of legal advice before announcing its plans and was satisfied the service broke no UK law.
"Laws are made by due process not by people standing up and saying it is illegal," he said.
Speaking at the meeting, IT specialist Alexander Hanff said Phorm infringed people's human rights with respect to privacy.
"What Phorm is trying to do is to turn people into products - a global warehouse selling pieces of us to the highest bidders," he said
But Mr Ertugrul said Phorm had the potential to transform the economics of the internet.
"The internet today is two to three professionals - Microsoft, Yahoo and Google - and 9,999,999 hobbyists.
"Phorm makes all websites capable of making a living," he said, adding the technology could end the stranglehold Google has online advertising market.
Mr Ertugrul said Phorm's ability to put adverts on participating websites based on the users' interests would be much more valuable that the current advertising model, which is based on the content on the actual web page.
"Even small websites can make money with Phorm," he said.
He said Phorm would aid ISPs who were struggling to provide a service to customers.
"In the UK the business of connecting you to the internet is almost not worth doing; margins are so thin," he said.
Mr Hanff added: "The public perception is that they find it offensive that Phorm are profiling them. They do not want it."
Mr Ertugrul dismissed concerns that Phorm's technology was open to future abuse through "mission creep".
"The ISPs stand to lose far more for breaching trust than anything else. If anybody is not interested in mission creep, it's the ISPs, because they will lose your trust," said Mr Ertugrul.
Mr Ertugrul invited privacy and security experts to examine the firm's technology embedded into ISPs at any time they wanted.