An Open Letter to Reed Hastings

Dear Mr. Hastings,

I am probably one of the few individuals who actually agree with your recent price increases and your recent spin off of your dvd service.  Given the rise in licensing fees and the additional expenses streaming adds as you expand to new markets and acquire users, the price increases are necessary to maintain a sustainable business.  Further, the nature of the two businesses are so different that they each should be their own entity.  By doing this, you segment your business into a mature market (DVD) and an market that is creatively disrupting the way we watch videos (Streaming obviously).  The DVD business can operate with the correct processes in place to maximize efficiencies while the Streaming business can remain nimble and flexible to spur new innovations.  This is really important because its process efficiencies that that will inhibit innovation and creative thought (See Microsoft) but it's also process efficiencies that support long-term growth of a company.

But this is all super nerdy bologna that your user base probably doesn't care about.  They want to know why the price increased by 60% and I fear that this has not been communicated effectively to your user base. Your company has failed to communicate that rising licensing costs and additional networking costs has created an unsustainable business model.  Your recent apology was good but it addressed your business model rather than prices.  So now you are in a PR nightmare.  What do you do next?

Transparency (the right kind) - Customers want to know why their fees increased 60% so tell them why.  Or at least be apologetic about raising prices.  Say something to the effect of, "we wish it didn't have to come to this but we had to raise our prices."  If this isn't communicated with your customer base, they will make their own hypothesis and it will likely not be to too favorable on your company.

Tiered Pricing for Streaming- Create a pricing model that provides more affordable price points (ie prices before the 60% rate hike).  Maybe limit streaming for value customers and do a similar pricing model that you do for your DVD business.

Seamless Integration (even if you sell off the DVD service)- As a user of your service, I don't want to have to go to two different websites and this could deter some of us from using your services.  Right now it is easy to move between steaming and DVD and it keeps me engaged with both services.  If I want to stream a movie, I often check my DVD queue as well.  If you separate the services too much people may stop checking their DVD queue when they stream or vice versa.  This could eventually lead to additional lost account.

So these are my thoughts, Netflix is still one of the more innovative companies so I have no doubt you will survive this recent string of bad press.

Good Luck!

Buzzfeed's Quest to Distinguish Themselves

Introduction:

Buzzfeed operate in a web space where content is free and plentiful.  This creates two problems that can be solved through gamification.  First, free content creates many competitors because there are relatively low barriers to entry.  Second, it’s virtually impossible to plow through all the content being released on the Internet and determine what will be viral.  In order for these sites to be successful, they need to build a loyal audience and categorize the best content.

Buzzfeed is a social website that hosts many media partners.  They use an algorithm to aggregate and display trending content from their partners on their website.  Their partners can be as big as Aol and TMZ or as small as an individual contributor.  They also have a team of their own editors that build their own portfolio of viral content.   The company creates revenue through users clicking through to their partner sites and through other forms of advertisements.  Given their business model of using an algorithm to generate content from their partners they focused their efforts on growing their user base and building user engagement.  This increases the likelihood of users clicking on partner content, which grows revenue for the company.  The ideal user of Buzzfeed will regularly visit and view content, provide insights on the content and create a portfolio of viral content.   So we can define their business goals as building a sizable user base that is loyal and socially engaged. 

How they do it:

Leader board – Users can vote on whether they think content will go viral by clicking a “Will This Go Viral” button located on every article uploaded to Buzzfeed.  If the article goes viral, the button will be replaced with a “Going Viral” badge.  Individual user performance is translated into a leader board that lists the top viral predictors.  This feature builds loyalty by creating a level of competition among users and encouraging the users to return to the site often to view videos and vote on content they believe will go viral. 

Badges – Buzzfeed’s badges work differently from other sites that offer badges (or at least the badges I am referring to here).  Badges are listed under every article as “LOL,” “OMG,” “Cute,” etc.  From time to time, they will also list sponsored badges from advertisers.  For example, Mountain Dew once sponsored the “extreme” badge.  Users click on these badges to vote whether they think a video is cute, shocking or just plain odd.  This feature empowers users to quickly provide insights related to the content and categorize the content via crowd sourcing.  With enough votes, a badge will appear on the front page alongside the content, which pushes more relevant content to the forefront and helps build a viral lift.  Though I don’t have sufficient information to measure effectiveness, content with badges seemed to get a few thousand more views via Buzzfeed than content without badges.  With analytical information, an analyst can categorize badge content and compare it to similar non-badge content to measure effectiveness.  He can also measure the usage rates of each badge category to determine the effectiveness of each badge and badges that are used less can be replaced with more impactful badges.  

Awards – Awards are used very much like other sites use badges.  If a user posts content that gets 100 views, they get an award for their accomplishment or if they like content related something the audience deemed gross, they will get a “Grossed Out Award."  By picking up these awards, it encourages certain behaviors from users.  For the examples I gave above, the “100,000 Views Award” encourages users to post content they think others would want to watch and the “Grossed Out Award” encourages users to like content and click on badges. 

How they can make it better:

Bring Gamification Offline – Though it is hard to determine the lifetime of an average Buzzfeed user, at some point a user’s engagement will decrease and possible end, even with an effective gamification strategy.  Buzzfeed’s challenge is to determine whether it is cost effective to attain this user.  In other words, whether it produce an expected positive return on investment.  If deemed important to Buzzfeed, using offline gamification strategies can help increase the lifetime of the user.  Offline strategies may vary from awarding company branded items to monthly leader board winners to awards for user-generated content.  In order to build an effective online gamification strategy, Buzzfeed will need to build a profile of their most valued users and align their key attributes to an offline strategy.

Summary

Buzzfeed effectively incorporates their business objectives into their goals by creating impactful badges, leader boards and awards.  The badges create simple and easy ways for users to quickly share their thoughts of the content.  The Leader Board creates a level of competition that encourages users to come back to find viral content and the Awards reward behavior that allows the user to attain the full experience of the Buzzfeed site.