Controversial advertising firm NebuAd announced this week that the company would delay the trial of its targeted advertising service for the duration of a congressional investigation, while U.K.-based firm Phorm acknowledged that its trial of a similar technology was going slower than planned.

The news came as VeriFone announced that NebuAd's CEO, Robert Dykes, would leave the Silicon Valley company for the top financial post at VeriFone. Both NebuAd and Phorm have faced serious allegations that their technologies undermine the privacy of consumers. NebuAd has faced a congressional investigation, while Phorm has had to field criticism from the European privacy community.

"With the touchpoints and visibility we have, we can’t afford to [deploy the technology] badly," Kent Ertugrul, Phorm's CEO, told the Financial Times. "What will be apparent after launch is what a large, complex project this is and how much preparation is required in order to execute flawlessly."

Both Phorm and NebuAd use a technique known as deep-packet inspection to peek at where users are going, and what they are looking at, on the Internet. Originally pioneered as a way to more effectively block attacks coming from the Internet, deep-packet inspection is now being used to detect digital piracy, protect corporate secrets and help manage network traffic.

In July, after months of complaints from privacy advocates and consumers that the two advertisers had paid Internet service providers to allow the companies to eavesdrop on users' surfing habits, the House Subcommittee on Telecommunications and the Internet heard testimony on advertisers' intent to use the technique. Both Phorm's and NebuAd's automated systems categorize users into certain consumer-focused buckets, using the resultant links to target specific advertisements to each user.

Privacy advocates claim that the technologies may have violated federal privacy and wiretapping law, while the companies argue that they have exceeded current privacy standards in implementing their systems. Rep. Edward Markey, D-Mass., the chairman of the subcommittee, appeared sympathetic to the privacy concerns, but also appeared loathe to restrict an emerging business during the U.S. economic downturn.

"These technologies raise, not only significant privacy concerns, but also highlight broader privacy questions, including how they impact the evolution of the Internet itself and its future prospects for driving innovation and fostering competition and job creation," Rep. Markey said in his opening statement to the July hearing.

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