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MARC-ing time on YouTube - September 19, 2008

Here in Washington, this week is likely to get consumed by the coming nationalization of our capital markets. But if Congress does manage to focus on anything else, the Senate Commerce Committee is scheduled to take up the issue of online privacy at a hearing Thursday. No witnesses have been announced yet, but according to the hearing notice, the committee will "examine consumer privacy issues related to broadband service providers." So you can expect a lot of rehashing of the NebuAd controversy that erupted this summer after several ISPs were discovered to be using deep-packet inspection technology provided by the Silicon Alley start up to track subscribers' web-surfing habits to target them with ads.

While content owners largely escaped singeing in that one, the fallout could still be problematic because precisely targeted, high-CPM advertising is generally regarded as critical to making money on the Web. Thanks to the incredible stupidity of the ISPs involved for not telling their subscribers what they were up to, the whole strategy of behavioral targeting is now under a cloud (for better or worse).

That doesn't mean content owners can't get in on the fun, though. Two weeks ago, little known Nexicon (Pink Sheets: NXCO) managed to land a deal with YouTube to help content owners "monetize their copyrighted digital media and products" when they appear on the site, according to the press release.

Nexicon has developed a platform it calls MARC, for Monitor, Analyze, Report and Collect. The system monitors Web sites and Internet Relay Chat (IRC) conversations for copyrighted content. It then runs what it finds through a proprietary "rating engine" to determine whether it's likely to be infringing and compares the source of the file against a database of IP addresses of known infringers and reports the results to its client.

As a final step, Nexicon can, at the option of the copyright owner, invoke one of its two "collection products," dubbed GetAmnesty and Digital Ranger. GetAmnesty monitors high-traffic P2P protocols, including Ares, Limewire, Kazaa, BitTorrent, and identifies a downloader's IP address. It then sends a DMCA notice via email to the ISP, which is passed on to the downloader. The email includes an offer of a monetary settlement of the alleged infringement and includes a link to Nexicon's online payment system.

Digital Ranger leverages user logs, GPS data and other technologies to pinpoint P2P "seeders" who upload substantial amounts of content and can notify ISPs of their approximate location. The system is accurate to within two square miles, according to the company.

Under the YouTube deal, Nexicon will act as an intermediary between content owners and YouTube Nexicon will leverage the fingerprint database that YouTube and the content companies have been compiling since Google agreed last year to develop a content filtering system for YouTube, to identify content on the site. Content owners can then deploy Nexicon's analytics or enforcement tools as part of their monetization plans.

Those enforcement tools, however, GetAmnesty and Digital Ranger, are bound to raise privacy questions.

"We're keenly aware of the privacy implications and we take them very seriously," marketing director Sam Glimes told Media Wonk last week. "We're watching the debate in Washington very closely and we're confident that we're fully compliant with all the applicable privacy laws."

Glimes acknowledges, however, that the privacy debate is "fluid," and that the rules could change, potentially causing problems for the company and any content owner using its services.

According to Glimes, the impetus for the YouTube deal came from YouTube. "They sought us out," he said. "We got an email from them in late June, July. We didn't even know they were aware of us."

Glimes said YouTube was attracted to Nexicon because its system offers "a much higher level of accuracy," with "many fewer false positives," the other content monitoring services.

"They're obviously very concerned about false positives," he said.
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