Netflix´s great idea for outsourcing innovation

December 7, 2006

The Netflix prize offers anyone who can beat their recommendation algorithm for selecting good movies to their users a prize of US$ 1 million. Until now there are 16600 contestants from 124 countries. Giving that the contest started in October, we might say that it´s been a hell of a success.

Now imagine how much would cost Netflix (in terms of money and time) to hire the right team that would eventually come up with a solution: they are expecting a 10% increase in the performance of their algorithm, that´s a tough goal (imagine how many man-hours have been already spent in ther own system).

So they figured out a much smarter strategy:

Instead of looking for those bright people, they just let them come to Netflix searching for the gold. The result you saw above. It´s like tapping into the global pool of academic talent hanging around on their dorms and say: Hey let´s have a game! And in the end you might also make a buck.

Oh, and apart from this algorithm I bet they´re surely hiring the guys that will do it. So it seems that Netflix will have the cake and also eat it.

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