Any company hoping to launch targeted advertising services should be watching the fate of UK start-up Phorm with great interest. In particular, they should take note of what this says about the public’s double standards on privacy.

Phorm is trying to build a new ad platform, serving ads targeted around users’ internet habits and interests. It is hoping to make this acceptable to the general public with reassurances that no personally identifiable information is kept or stored as part of the process.

According to Phorm, the system will know it is serving an ad to a 30-35 year old male looking for a new car insurance deal. It will not know who you are, however.  You are just a random number. It will not even keep your IP address.

Phorm has consulted with every possible stakeholder to assure people the system is privacy-friendly - like the UK Home Office and the UK Information Commissioner - and it has had its privacy system audited by Ernst & Young and 80/20 Thinking, a privacy consultancy. It is inviting anyone with an interest to do their own inspection.

But none of this has really helped with public perception. There has been a blogosphere furore, and Phorm has been branded a spyware company in the press. A UK think tank this week sent an open letter to the Information Commissioner’s office, asserting that Phorm was possibly illegal.

As was seen in Facebook’s Beacon experiment, people are strongly against the idea of targeted advertising. Given any choice in the matter, it seems, they will campaign hard against it.

The attitude is, however, inconsistent with our tolerance for all kinds of other, less overt data collection and targeting. Where people are not explicitly told about targeting they are generally too lazy to protest.

Every Google search is stored for 18 months, complete with IP address and cookie information from a personal computer. There is much more of a profile kept on Google’s servers than on Phorm, yet, even after the issue was raised a year and a half ago by European privacy regulators as a problem, users have not abandoned the search engine in droves. It appears to be too convenient to boycott.

Millions of us carry store loyalty cards that allow supermarkets to closely profile our shopping habits. This is linked to our name and address – but that doesn’t bother any more than a handful of people.

In fact, we hand over our personal information constantly to any number of companies, from signing end-user licensing agreements to use software, to filling in forms to extend warranties on our household goods.

The companies to which we give this data use it for their own targeting – and are notoriously bad at protecting it. Several recent studies have shown that only a minority of companies have adequate data safeguards. Many don’t even know what data they have in their files and couldn’t say if any of it had leaked or been hacked. Big data losses such as the TJX incident are just the tip of the iceberg.

This is not causing major uproar.  However, if a company declares its intention to target us, albeit in as secure a way as possible, we feel outrage. Phorm is in danger of becoming a scapegoat for a general frustration about an information society we no longer feel in control of.

It is a shame, because the company was at least trying to move privacy technology forward to some extent. It may not have gone far enough, but it is a start. Stamping the business out before it has even started will not stop attempts to target advertising, but may simply drive it underground. The lesson from all this seems to be:  if you want to target, just don’t tell anyone you are doing it. They probably won’t notice.

You’ve probably heard of Guitar Hero, the best selling game from Activision that puts a guitar-shaped peripheral in gamers’ hands and lets them play along to well known rock songs.

Guitar Hero has surpassed $1bn in retail sales in North America, sold 16m units worldwide, enlivened countless parties and prompted Guitar Hero nights comparable to karaoke ones in clubs and bars across America.

However, you’ve probably never heard of Patent Number 5,990,405 filed by the Gibson Guitar Corporation in 1999 for a “system and method for generating and controlling a simulated musical concert experience.”

The patent document describes it as a virtual-reality device where a guitar player could wear a head-mounted 3D display equipped with speakers and be given the simulated experience of playing a real concert with other musicians. It envisages the invention as a source of entertainment for professional and amateur musicians or as an aid for guitar makers in selling their products by allowing prospective buyers to recreate a concert atmosphere.

The system does not seem to have made much progress. I could find no mention of it among the current product listings on Gibson’s website and the company’s spokeswoman was travelling and unavailable for comment today.

But Gibson wrote to Activision in January alleging that Guitar Hero simulates a musical concert experience in a similar way to the device in the patent. It said it should obtain a licence for the patent or stop selling all versions of Guitar Hero and its peripherals.

In response, Activision filed a complaint in a Los Angeles court this week seeking a judgement that it has not infringed the patent.

The background is that Activision’s RedOctane subsidiary, publisher of Guitar Hero, signed an agreement with Gibson in 2005 to feature several of its famous models, such as its SG and Les Paul guitars, in the game and as peripherals.

They have featured in Guitar Hero I, II and III, but no agreement has been reached for any further titles.

Activision’s senior litigation counsel, Mary Tuck, wrote to Gibson this week saying it “knew about the Guitar Hero games for nearly three years, but did not raise its patent until it became clear that Activision was not interesting [sic] in renewing the License and Marketing Support Agreement.”

She said this suggested Gibson was not acting in good faith.

Gibson has yet to respond but, with millions in future licence fees at stake, a heavy legal riff of its own seems likely.

The investors in San Francisco start-up Zivity would prefer to think they are funding the next wave of social networking rather than an online peepshow.

Zivity, which serves up photo-shoots of scantily clad and tastefully nude women for subscribers paying $10 a month, is announcing its second-round funding today and has raised $7m from some prominent venture capitalists.

Founders Fund and BlueRun Ventures are providing the financing for the company founded by Scott Banister and his wife Cyan.

The connection is the online payment service, PayPal, bought by eBay for $1.5bn in 2002. Founders Fund founder Peter Thiel was chief executive, John Malloy sat on PayPal’s board before he co-founded BlueRun and Scott Banister was also a director. Mr Thiel was also an early investor in Facebook and both have invested in Slide, which provides popular social-networking widgets.

“The fundamental investment is in people who can make the seemingly impossible possible and the unlikely likely. We’ve worked together on other things and Scott is someone who has done great things a few times over and he is still a young guy,” says Mr Malloy.

The 32-year-old is a serial entrepreneur and co-founded IronPort, an email security company that Cisco bought for $830m last year.

Mr Banister draws parallels with Zivity – IronPort aimed to challenge the dominance of Sendmail in email, Zivity aims to challenge the dominant advertising model for social networking.

“The subscription model is coming and we are interested in having great content and paying the people that create that content,” he says.

Subscribers to Zivity, which is still in invite-only mode, get their own profile page where they can add their details, friends and status updates, but the focus is really on the models and photographers, with members allowed five votes a month to give to their favourites.

Mr Banister says it is giving an unprecedented 40 per cent of its subscription revenues to the content creators, divided according to how many votes they get. His own wife Cyan, as well as being Chief Strategy Officer, is also one of the topless models eligible for the profit sharing.

“You see stars like Lindsay Lohan appearing nude [as Marilyn Monroe] in New York magazine and getting paid for it, but in this era of self-publishing, women do it on MySpace and see their photos taken down by the MySpace abuse department,” he says.

“There’s a big gap we can bridge here, the models and photographers are really excited.”

Despite soft-porn photos being available in abundance on the internet for free, Mr Banister feels Zivity can still create sufficient interest to be a profitable business.

“We’ve close to 30,000 people on our waiting list to get in, the reaction has been incredible,” he says.

“We’re creating something here that is just not available on other social networking sites and we’re providing an outlet for models and photographers that they’ve never had before.”

A bit like Victor Kiam and his Remington shaver, some bloggers liked the Seesmic video product they tested so much that they decided to buy the company.

Well, almost: a long list of industry “names” has been announced as investors in Loic Le Meur’s hot San Francisco start-up.

They include well-known bloggers Michael Arrington of Techcrunch, Dan Gilmor, Steve Garfield, a video blogger, and Jeff Pulver.

Also investing are Atomico, the investment group of Skype founders Niklas Zennstrom and Janus Friis, Steve Case, co-founder of AOL, Ron Conway, an early Google investor and Reid Hoffman, LinkedIn founder, among others.

This first round of funding is worth $6m. Seesmic allows users to make videos of their thoughts as easily as adding a comment to a blog post.

It is still in closed alpha, but Mr Le Meur’s clever cultivation of well-known bloggers as testers has garnered Seesmic influential support, plenty of publicity and now, loads of money.

Palm Desert, California: Online video creation, distribution and analytics are becoming more sophisticated as the industry matures. A number of companies focused on video are launching products here at DEMO 08. The highlights:

Xtranormal, based in Montreal, Canada, introduced "movie-making in a box". It can turn an IM-like chat into a movie, attaching the text to a 3D avatar and using emoticon-type animation icons in the text to add movements. It’s an intuitive interface that should be easy enough for children to construct school projects and adults to make their own chat shows, business presentations or animated blogs. Users can add their own mugshots to the avatar to make it more realistic and their animation can take place in a range of sets. Xtranormal will likely sell additional packs of props and sets. The finished result can easily be published to a blog or social networking site. Xtranormal plans to launch in April.

BitGravity launched BG LiveBroadcast, a Flash-based video streaming service. It showed video in high-definition quality and switched between sources in the rapid channel-hopping style of regular television.  There were also digital video recorder features - skipping back and forward. Perry Wu, chief executive, said the service was designed for live broadcasting. "The only thing traditional TV was better at was live broadcasts, today that’s all about to change," he said. To demonstrate its technology, BitGravity has been streaming the DEMO conference itself.

TubeMogul showed off how it could deploy video to different services such as YouTube, Metacafe and MySpace, saving content creators the bother of encoding for the different services and allowing them to instantly reach a larger aggregate audience. For anyone uploading less than 150 videos a month, the service is free. TubeMogul is also able to provide detailed analytics on where the video is being most watched and a breakdown of the demographics of the audience.

Visible Measures can give creators information on how viral their video is and how much it engages its audience. It demonstrated how the well known World of Warcraft Toyota ad lost 20 per of its audience online before the truck actually appeared. It has just acquired Vidmeter, a viral video ratings and distribution service. The Boston-based start-up has also announced $13.5m in second-round funding at DEMO.

SeeqPod, the music search engine that we wrote about in September, has finally incurred the wrath of the record companies.

The Bay Area start-up is considering its legal position after Warner Music Group filed a suit in a Los Angeles court alleging copyright infringement.

SeeqPod users type in the name of a song or artist and the search engine compiles a list of instances that can be played with the click of a mouse.

SeeqPod told us at the time that they did not host any of the music and therefore felt they were acting legally, which seemed a little hopeful and perhaps naive.

Warner’s complaint, a copy of which has been posted on the Electronic Frontier Foundation’s site, says that SeeqPod links to sites with illegal copies of copyrighted music and makes this “practically unlimited catalogue of unauthorised sound recordings available for on-demand streaming.”

“SeeqPod directly supplants legitimate contractual arrangements that exist for the authorised digital audio transmission and distribution of copyrighted music.”

While SeeqPod does not allow actual downloads of the music it finds, the major record companies are clearly inclined to clamp down on streaming services that do not have their approval.

In contrast, Warner, EMI, Sony BMG and Universal made a deal with CBS’s Last.FM on Wednesday that permits free streaming of their music.

The four majors earlier gave their backing to streaming from imeem, a social networking site. But that was only after Warner launched litigation last May against imeem similar to that it is now bringing against Seeqpod.

The message to the search-engine start-up therefore seems to be: Sign up or sign off.

The biggest film studios have access to libraries of tens of thousands of films and TV titles, but most of them never see the light of day. That is because only a handful of those titles account for the vast bulk of DVD sales. Retailers have little incentive to stock the thousands of less popular titles that make up the rest of studios’ libraries, since it would force them to carry costly and slow-moving inventory. 

HP estimates that there may be $1.5bn-$2bn of untapped opportunity lurking in this long tail of library content. But that could change under a new partnership between HP and Sony, set to be announced on Thursday. Under the partnership, HP will offer content from Sony, manufactured on demand for DVD retailers and wholesalers. The idea is to use HP’s digital technologies to change the economics of DVD distribution. 

While details about specific film titles and retail partners are scarce, the idea is that retailers would be able to use the HP technology to fill single orders of Sony library titles. Meanwhile, video wholesalers would be able to use the same technology to fill smaller orders of less popular films that otherwise would only be economical to press in bulk. 

Eliminating the need to carry inventory should allow retailers to expand the array of titles available in their stores, opening up the long tail of library content to consumers. With Sony now on board with its DVD-on-demand technology, HP will no doubt be looking to strike deals with other prominent studios soon.

Bill Gates’ Last Day At The Office video at the Consumer Electronics Show was quite a hit, but it appears to have been eclipsed among geek attendees by the media marketing power of a simple picture book - Mommy, why is there a server in the house?

This faux children’s book explains why home media servers are the coming thing.  Gizmodo has captured each lovingly illustrated page and lines like: "When a mommy and daddy love each other very much, the daddy wants to give the mommy a special gift."

Microsoft Watch points out this is part of the company’s Stay-At-Home Server marketing campaign. There are billboard ads at CES featuring a “mom” saying: “I admire a server secure enough to stay home with the kids.”

Whoever thought servers could be humanised? Hats off to Microsoft for this one, although these machines hardly need the publicity – HP says it sold three months of inventory in the new category in the first three weeks.

If HD DVD is about to lose the next-generation DVD format war to Blu-ray, comparisons with the Betamax-VHS battle and even (for UK readers) the squarial versus Rupert Murdoch’s Sky television, seem particularly apt.

Both Betamax and British Satellite Broadcasting offered better technology than their victorious rivals and the same can be argued for HD DVD.

When Microsoft and Intel came out in support of HD DVD in September 2005, they listed its technological advantages.

These included “managed copy”, a feature that allows consumers to copy movies to their portable devices, “hybrid discs” – copies in both HD DVD and standard DVD formats on the same disc, as well as greater capacity, interactivity and picture-in-picture capabilities.

In contrast, many Blu-ray releases have been a disappointment with their conversions of standard definition films to the HD format, their lack of extra features and capacity constraints.

For an example showing the dramatic difference between what the two formats have been offering, look at the abundant extra features available on the HD DVD version of the movie 300 here (scroll down) compared to the lack of features and poor conversion to Blu-ray for the same movie here.

The one Blu-ray disk I have bought (rather than renting) is the BBC’s Planet Earth, which was actually filmed in high-definition, making the pictures look truly spectacular through a high-definition Blu-ray player and TV.

I still felt cheated though as I paid far more than for the standard DVD set, which included extra features such as mini-documentaries on how the series was made that were missing from the Blu-ray version.

However, times have changed, and while VHS was never going to beat Betamax for quality, Blu-ray can catch up with HD DVD.

Today’s consumer electronic devices are becoming memory-card upgradable and even internet-connected. The forthcoming specification for Blu-ray, Profile 2.0 or "BD Live", was demonstrated at CES this week and has many of the HD DVD features praised by Microsoft and Intel.

They can be added as simply as an operating system upgrade over the internet connection of a PlayStation 3.

The CES demo and Blu-ray booth showed ringtones from a movie soundtrack being transferred from a Blu-ray disc over the internet to a mobile phone and copies of movies being made to a PS3 and then transferred for watching on a PlayStation Portable. A role-playing game is included in the upcoming Alien vs Predator release and Mologs – interactive movie blogs with viewers sharing thoughts on films – will be introduced with SAW 4.

It looks like a brave new Blu-ray world that probably won’t have HD DVD in it.

It seems like Yahoo chief Jerry Yang fell into the usual trap of keynoters at CES of trying to sound relevant by demonstrating products in January, but then admitting they will be delivered who knows when?

And for a company that seems forever trapped in the process of trying to make something synergistic from its disparate parts and acquisitions (think Flickr, Upcoming and Del.icio.us), that can’t be good.

Mr Yang said it was time to get Yahoo yodelling again, but the only substance in his speech was the announcement of Yahoo! Go 3.0 for mobile devices and a demo of what Yahoo Mail could look like in the future.

Yahoo Go did look a big improvement on the 2.0 version and the carousel of services it offers, always limited by the size of the mobile screen.

It includes a redesign, a new mobile home page and mobile widgets that third parties are expected to provide now Yahoo is opening up its platform. But the service is only in its early beta phase and is limited to just a few devices.

The Yahoo Mail revamp looked impressive with its ability to rank the importance of address-book contacts and reveal their activities in a style similar to Facebook’s newsfeed and Plaxo’s Pulse.

Jerry Yang showed how an email or instant messaging discussion about where to eat for dinner could be dragged onto a Yahoo Maps icon to reveal favoured locations or turned into an Evite invitation.

However, as Mr Yang and fellow co-founder David Filo confessed, this was still very much in the concept phase.

“We are not that far away, some of the building blocks are there today,” said Mr Filo, in a statement that summed up Yahoo’s continuing quest for its holy grail of joined-up social networking and Web 2.0 services.