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Analytics by Shawn Rogers, John Thompson

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CHAPTER 3 The Age of the Algorithm Economy

“The price of light is less than the cost of darkness.” – Arthur C. Nielsen, market researcher and founder of ACNielsen

How much would any specific algorithm be worth to a company? Maybe $1,000? Or perhaps $10,000, or even $50,000? For Netflix, the answer was a cool $1 million.

More than 10 years ago, the online entertainment company was looking for a way to improve its video recommendation system for customers. It established the “Netflix Prize,” an open competition with a $1 million purse. The cash would be awarded to anyone or group of individuals who could best improve the performance of Netflix’s existing algorithm, called “Cinematch,” by at least 10 percent.

The competition began on October ...

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