Sunday, March 10, 2013

Yelp is to Netflix as Foursquare is to Netflix

Pop quiz, hot shot. Here's an SAT-style analogy question for you. Yelp is to Netflix as Foursquare is to what? Answer: Netflix. To be precise, Yelp is to Netflix DVD as Foursquare is to Netflix Streaming. The reason for that is data.

When it comes to data and the applications of data to personalization and merchandising, Yelp is like the Netflix of yesteryear. Before its foray into instant streaming, Netflix had limited access to data that described the behavior of its customers. In the DVD-by-mail world, Netflix was able to know the movies its users wanted, the movies the users rented and returned, and the rating a user gives to a movie. In the streaming world, Netflix has access to all that data, plus a whole lot more - what movie the user watches, when they watched the movie, how much of the movie they watched, how often they watched the movie, and where (i.e. on which device) they watched the movie. The data collection abilities in the steaming world are so much more fine-grained and specific in the streaming world that it dwarfs the old days of DVD-by-mail.

Likewise, Yelp for the most part gets data after-the-fact when a user decides to write a review about or rate a restaurant they just visited. However, it's a single datapoint - a blob of text or a single 1 to 5 star rating about a restaurant. On the other hand, Foursquare is in the same boat as Netflix Streaming with respect to its ability to collect fine-grained information about user behavior. Unlike Yelp, Foursquare can access data about which the restaurant the user goes to, how often they go to that restaurant, when they go to that restaurant, who they go to the restaurant with, and where they were before and after going to the restaurant. The amount of information that can be captured is immense.

It all boils down to having the ability to collect discrete data in the old, transaction-driven world versus continuous data in the new, real-time world. Foursquare is in a much better position to take advantage of their data to build more interesting, engaging experiences for its users. Unless Yelp is able to catch up in the big data game by extending their mobile capabilities, it may slowly fade away much like the old world of DVD-by-mail for Netflix.

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