We are able to see a rise in YouTube, Amazon, Netflix and many other such web services which utilizes a recommender system, which is taking more and more place in our lives. In simple words, recommender systems are algorithms aimed at suggesting relevant items/information to users. Recommender systems help to personalize a platform and help the user find something they like.
Recommendation systems plays an important role in e-commerce and online streaming services, such as Netflix, YouTube, and Amazon. Making the right recommendation for the next product, music or movie increases user retention and satisfaction, leading to sales and profit growth. Companies competing for customer loyalty invest on systems that capture and analyses the user’s preferences, and offer products or services with higher likelihood of purchase.
For example, Amazon is the largest online retail company by sales and part of its success comes from the recommendation system and marketing based on user preferences. In 2006 Netflix offered a one-million-dollar prize for the person or group that could improve their recommendation system by at least 10%. Recommender systems are critical in some industries as they can generate a huge amount of income when they are efficient or also be a way to stand out significantly from competitors. From a business standpoint, the more relevant products a user finds on the platform, the higher their engagement. This often results in increased revenue for the platform itself. Various sources say that as much as 35–40% of tech giants’ revenue comes from recommendations alone.