How Netflix uses Analytics

Netflix, for example, uses descriptive analytics to find correlations among different movies that
subscribers rent and to improve their recommendation engine they used historic sales and
customer data.

The core job of analytics is to help companies gain insight into their customers. Then, the
companies can optimize their marketing and deliver a better product. (Without analytics,
companies are in the dark about their customers.) Analytics gives businesses the
quantitative data they need to make better, more informed decisions and improve their
services.

So how does Netflix use analytics?

As of July 2018, Netflix has 130 million worldwide streaming subscribers. Having this
large user base allows Netflix to gather a tremendous amount of data. With this data,
Netflix can make better decisions and ultimately make users happier with their service.

Traditional television networks don’t have these kinds of privileges in their broadcasting.
Ratings are just approximations, green-lighting a pilot is based on tradition and intuition.
Netflix has the advantage, because being an internet company allows Netflix to know their
customers well, not just have a “persona” or “idea” of what their average customer is like.
Let’s look at an example.

If you’re watching a series like Arrested Development, Netflix is able to see (on a large
scale) the “completion rate” (for lack of a better term) of users. For example, the people at
Netflix could ask themselves “How many users who started  Arrested Development (from
season 1) finished it to the end of season 3?” Then they get an answer. Let’s say it’s 70%.
Then they ask “Where was the common cut off point for users? What did the other 30% of
users do? How big of a ‘time gap’ was there between when consumers watched one
episode and when they watched the next? We need to get a good idea of the overall
engagement of this show.”

They then gather this data and see user trends to understand engagement at a deep level. If
Netflix saw that 70% of users watched all seasons available of a cancelled show, that may
provoke some interest in restarting Arrested Development. They know there’s a good
chance users will watch the new season.
But the data gets deeper than that. Here’s a look at some of the “events” Netflix tracks:

 When you pause, rewind, or fast forward

 What day you watch content (Netflix has found people watch TV shows during the
week and movies during the weekend.)

 The date you watch

 What time you watch content

 Where you watch zip code.

 What device you use to watch. Do you like to use your tablet for TV shows and
movies? Do people access the Just for Kids feature more on their iPads?

 When you pause and leave content and if you ever come back.

 The ratings given per day.

 Searches per day.

 Browsing and scrolling behavior.

Netflix also looks at data within movies. They take various “screen shots” to look at
“in the moment” characteristics. Netflix has confirmed they know when the credits
start rolling; but there’s far more to it than just that.  Some have figured these
characteristics may be the volume, colors, and scenery that help Netflix find out what
users like.
Why does Netflix want to know when the credits roll? They probably want to see what
users do afterward. Do they leave the app or go back to browsing? Notice how Netflix now
offers movie recommendations (they have personalization algorithms that aim to
accurately predict what users will watch next) soon after credits start (or, for television
shows, they automatically play the next episode).
Because if users leave the app after watching a show, that may mean they are more likely
to cancel. Allow me to explain:

Through their analytics, Netflix may know how much content users need to watch in order
to be less likely to cancel. For instance, maybe they know “If we can get each user to
watch at least 15 hours of content each month, they are 75% less likely to cancel. If they
drop below 5 hours, there is a 95% chance they will cancel.”

So now that they have this data, they can ask themselves “How do we help users watch at
least 15 hours of content per month?” One idea: enable post-play, which automatically
plays the next episode of a TV show unless the user opts out. For movies, show movie
suggestions (based on the rating of the movie just watched) right after the credits start
rolling and allow users to press play right from that screen. Netflix can add this feature to
their web and mobile apps and, again, through analytics, see the results.

This is only a theory of how Netflix came to the decision to implement post-play and an
example of how analytics can help Netflix make decisions.