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One carrot on a stick vs. hundreds of salaries

A year after Netflix announced a million dollar contest to improve their recommendation algorithm, they gave out their first prize. Except it was only $50,000.

By stipulating that a 10% improvement in the algorithm’s effectiveness is required for the big prize, Netflix was able to hold onto their million while gaining an enormous amount of development work for a pittance.

The team that won the smaller “progress prize” claim they put in about 2000 hours to produce an 8.5% improvement. So Netflix essentially paid $25/hour for high quality programming, and received thousands of hours of work on top of that for free.

Factor in all of the publicity through news articles, and this contest turned out to be a massive ROI, even if they never implement the code.