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Two small updates

IP — Fri, 13 Aug 2010 15:23:42 +0000

The first one regards AB-InBev and the fact that it’s still hard for “foreigners” to fully grasp it. Yesterday’s LEX column on the company has flattering but less than enlightened comments and puts way too much weight on the P/E ratio. Here’s a quick way to find ABI-related posts on Buysiders.

The second one is about Netflix. A quick search on Buysiders will yield a lot of material on the company, and this story in the NY Times sheds some (more) light on the company. It’s about creative destruction stimulated by the company itself. It doesn’t guarantee Netflix will win as the technology shifts continually challenge its business model, but it gives the company a fighting chance. Again, such a shifting business model is probably not the best playground for investors, but Netflix is still worth tracking for all the other reasons.

Quick update on Netflix

IP — Mon, 15 Mar 2010 18:09:52 +0000

We’ve discussed crowdsourcing and Netflix more than once. That it works for some uses better than for others is pretty clear… But Netflix has apparently messed up the database used in the original contest and that allowed some contestants to identify the actual people behind the movie choices, despite the promise of privacy. Needless to say, the FCC wasn’t too happy about it and lawsuits ensued – and Netflix had to cancel its “Contest 2.0″, at least for now.

Doesn’t mean that the tool doesn’t work, it just means that you have to be careful using it. Talk about hitting your finger with a hammer!

Netflix doing the right things at the right time

Gustavo Ballvé — Mon, 05 Oct 2009 21:26:54 +0000

Netflix is one of the most admirable cases around on corporate strategy AND execution. Their products are not exactly cutting edge, but their strategy, execution and specifically data use is out of this world. It shows how you can make billions out of simple things. That said, other than the data culture (a huge missed opportunity by Blockbuster in terms of the head start it could have had), they have to kill a lion a year to stay ahead. Investment-wise, we never got to the point where we felt we knew enough to invest in them – and don’t regret not doing it.

Netflix’s smart crowdsourcing initiative

IP — Tue, 22 Sep 2009 15:31:38 +0000

Two years ago, Netflix wanted to improve its movie recommendation system and decided on an experiment: let people have a go at it. The rules and official proposal are here, but the main idea was that if you could improve Netflix’s recommendations by 10%, you’d get a cool US$ 1mm. That contest ended on July 27th, 2009 with huge success – not just for the winners, but for other contestants as well who claim that the internal payoff of the learning efforts involved was already over the US$ 10mm figure. It’s a great example of crowdsourcing, and there are other examples of so-called “Open” business models (Innocentive jumps to mind).

But that’s not all that matters: is crowdsourcing then a substitute for companies’ R&D demands? Does it always work? How open do you really want to be? Some people are looking at it and saying “hold your horses”. That’s always a good advice in our book.

As for Netflix, they’re happy enough to have a Netflix Prize 2 on the works. Very smart: it keeps the ball rolling and takes advantage of the community they built. The press coverage doesn’t hurt, either.

But there’s more. We’d argue that the benefits of the Netflix Prize in terms of research in statistics/ data mining/ etc. in large data sets may be felt for years. It’s interesting to consider this in terms of efficiency gains for many different types of companies. It’s something companies all around the world should be paying attention to.

Here’s a video interview with Reed Hastings, Netflix’s CEO, at the time of the award.

Links:

Crowdsourcing page on Wikipedia

Jeff Howe’s classic article on Wired, his book and his blog

The teaser for Netflix Prize 2

Winning the Netflix Prize – NY Times, October 2008 (huge article with a video that apparently can’t be embedded here).