Netflix has revolutionized the technology industry over the past five years, but they weren't the first to do it. Amazon, Facebook, and other media companies have laid the foundation and blueprint for technology companies looking to have a competitive advantage. Netflix's stock price is around an outstanding $500 per share, and Netflix is the leader in the movie/tv streaming industry.
How did Netflix become so successful? Simply by utilizing artificial intelligence and advanced algorithms.
Netflix and many other media companies who gather "large data" analyze their users' behavior patterns. I want to add that only two services classify their customers as users: drug suppliers and media companies. Just something to be aware of.
Anyways, Netflix uses clustering and segmentation to separate data they get from their users. In essence, Netflix is grouping similar behaviors together under a single phrase. This phrase allows AI to contextualize categories and box these categories together as advertising strategies. The parameter/border around the cluster of data is used to identify a personality trait. This personality trait is then attached to your name/account and is used in an algorithm that markets similar products to you.
For example, let's say Facebook has an ad that sells men's jewelry. A man who looks at celebrity clothing and men's fashion will probably be shown the men's jewelry advertisement. His searching and viewing habits may not align perfectly with men's jewelry, but it aligns better than a man who views investing, business, and finance posts. Artificial intelligence gets this personality trait from the cluster of data that has previously monitored your behavior patterns.
Programming artificial intelligence to automate a platform like Netflix gives a company dominance over the market. Any competitive company that is not tearing down their existing model and replacing it with the model Netflix uses will become dinosaurs. These companies will go extinct because the future depends on big data to run business operations.
The use of big data saves people's time and money. By using big data, artificial intelligence, and modern technology, Netflix gives their company a competitive advantage over most other media companies. Also substantial, Netflix has the ability to scale their advertising campaign because they generate millions of dollars in sales.
By understanding an aspect that made Netflix become number one in the streaming industry, you can look for similar signs from up and coming (small-cap) companies on the stock market. Use this information for your own competitive advantage.
Good investing,
Dan Sarver
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