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What Netflix can teach you about big data

Updated: Jan 13, 2021

Seriously, how do they know exactly what we like?

Here we are – four months into various forms of COVID-19 shut-downs and restrictions. With work-from-home schedules, kids out of school and daycare, no Major League baseball and more homemade baked goods than America knows what to do with, there’s one company that has been clutch in many a household. That’s right, Netflix, the global streaming powerhouse, has added 15.8 million new subscribers during the pandemic. That’s a lot of Tiger King.

It’s also a lot of data-driven business savvy. Netflix is pretty much the poster child for a company that started down one model (you remember those mail-order DVDs, right?) and embraced digital transformation way ahead of the curve to become a category leader, a household name, a family member … OK, you get the point. We all love it. But the Netflix glow-up was about way more than introducing streaming and cleaning up its logo. What really makes Netflix work is its expert handling of lots and lots of data. Here are some key takeaways:

1. Collect data every chance you get.

As an online company, Netflix definitely has one up on its network competitors. Netflix is able to track a wide-range of user behaviors and info, including the date and time you watch, what devices you use, your location (ZIP code), the duration of your watch times, your star ratings, how your behavior overlaps with similar users, your searches and browsing habits, and way more. The streaming service analyzes this data to make better recommendations and content, to create more effective marketing, and to adjust its operational model as needed.

Takeaway: Are you collecting and analyzing all the data you have access to? List all the devices and systems you have that collect data and consider ways to better organize and utilize that data to make decisions. Can you add additional areas of data collection? For example, can you place IoT sensors on machinery, on PPE gear or at a specific location?

2. Process large volumes of data fast.

Right, so clearly Netflix has a ton of datasets to work with. For a lot of companies, that would result in data chaos and decision paralysis. Yet, Netflix is somehow able to update your watch list and recommendations every time you open the app. What gives? Good news – it’s not magic. Netflix has a robust data infrastructure that allows incredibly fast and accurate data processing. The streaming service uses a combination of platforms, such as Amazon’s S3 for data warehousing, Hadoop for clustering and its own open-source solutions and algorithms. Netflix just goes to show you that investing in data also means investing in some kind of data organization and analysis system.

Takeaway: Don’t panic. You’re not Netflix, and chances are that your business doesn’t need a solution as sophisticated. However, if you collect high volumes of data, you may want to consider building a data warehouse so that you can mine your data and look for trends quickly and cost-effectively.

3. Leverage data to improve customer experience.

Do you watch more dramas, docuseries, sitcoms or movies? Do you tend to watch one type of content on weeknights and something totally different on weekends? Does it depend on what device you’re on at the moment? Are you a sucker for anything Morgan Freeman’s ever been in? Netflix is able to track your behaviors to show you more of what you want when you want it. Your viewing history is a powerful tool that adds convenience and delight to your experience.

Takeaway: Let your customers tell you what you do well (so you can do more of it) and what you’re fumbling with (so you can adapt.) Only, think beyond just your customer interactions. What are you learning from transaction data? Marketing data?

4. Use data to give customers the new stuff they really want.

If you’ve binged Making a Murderer, House of Cards, Stranger Things or any of the top-notch Netflix originals, you know that Netflix isn’t skimping when it comes to producing content. In fact, last year, Netflix spent $15 billion on content, which was roughly five times its marketing budget. So, how does Netflix ensure the investment is money well spent? Data, of course. In addition to the data points mentioned already, Netflix can capture some really granular info. For example, it tracks which shows users watch to completion, when users give up on a show, which actors garner more interest, which title formats work best, if users leave the app when the credits roll or if they return to browsing. Netflix even takes snapshots of programs in the moment for further analysis. All of this info helps determine new original content.

Takeaway: Big data is a forward-thinking effort. All the data you collect and analyze should be in the spirit of innovation. Of course, there’s no perfect mathematical way to draw creativity-centered conclusions from data. Make sure you hire fresh-thinking people to analyze your data in terms of product development.

So, the next time you open Netflix and get hooked into a four-hour binge, you can at least have a sincere appreciation of how it happened. Plus, you can make sure to come armed with drinks and snacks because you’ll be clued into the fact that the streaming service knows you well enough to keep you engaged for a terribly long time. Hopefully, you can also take some of these principles and apply them to your business. If you need help, we may know a guy. Get in touch!


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