Have you ever gone to a Web site to satisfy some late-night craving for a song? Let's say you were just really in the mood for something Eighties with lots of digital sampling and a thundering beat—maybe along the lines of Shock the Monkey by Peter Gabriel.
You download the song and then, before you know it, the site says you might also enjoy Gabriel's Sledgehammer. That's about as helpful as saying, If you enjoyed Hamlet, you might also appreciate King Lear. How did fans of Shakespearean tragedy ever make such connections before the Internet?
Wouldn't it be nice if somebody came along with a better way of recommending music and video on the Web? Actually, someone has. And wouldn't you know it, it's Peter Gabriel himself.
The 60-year-old rocker, who is starting to look like a hipper version of a wizard from a Harry Potter movie with his close-cropped hair and goatee, is the front man for The Filter, a six-year old privately held company in Bath, England, that provides recommendation technology for such clients as Sony Music (SNE), Nokia (NOK), and thePlatform, a Comcast (CMCSA)-owned operation that serves video to the cable giant's online properties.
In early April, NBC (GE) announced it was licensing The Filter's technology on its Web sites. So if you visit NBC's Saturday Night Live online and the site suggests you watch a clip from 30 Rock, you will have been touched by The Filter's hidden hand.
"It's a very important one for us," Gabriel says. "We have been building a number of relationships, but obviously NBC is a very large player."
People have been working on recommendation engines for a long time; Netflix (NFLX) once offered a $1 million bounty to anyone who could make its recommendations 10% smarter. The idea is to go one better than search engines: Rather than merely help people find what they're looking for, offer them stuff they didn't know they wanted. And then, preferably, get them to buy. Or in the case of many of The Filter's clients, persuade them to watch more ads.
Stephen Andrade, senior vice-president for digital development for NBC.com, says the company tested The Filter against other recommendation services and found there was no comparison. "The Filter did better than a lot of its competitors," he says. "That's why we are moving forward with them." (NBC declined to say what other services it considered.)
Gabriel isn't involved in the day-to-day operations of The Filter, which has 15 employees and says it expects revenues of nearly $4 million this year. But he is a lead investor along with Eden Ventures, a British venture capital firm. His representative on The Filter's board is his business manager, Mike Large. Gabriel attends board meetings and strategy sessions; Filter CEO David Maher Roberts, a former jazz drummer, calls him the company's resident "visionary."
This isn't a vanity project for Gabriel. He established himself long ago as a technology thinker and entrepreneur. His interest in tech flowed naturally from his music career beginning in the late 1960s as a founding member of Genesis, the seminal progressive rock ensemble, then as a successful solo artist known as much for his futuristic synth orchestrations as his political messages. In 1990 he invested in a company called Syco Systems which created a digital audio workstation called the Tablet. He took a financial beating. "I totally underestimated how long it would take to get it to market," he says.
Gabriel had better luck in 1999 when he helped start OD2, an acronym for On Demand Distribution. The venture was a music download service that predated Apple's (AAPL) iTunes by four years. For a time, OD2 was Europe's leading online music company with clients like Nokia, MSN, Virgin, and HMV.
Then along came iTunes, which quickly became the dominant online music store. Gabriel says that in 2004 his business partners decided to sell OD2 to a digital media company in Seattle called Loudeye. The British press reported at the time that Gabriel made $11 million from the approximately $40 million sale, but today he sounds regretful. "I did not vote to sell it," he says. "Apple does what it does very well. But I thought it would just be a phase." There was little Gabriel could do to block the sale; he was a minority investor.
It was through OD2 that Gabriel became fascinated with recommendation technology. In 2004 he met Martin Hopkins, a musically inclined physicist who had an online media-recommendation venture. Hopkins began his project out of his frustration managing his own digital music. "Martin had amassed a library of 10,000 tracks," says Roberts. "He was bored because he couldn't find the music he wanted."
According to Roberts, Hopkins wrote software to manage his music and used artificial intelligence that learned his tastes and then suggested playlists. That technology is the basis for The Filter. Gabriel and his OD2 partners concluded the system was superior to anything on the market, including technologies used by Amazon.com (AMZN) and Netflix.
Amazon, which did not respond to interview requests, is famous for telling you if you bought a particular book, you may like another that customers with similar buying patterns have purchased. That's also why people who buy Sledgehammer might get a suggestion for Shock the Monkey. Or if you search on Gabriel's latest album, Scratch My Back, Amazon recommends an album of his songs performed by other bands including one called Bonglab. (Hmmm, we'll pass on that one.)
Netflix makes extensive use of customers' posted opinions. Steve Swasey, a company spokesman, says it has amassed a database of 3 billion movie ratings that enable it to accurately predict what films you might want to watch. But even he concedes that because you rate a movie highly once doesn't mean you'll feel the same about it later. "[Fellini's] Amarcord was always one of my top five movies," he says. "I watched it a few years ago, and it fell off my list." And not all Netflix users bother to rate movies, which means the company has to rely on their rental habits instead. Swasey declined to comment on The Filter, saying he's unfamiliar with the company. He did say, however, that he's "a big Peter Gabriel fan."
So what does The Filter do that's so different? "When you are making music or video recommendations, you need to steer people away from the most popular stuff that everyone already has," says Ty Roberts, co-founder of Sony's Gracenote media database unit. "That's what their technology does."
Another difference, says Roberts, is The Filter deals only with digital media, not physical items that can't be tracked after they're purchased online. Amazon, for instance, may know you bought the latest legal thriller by John Grisham. But it doesn't know if you liked it enough to finish it. Netflix may know you rented a DVD of Stanley Kubrick's A Clockwork Orange. But what if you decided the film's "ultra-violence" wasn't your thing and you didn't bother to rate it? If that's the case, you might not like Spike Jonze's Being John Malkovich, which is also on the company's list of "mindbenders." (Netflix says it is gathering even more information about customer viewing habits through its streaming services.)
The Filter, says Roberts, knows if you watched an entire clip of The Office at NBC.com. Or if you turned it off halfway through at a point where the show's boss, portrayed with cringeworthy brilliance by actor Steve Carell, goes one cringe too far.
But The Filter's algorithm culls more data than that. Early on the company tested its technology on the BBC's archive of digital TV and radio shows. The library wasn't open to the public, so Roberts and his team collected the usage patterns of tens of thousands of the British network's employees.
The Filter's filters took into account a Netflix-like rating system set up by the Beeb for its workers, and it also included results from a test based on the number of programs the employees saved for later. "They had this little button on their site that you could click on to save something to watch or listen to later," Roberts says. "We found that provided us with much better, way deeper results. There are all these little nuggets of information on everybody's Web site."
What kind of digital "tells" has NBC.com discovered through The Filter's algorithms? Andrade is coy. But it must have been something useful. "I mean, Google (GOOG) has made billions of dollars being really good at guessing what people are looking for," he says. "This is just the next level."
That is not to say that The Filter hasn't hit some bumps since Gabriel and Eden Ventures together invested $5 million in 2006. (They've since upped that ante to $8 million, along with some other partners.) The service launched as a consumer Web site in 2008. It encouraged users to download a software application that sucked data from users' Last.fm and Flixster accounts. It also observed what they did with their iTunes collections. Then the system took all that information and suggested movies and music.
The Filter found a million users, which, according to Roberts, didn't attract enough ads for the service to turn a profit. So the company shifted strategy early last year to focus on selling its services to media companies. That seems to be working: Roberts says The Filter should break even by the end of the year.
Gabriel says he's certain The Filter could one day serve as an all-purpose "decision guru" that goes beyond music. He sees it as a tool for people who find themselves in, say, Barcelona and need quick tips on where to dine and how to dress. "I think the same way we got used to Google being part of our lives and asking it questions, The Filter will be like our own Babel fish [the translating creature from the comic novel A Hitchhiker's Guide to the Galaxy] who will help us make decisions," Gabriel says.
One sign that the company may be on the right track: Roberts, Gabriel, and Eden Ventures say The Filter recently got unsolicited offers from potential buyers, none of whom they would name. "It's funny," Gabriel says. "You struggle along. Suddenly something begins to work and the heat goes right up."
Gabriel adds he doesn't want to sell the company, but worries its venture capital backers feel differently. "A lot of VCs have really been hurting," the singer says. "You get a big sigh of relief from them if they see anything that looks like an exit."
Charles Grimsdale, an Eden Ventures partner and Filter board member (who plays drums in a funk band), acknowledges that he and Gabriel have discussed the potential for a sale. But he says: "I think the business is doing really well. It's got a lot of momentum. We think there is a big opportunity, and we are in no hurry to sell."
Should Eden decide to sell, there may be little Gabriel can do to prevent it. As he was with OD2, Gabriel is a minority investor in The Filter. Anyway, a sale would mean another payday for Gabriel. He says he has plenty of other projects to occupy his time. There's Scratch My Back, for instance, his new album of covers of David Bowie's Heroes, Neil Young's Philadelphia, and other songs. It has been getting critical raves. One can only imagine how much it will test the limits of online algorithms. Gabriel's lush, string-laden interpretations bear little resemblance to the originals.
He's also working on Gabble, an Internet-based video dictionary that would help people in nations with low literacy rates communicate with the rest of the world. "Initially, it will be a fun thing," he says. "But in the long run, it will help people in countries where they don't have good translation services. Now they will be able to communicate with pictures."
But the singer says he isn't through with the recommendatory sciences. If The Filter is sold, Gabriel plans to ask potential buyers for a noncompete exemption so he can create consumer-oriented services along the lines of the original business plan. "I just think there is much more to explore," he explains.
And here's an obvious, non-algorithmic recommendation: Maybe next time he'll be majority shareholder so he'll have the same control of his company that he has over his music.