Netflix has been so successful that it’s become the archetype for how modern media companies work. So how did it manage to become the undisputed champ of streaming? It mostly comes down to how Netflix uses big data analytics from its users.
Lots of companies use big data, but Netflix takes it to some impressive heights. In many ways, their entire business strategy relies on their use of big data analytics. This strategy seems to have worked, too, since Netflix is now the most valuable media company, passing even Disney.
How did this happen? Here’s a closer look at how Netflix uses big data to stay on top of the competition.
Making Informed Recommendations
The most obvious way Netflix uses user data is in its recommendations. When you watch something, Netflix takes note of it and suggests similar things, as all streaming sites do. Unlike some other services, though, they don’t stop at analyzing what you watch.
On top of what you watch, Netflix looks at how you watch it. The system also notices things like:
- How much of a series or movie you watch
- How often and where you pause
- Where you watch things
- When you watch things
- Your searching and scrolling behavior
- If and how often you rewatch content
That’s a lot, and it’s not even all the data they consider. Netflix even looks at the content itself to understand factors like color schemes and shot composition users like to watch.
All of this data gives Netflix a remarkably accurate idea of your viewing habits. This system works, too. The company says that 80% of the shows people watch on the site come from their algorithm’s recommendations.
Creating and Licensing New Content
Netflix’s recommendation algorithm may be unusually complex, but the results aren’t all that unique. You’d have difficulty finding an online service that doesn’t use user data to make recommendations. That’s not the only way that Netflix uses big data, though.
The same data also informs Netflix on the shows and movies they add to their library. Netflix decided to produce House of Cards without ever watching a pilot because their data analytics predicted its success. Their algorithm determined that users would enjoy the subject matter, star appeal and format based on their viewing habits.
Greenlighting a series as high-budget as House of Cards without a pilot would normally seem like a risk. Nevertheless, Netflix trusted their big data, and it paid off. The series was one of their most successful and helped legitimize them as a media producer, not just a streaming service.
Netflix uses the same strategy in deciding what third-party content to license. Some choices, like box office hits and renowned classics, are easy choices, but others are less black-and-white. The service also features plenty of lower-budget, lesser-known content, and these are riskier investments.
Acquiring the rights to less popular content is less of a risk with big data analytics. Netflix can see if audiences may enjoy a B-movie once they have access to it. They can even use predictive analytics to buy the streaming rights to a movie before it spends much time in theaters.
Netflix Owes Its Success to Big Data
Netflix’s confidence in big data has made it a unicorn of a success story. The company has almost double the monthly users as Hulu, the next most popular streaming site. That’s not bad for a business that started out as a DVD rental service.
Big data analytics certainly isn’t the only thing behind Netflix’s enormous success. Without it, though, they most likely wouldn’t have made it this far. Netflix’s use of big data gave it its streaming throne and continue to solidify its place.
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