Is Netflix's Monkey the Next Cloud Vaccine?

I'm beginning to realize that nobody truly knows what the cloud is. But they sure as heck understand that they need some form of it if they care to survive. And according to Netflix (NASDAQ: NFLX  ) , a part of that survival is failure and doing so as often as possible.

To that end, the company has created Chaos Monkey, a service that runs in the Amazon (NASDAQ: AMZN  ) Web Services, or AWS, that seeks out to terminate what is called Auto Scaling Groups. For those unfamiliar with the cloud, this is an absolutely brilliant tool. Netflix designed the software to be flexible enough to work with other cloud providers and can scale to any existing network. And you thought all Netflix did was stream movies.

However, this underscores my frustration with calling writers thinking they have fully grasped this cloud concept, to the extent that they can distinguish between what is real and what is fake, which made no sense at all. I've recently felt the urge to come to Oracle's (NYSE: ORCL  ) defense after a barrage of stories surfaced launching accusations at the company's service delivery model. The nerve it requires to discredit what is still essentially a theory didn't sit well with me. Understandably, it didn't sit well with many Oracle supporters, either.

In the case of Netflix and Amazon, these two companies have a lot more in common than their high-priced stocks. They are brilliant innovators with revolutionary visionaries running their businesses. While everyone focuses on their heated streaming movie battles, behind the scenes they are eating bananas together and swinging on vines. Amazon, which has arguably one of the best cloud services on the market with AWS, has Netflix as one of its biggest customers.

Similarly, when Amazon has recently suffered severe service outages, it reached out to Netflix's Chaos Monkey for a solution. Meanwhile, conventional thinking would have you wondering, "Why would Netflix not try to capitalize on Amazon's struggles and use it as leverage for their streaming battles?" After all, Netflix CEO Reed Hastings has an ambitious goal of 60 million to 90 million domestic subscribers. It would make sense to steal what Amazon has.

Netflix is smart enough to realize that the capacity requirements of this goal would be pretty aggressive. To that end, if it can help Amazon's 121 million worldwide users stay connected, then it means Netflix would have likely figured out how to prevent its own outages in the future. Essentially, you hire a bank robber to help prevent bank robberies. It's the same concept. But now we're back to that word again.

The cloud concept is so strong that it even brings rival companies together. We are seeing this all the time. Citrix and Cisco's partnership serves as the perfect example. While these strategic alliances do further the interest of each company, it is ultimately the customer who draws the most benefit. As Netflix pointed out, "Failures happen and they inevitably happen when least desired or expected." I don't think Netflix was talking about a PowerPoint presentation here but rather its movie service. But there's really difference -- uptime is the key.

To that end, I would think that at some point Apple, which has 400 million iTunes users who buy movies and music, should reach out to Netflix. So should Twitter and especially Facebook, which has 1 billion users and has suffered a recent outage. I'm not suggesting that Netflix is going to become the next great cloud company, but Chaos Monkey highlights how there is not yet a clear-cut standard for how businesses view the cloud and the many variations that exist. 

The precipitous drop in Netflix shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.


Read/Post Comments (3) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 01, 2013, at 11:47 PM, CramerJohnmaster wrote:

    Netflix Chaos Monkey is old news. They are Amazon's biggest customer from a bandwidth perspective and they need to minimize the bad effects of Amazon's outages on their customers. This is a tool that helps them do that. It's good as far as it goes, but it is not especially innovative.

    The real innovation at Netflix is coming from their investment on the content side. Throwing down $100 million on House of Cards is a nice first step toward becoming HBO. In fact in the USofA, HBO is so timid on rolling content out to customers outside of the cable subscription model, that Netflix is going to own them in 5 years if they don't change. HBO get off the cable subscription meth. It's not good for you.

  • Report this Comment On March 02, 2013, at 12:07 AM, badkat7 wrote:

    The Cloud is this: your data, your settings, your applications anywhere and anytime. At present many Cloud applications are little more than personal server space with optional players for media. Some of them replicate data between Cloud space and selected directories on your computer. Microsoft Office 365 is a step in the right direction, but fails because you must still install Office to any of 5 computers (Home edition). A true Cloud application would run as an internet application on any platform and the licensing would be per user rather than per machine. Nevertheless Microsoft did get the concept of personal settings more-or-less right. However the truth is that the Cloud will eventually be MUCH more. It will embody the concept that programs will be able to run on any available computer resource; even an adjacent appliance! It also means that ANY computer can be scaled linearly with the addition of networked cores. But that time is maybe five to ten years hence. Until then, Microsoft Office 365 is a good indication of where we are going.

  • Report this Comment On March 02, 2013, at 5:53 PM, JakeFantom wrote:

    Your writer should take a basic course in communications skills. His writing style is obfuscatory and his thoughts are disorganized.

Add your comment.

DocumentId: 2289366, ~/Articles/ArticleHandler.aspx, 4/24/2014 7:18:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement