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Netflix knows you in ways you can't even imagine

A U.S. Postal worker holds a stack of Netflix envelopes at the U.S. Post Office sort facility in San Francisco, Calif.

Image of Netflixed: The Epic Battle for America's Eyeballs
Author: Gina Keating
Publisher: Portfolio Hardcover (2012)
Binding: Hardcover, 288 pages

It knows when you pause a movie. It knows which actors you hate. And it knows how much you like that cheery red interface.

Netflix knows us well, and has used that knowledge to push our viewing behavior. The company pushed us away from videos, then out of video stores, and now, from piles of DVDs to streaming content.

Gina Keating is the author of a new book, called "Netflixed: The Epic Battle for America's Eyeballs." She believes the company has two core strengths that has made it so powerful in the lives of its subscribers. First, its streamlined consumer experience. And second, it harnessed a range of powerful algorithms that govern everything from predicting which movies you'll like to how DVD returns are processed.

That deft consumer sensibility came from little-known co-founder Marc Randolph, according to Keating.

"The interface," Keating says, "which makes us feel like we're having a conversation with the company, was really Marc Randolph's idea."

Meanwhile, Netflix CEO Reed Hastings, is "absolutely a brilliant mathematician and was able to boil down human behavior into algorithms."

Randolph is no longer with the company, and Hastings' brilliance sometimes comes at a price, according to Keating's account. One notable example: when Hastings attempted to split the DVD business off into a separate company called Qwikster.

"That's the other side to being headstrong and sure that you're right. Sometimes you're not," she said. But what Hastings really got wrong was the timing, according to Keating.

"He doesn't really understand consumers that well, but he does have a lot of data to show what they're likely to to do. And he knew that eventually people were going to stop wanting to have DVDs delivered by mail and so he just thought, 'maybe I'll just nudge people along.' "

And at the end of the day, those very same algorithms make Netflix's data on us so precise, and its position in the market so strong.

"They have 15 years of data about consumers," Keating said. "They can figure out when you stop a movie, which scenes you like, when you like to watch TV."

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
Image of Netflixed: The Epic Battle for America's Eyeballs
Author: Gina Keating
Publisher: Portfolio Hardcover (2012)
Binding: Hardcover, 288 pages
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