LONDON: UK telecoms giant BT began trials yesterday of a new (and controversial) targeted online advertising system, placing ads on webpages based on the browsing history of individual internet users.

Participation is voluntary and requires web users' prior consent, with BT hoping to lure some 10,000 broadband subscribers to participate in the tests.

Created by internet advertising firm Phorm, the tracking system – the Open Internet Exchange – attracted controversy after BT used it without customers' permission in 2006 and 2007.

The City of London Police even received a complaint – though did not launch a formal investigation – and the Department for Business stated last month that the system must operate in a "lawful, appropriate and transparent fashion".

The earlier trials were an attempt to assess whether the system was compatible with BT's technical infrastructure, while the latest pilot tests how effectively the system works with customers.

BT is the UK's biggest broadband provider – with 4.5 million customers – and revenues from the new system will be split between the websites hosting ads, BT and Phorm.

Landsbanki analyst Andrew Walsh predicts the targeted online ads market could be worth £528 million ($953m; €664m) by 2010, and ISPs Virgin Media and Carphone Warehouse are both said to be planning Phorm trials.

Data sourced from Financial Times; additional content by WARC staff