No, Data Is Eating the World [Jan. 7, 2015]
By Dries Buytaert
Marc Andreessen famously said that “software is eating the world.” While I certainly agree with Marc that software companies are redefining our economies, I believe that much of that technological shift is being driven by data. So, is the value of a business in the data, or in the software? I believe the value is increasingly more in the data, and not the software. Let’s investigate why:
Netflix provides a great example of a data-driven, customer-centric company. By introducing streaming video, its software “ate” the traditional DVD business. But Netflix soon realized that its future wasn’t in the medium of delivery — it was in the wealth of data generated simply by people using the service. The day-to-day data generated by Netflix viewers provides a crucial ingredient to competing in the marketplace and defining the company’s mission: Improving the quality of the service.
To that end, Netflix uses passive data — the information gathered quietly in the background without disrupting users’ natural behaviors — to provide TV and movie recommendations, as well as to optimize the quality of services, such as streaming speed, playback quality, subtitles or closed captioning. Of course, Netflix subscribers can contribute active feedback to the company, such as movie reviews or feedback on the accuracy of a translation, but the true value of Netflix’s data is in the quiet, zero-effort observation that allows the company to optimize experiences with no friction or disruption to regular user behavior. In fact, the company even hosted several competitions to invent better algorithms for user ratings, with a winning prize of $1 million.