Shares in Phorm have declined about 75 percent since peaking 11 days after the announcement. A company representative said Phorm CEO Kent Ertugrul, who earlier praised his own company's commitment to privacy, was traveling and unavailable for an interview.

Both systems work with Internet service providers to scan customers' Web traffic for patterns. Then NebuAd or Phorm determines which advertisements are likely to interest those customers.

If you've visited several sites on golf, for instance, NebuAd could label you a golfer. Then Web sites that participate in ad networks created by NebuAd can be triggered to show you an ad for golf clubs or golf resorts, while someone else who frequents sites on Jaguars might see an ad from an auto dealer instead.

The thinking is that Internet users are more likely to pay attention and find advertising less annoying if the pitches are relevant to them. That's why Web sites or the networks that deliver online ads can charge advertisers more for running targeted ads, even when they use cruder methods for trying to discern people's interests.

For Internet service providers, the rise of NebuAd or Phorm means they could share in ad revenue now going mostly to the networks of Web sites affiliated with Google Inc., Yahoo Inc., Microsoft Corp. and Time Warner Inc.'s AOL.

"Naturally if there is a way to take a meager slice of that revenue in some way, it's something which companies will want to look at," said Adam Liversage, a spokesman for BT Group, which plans to start trials "pretty soon" with Phorm.

Both NebuAd and Phorm say their systems do not register visits to sites related to "sensitive" subjects like health or sex, nor do they read e-mails or track consumers by name.

Yet questions have emerged about how well their partner Internet service providers are informing subscribers and getting their consent, and whether the ISPs need permission from Web sites as well.

Although Web sites routinely target advertising, privacy advocates hold ISP traffic as sacrosanct. Imagine the post office opening your mail to gauge your preferences and then deciding which catalogs and fliers to leave in your box.

Complaints about NebuAd largely failed to gain traction until Charter, the nation's fourth-largest cable access provider, began notifying customers of its planned trial. A House subcommittee took notice and held a hearing in mid-July, following a similar one in the Senate.

Dave Burstein, editor of the industry Web site DSL Prime, said the backlash came as a surprise given years of deregulation being embraced in Washington.

"Inside the industry, nobody took the politics seriously," Burstein said. "They all looked at the financial opportunity and didn't think about the repercussions. They didn't realize what problems they would get when they got exposed."