How Netflix uses causal inference for customer insights — Series 1

How Netflix forecasts revenue from their subscribers

In this article, we will go over on a very high level how Netflix forecasts revenues based with their subscription data. Here are a few concepts that we will go over:

• Business concept — Acquisition and retention of subscribers, Customer lifetime value, Incrementality
• Data science — Causal inference, Markov chain

For a more technical overview on this case study, please visit our post on our newsletter as below:

How Netflix measures the value of subscriber acquisition and retention using causal inference and…

The business case

The problem that Netflix wants to solve in this case is, given a subscriber, to predict the incremental revenue, or incremental customer lifetime value (CLV) that Netflix can earn from this subscriber.

Netflix is interested in incremental CLV instead of just CLV because the former can more accurately measure additional monetary gains generated by specific marketing or advertising efforts.