NetFlix 2006 Annual Report Download - page 13

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Please find page 13 of the 2006 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

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Our account signup and management tools provide a subscriber interface familiar to online shoppers. We
use a real-time postal address validator to help our subscribers enter correct postal addresses and to determine the
additional postal address fields required to promote speedy and accurate delivery. Subscribers pay for our service
primarily by a credit or debit card. We utilize third party services to authorize and process our payment methods.
Throughout our Web site, we have extensive measurement and testing capabilities, allowing us to
continuously optimize our Web site according to our needs as well as those of our subscribers. We use random
control testing extensively, including testing service levels, plans, promotions and pricing.
Our Web site is run on hardware and software co-located at a service provider offering reliable network
connections, power, air conditioning and other essential infrastructure. We manage our Web site 24 hours a day,
seven days a week. We utilize a variety of proprietary software and freely available and commercially supported
tools, integrated in a system designed to rapidly and precisely diagnose and recover from failures. We conduct
upgrades and installations of software in a manner designed to minimize disruptions to our subscribers.
The terms and conditions by which subscribers utilize our service and a more detailed description of how
our service works can be found at www.netflix.com/TermsOfUse.
Merchandising
The key to our merchandising efforts is the personal recommendations generated by our recommendation
service. All subscribers and site visitors are given many opportunities to rate titles and we have collected
approximately 1.7 billion ratings. The ratings from our recommendation service determine which available titles
are displayed to a subscriber and in which order. In doing so, we help our subscribers quickly find titles they are
more likely to enjoy. Ratings also determine which available titles are featured most prominently on our Web site
to increase customer satisfaction and selection activity. Finally, data from our recommendation service is used to
generate lists of similar titles as well as the promotional trailers they may see when engaged with our Previews
feature. Subscribers often start from a familiar title and use our “Recommendations” link to find other titles they
may enjoy. This has proven to be a powerful method for catalog browsing and expanding library utilization.
We also provide our subscribers with detailed information about each title in our library which helps them
select movies they will enjoy. This information may include:
• factual data, including length, rating, cast and crew, special DVD features and screen formats;
• movie trailers and other editorial perspectives, including plot synopses and reviews written by our
editors, third parties and by other Netflix subscribers; and
• data from our recommendation service, including personal rating, average rating and other similar titles
the subscriber may enjoy.
Marketing
We have multiple marketing channels through which we attract subscribers to our service. Online
advertising is an important channel for acquiring new subscribers. We advertise our service online through paid
search listings, banner ads, text on popular Web portals and other Web sites and permission based e-mails. In
addition, we have an affiliate program whereby we make available Web-based banner ads and other
advertisements that third parties may retrieve on a self-assisted basis from our Web site and place on their
Web sites. We also advertise our service on various regional and national television and radio stations. We utilize
direct mail and print advertising as well as promote our services in certain consumer package goods. We also
participate in a variety of cooperative advertising programs with studios under the terms of which we receive
cash consideration in exchange for featuring the studio’s movies in Netflix promotional advertising. We believe
that our paid marketing efforts are significantly enhanced by the benefits of word-of-mouth advertising, our
subscriber referrals and our active public relations programs.
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