Netflix's Secret To Success In Latin America

Netflix, until now a strictly U.S. and Canadian phenomenon, is illustrating how a company with a successful public API can move south of the border to a broad new set of customers. The firm announced Tuesday that it will expand into Mexico, the Caribbean, Central America, and South America.

Will it throw open offices in Mexico City, Brasilia, and Buenos Aires? Maybe, but it doesn't have to. The occupants of those offices would have to be trained to speak the local language and understand the local culture. What if programmers in each locale built applications that connected the populace to Netflix services? Why not let them do the hard work of interfacing customer needs to the Netflix services? That's exactly what Netflix will do, in my opinion.

It will expand the capabilities of its now well-established public API to recognize when requests are coming in from south of the border and respond with Spanish and Portuguese language options, including local TV shows and movies. As it does so, it will start to reach some fraction of the 35 million broadband subscribers that exist in Mexico, Brazil, and Argentina alone. It will illustrate how to reach international customers at a minimum of expense, although the expense is not negligible. A lot of work behind the scenes goes into the public API to make it accessible and useful to each new segment of customers.

It's been able to go from 12 million subscribers in the United States and Canada at the start of 2010 to 23 million today. The step into Latin America is its first beyond the English-speaking world. Netflix is a leading example of a firm that's internationalizing the company, not by learning to speak a foreign language but by letting its public API, its programmable interface, speak for it.

Isn't it as simple as putting up another Web server? No, not exactly. Consider this: In January of this year, after everyone opened their new Macintoshes, Intel Xeon laptops, iPhones, Xbox 360 game consoles, Nintendo Wiis, and Sony PlayStations, Netflix experienced over 20 billion calls to its public API, according to the director of public API engineering at Netflix, Daniel Jacobson, in a blog he wrote Feb. 8. Those API call numbers started to build after Blockbuster declared bankruptcy at the end of September; the calls were for all types of Netflix services, from catalogue listings to downloads.

As the calls multiplied to 37 times their level 12 months earlier, they were served through the public API running in the Amazon Web Service's infrastructure as a service. Amazon can handle one million or 20 billion API calls a month; it's all the same. It expands the virtual servers at work behind the API to satisfy the traffic. Each API call is actually a complex set of interactions that requires the identity of the device user to be established with each transaction. An Xbox 360 user, for example, might be checked out by issuing a request to a Microsoft directory of Xbox user identities and getting a confirmation before proceeding with the financial transaction and download.

Many of January's 20 billion requests were simply for show listings and account information but many were also for downloads as well. All the named devices can be served through the public API; developers for each device gain their own pathway through the API to the set of Netflix services.

"Cloud infrastructure as a service is a great way to manage public APIs, especially when delivered on a true, multi-tenant solution," wrote Oren Michels, CEO of Mashery, a Netflix API manager, in response to my inquiry on why a company's public API operation may end up on Amazon. The cloud provides lower operational costs than Netflix could, Michels wrote. Netflix would have to provision for that post-Christmas season peak, when 30 days of free Netflix service have been included in many of the electronic presents that just got opened. Other companies make use of the cloud because of their pre-Christmas peak. By balancing out pre- and post-holiday peaks, Amazon infrastructure can offer a per hour rate that beats a private data center's, he said.

Dimitri Sirota, co-founder of Layer 7, another API management firm using EC2, says he has no special knowledge of Netflix. But he adds that Netflix's move south of the border didn't require it to produce a new API, which would be a major programming undertaking. Instead it can regionalize its existing complex API by creating a virtual API geared to its Portuguese and Spanish speaking customers. API calls coming from IP addresses known to be south of the border are routed to the virtual API. It would include access to local television shows, for example, that wouldn't be offered to a North American visitor.

Running an enterprise API in the cloud means "offloading a computationally intensive task off the back end" of enterprise systems. The task can be managed in-house as well, through software installed on data center servers, but a company with dramatic peaks and valleys often considers the external option. API functions involved with financial transactions invoke cryptography--one of those compute-intensive tasks.

Netflix has hit some bumps in the road on its way to 20 billion API calls. Some applications invoking the API are much chattier than others, noted Jacobson. Those from one type of device accounted for 50% of the API traffic but accounted for "significantly less" of the streaming traffic, the pay-off. "Why is this device so chatty?" he asked in his Feb. 8 blog. The answer, I'm guessing, is all those new iPhone users trying to see how much the device can make use of their temporary free service. They don't actually want to view a movie on that screen.

Jacobson and Netflix have more hurdles to cross in their pursuit of efficient API management. But the public API represents a new way of doing business around the world and is likely to push back boundaries rapidly. Who wouldn't like to add a million customers in this automated way, with outside developers providing the key customer interface?

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