About 75 percent of the streaming video traffic Netflix (Nasdaq: NFLX) generates is driven by personalized recommendations for TV series and movies that it suggests to subscribers based on factors such as viewing history and the activity of their friends on Facebook.
Netflix's Just for Kids PC menu.
The effectiveness of its recommendation engine, which Netflix detailed in a blog post on Friday, shows how pay TV providers such as Comcast (Nasdaq: CMCSA) and DirecTV (Nasdaq: DTV) may be able to benefit from using recommendation engines to suggest personalized TV listings to subscribers. While Netflix offers subscribers the ability to search for TV series and movies, the company says the bulk of its traffic comes from personalized recommendations such as the "top 10" titles that it suggests to users.
Netflix research and engineering manager Xavier Amatriain and senior software engineer Justin Basilico wrote in a blog post that one of the keys to the company's recommendation engine is explaining to users why it suggests certain titles.
"A different way of promoting trust with the personalization component is to provide explanations as to why we decide to recommend a given movie or show. We are not recommending it because it suits our business needs, but because it matches the information we have from you: your explicit taste preferences and ratings, your viewing history, or even your friends' recommendations," Amatriain and Basilico said.
Cable operators and satellite TV providers are also investing in recommendation engine technology that can be incorporated in interactive program guides that subscribers use to navigate live TV and video-on-demand programming. Last fall, DirecTV launched a "My DirecTV" feature on its interactive program guide that suggests titles to subscribers based on viewing habits. And Comcast plans to use a recommendation engine to offer subscribers of its new X1 digital video service personalized TV recommendations.
U.S. privacy laws could limit the way pay TV providers can incorporate data from Facebook and other social networks into recommendation engines. Netflix notes that it uses Facebook Connect to recommend content to subscribers in 46 of the 47 countries in which it operates, but that it can't use Facebook Connect in the U.S. because of the Video Privacy Protection Act.
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