Media companies will have to abandon their efforts to prevent digital music from being copied and concentrate instead on tracking a song's path around the internet, the head of the one of the world's most popular Web 2.0 sites has said.

The chief executive of Digg, which created controversy earlier this year when users published a code that unlocked digital rights management (DRM) software designed to prevent illicit copying, said that media companies had to change the way they policed intellectual property.

If record companies focus on finding a way to measure how many times a song had been listened to on the web, using what is known as watermark technology, they will have a better chance of accurately estimating advertising revenues, which will underpin the new business model for the record industry, Jay Adelson said.

"What social networks show is that people control the information," he said, referring to an incident in May, when users of Digg, who recommend and vote on stories they like on the web, posted the key to a piece of software which prevented HD-DVD movie files from being copied.

When the site attempted to take down the links, other users reposted them, to the point where the site's administrators gave up trying to stop the activity, and let the links stand.

"There's an inertia there that is almost impossible to stop," Mr Adelson told Times Online. "What it means is that DRM has to change its scope and purpose. It has to stop being a system that prevents distribution."

Asked what should replace the current method, he suggested that a piece of software could be embedded into a digital file and log how many times the file is downloaded or streamed over the internet. That information could in turn can be used to determine advertising rates.

"For the majority of people, it means DRM as they know it disappears, but in truth what's happening is the content is being monetised in a different way. All the media executives will tell you that their strategy is moving in the direction of being able to monetise content without DRM."

Some labels, including EMI, have experimented with making their music available without copy protection, but attempts by the industry to embrace the internet as a means of distributing digital music have failed to prevent the decline in CD sales, which have fallen by 23 per cent since 2000, largely because of piracy.

In a wide-ranging interview with Times Online, Mr Adelson dismissed persistent reports that Digg, which he helped to found four years ago, was to be put up for sale, and said that the site was on target to be profitable.

The most recent rumour, on the site Venturebeat, said the site has hired the investment firm Allen & Company to attract offers in the vicinity of $300 million.

Mr Adelson said that Digg's revenues were good and that the site, which has raised $10 million from a range of venture partners, including Greylock, would not need more money before turning a profit, but declined to say when that would be.

Digg - which ranks stories based on how popular they are with users - was "100 per cent focused" on releasing new features, he said, including a much anticipated image feature, which will let people vote on photos and other images.

Under a deal announced early last year, Microsoft will serve all the adverts on Digg, meaning that the site's staff - which will grow from 35 to about 40 over the next year, can focus on software development.

Asked about how other web 2.0 sites could compete with the likes of Facebook and MySpace, Mr Adelson said that he thought there was room for new networking sites to emerge, but that in order to gain a foothold, they would have to offer a very specific service, as LinkedIn had with its focus on professional workers.

In addition, he said, there was scope for sites which took a syndicated approach, like Digg, and used other sites as a way of "extending their own database and value." (In Digg's case, this means placing their own 'buttons' on other websites, so that visitors to such sites could vote for stories they found there, which in turn fed back in to the main Digg page.)

"That really is the Web 2.0 thing," he says. It really is a buzzword that gets thrown around too often, but what's revolutionary at the moment is that you have this collaboration beyond a single location. It's the use of collective wisdom to affect ranking and value."

Digg, which Mr Adelson founded with his friend, Kevin Rose, in 2003, had 6.1 million unique visitors in October, an increase of 109 per cent on a year ago. In the UK it had just over a half a million visitors - an increase of 82 per cent.

Mr Adelson was previously chief technology officer at Equinix, an internet exchange he helped found that routes web traffic.

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