Thursday, October 12, 2006

Netflix $1 Million Contest

Netflix is offering $1 million to anyone who can beat their movie recommendation system, which recommends movies based on whether people liked or disliked other movies. They have a dataset of anonymous movie ratings, and your system would have to predict what movies people will like at least 10% better than the system that Netflix currently uses.

Here is an overview of the basic rules. You can look at how the teams competing for the prize are doing here.

Here is the take of Economist Steven Levitt:
I love the Netflix approach to the problem. They could easily spend $1 million internally hiring some programmers or Ph.D’s to try to improve their algorithm, with uncertain results. Instead, by making it a contest and offering up data to outsiders, they will probably succeed in having 100 times as many person-hours devoted to the problem for the same price—or cheaper because they only pay out the million if someone really improves on what they are doing now. In addition they gets lots of free publicity. Truly a brilliant strategy.
Do you agree that it is a brilliant strategy? Is there any downside to this strategy?

If you do agree that it is a brilliant strategy, why don't more companies use this method of innovating?

(Source: Freakonomics Blog)


Anonymous said...

I think Netflix strategy for creating anew recommendation system is a great idea beucae it is allowing them to save cost expenses. The only downside to using the public to help create the system is it makes netflix look very unproffesional, but there is no need for a movie company to appear extremely proffesional. Other companies do not use this approach for the reason that it seems unproffesional and will affect the consumers of the company. Also by allowing the public to suggest ideas, companies run the risk of not getting their need met by the public. If a company hires an employee to do a certain job they can expect the employee to carry out the job of they will be fired, but the public does not have any threat not to carry out the job, so they may not carry it out.
seth weiland

Anonymous said...

I think that Netflix has come up with a great strategy for developing a new reccomendation system. Holding a constest will save a lot of money and will give them thousands of ideas to work with, even if one doesn't win. The only downside to their idea is that it could take a much longer time for a new system to be developed than it would if they just hired someone who could work full time on developing a new system. Although, because of the nature of competitions it could speed up the process. So they could potentially have a new system years before they would if they hired someone to develop one. Other companies might not use this idea because it could be unreliable or look unprofessional. Also they might think it is more difficult to set rules for a competition and judge entries than it is just to hire someone to do the job they need.
-Emily Spurlock

Anonymous said...

like seth and emily, i agree. by not repeating what has been said, i think this contest is a unique way of inspiring sales. it not only brings out the competition in people to try and win the money, but you have to buy the product and try it. and netflix knows once you have tried it, you'll probably become a normal and dependable consumer. It's really effective because netflix gets tremendous advertising and their client buisness relations will be on really good terms. by doing holding the competion,they are getting the consumer directly involved in the market of this product. this is very effective and i don't really know why more companies don't do the same...maybe some other one's can't afford it?

-john schmidt

Anonymous said...

Netflix, in my opinion, has come up with a very clever contest. They can increase their publicity and, at the same time, solve their problem. Netflix will be able to find a solution to a better recommendation system. By making it a contest to the public, Netflix will achieve publicity and probably save costs in the long run, if they had to pay an actual programmer. I think the only downside, like Emily said, is that the contest could potentially take longer to find a solution than it would if an actual programmer tried to find a solution. The downside seems small compared to the benefits of this contest though. If you think about it, the public has nothing to lose in this situation and $1 million is a large amount of money. Maybe other companies do not have contests like NetFlix because they can't afford it or because other companies don't have a problem that the public could solve without extended background knowledge. I think the Netflix contest will have a lot of participation and an eventually million dollar winner.
-Morgan Hale