SmartPulse — our weekly nonscientific reader poll in SmartBrief on Social Media — tracks feedback from leading marketers about social media practices and issues.

Last week’s poll question: Was Reed Hastings, CEO of Netflix, right or wrong to announce the launch of Qwikster in a blog post?

• Wrong: 72.6%
• Right: 27.4%

Imagine for a moment, if you would: You are the CEO of a wildly popular, mail-order DVD rental business. Actually, you invented the category by defying the odds and ignoring conventional wisdom. Since the company’s inception, your customers have loved you. Whether it be the powerful recommendation engine or the beautifully simple return process, just about everything about your service is beloved.

Add to that the fact that over the past two and a half years your stock has climbed from $30 a share to a recent high in early July of this year of $296 a share. You’ve all but eliminated your main competitor, but something still gnaws at you. Something big.

There is a new shift coming in how media is delivered and you don’t want to suffer the same fate as your old video rental friends as new rivals take the stage. It’s time to make some tough decisions. What do you do? Do you sit back and wait for the market to move around you? Or do you start taking action to position yourself for the future?

In Netflix’s case, Reed Hastings is positioning his company for the future, raising prices in July and separating streaming and DVD delivery; the problem is customers didn’t respond so kindly. One article estimates Netflix has lost a million customers in the last quarter alone and suggests that Netflix’s stock has lost half its value in the past two months — about $8 billion.

That is catastrophic.

In an attempt to reverse his fortune, Reed Hastings published an article (letter to customers) on the Netflix blog on Sept. 18. In the ninth paragraph, he announced the renaming of their DVD by mail service to Qwikster: 78% of you thought it was the wrong decision to do so.

Based on the fire storm of customer outrage the blog post incited, you may be right. To date there are 27,281 Facebook comments on that post. In just the first two days, there were more than 24,350. During the last week, almost 3,000 more comments were left. Netflix customers are not done having their say.

The other social dimension to consider in this as well is that with Facebook comments, each comment has its own number of “likes” — many reaching more than 500. The network effect of that negative word of mouth is just incredible, each comment spreading throughout Facebook repeating itself.

Frankly, I am not sure it was the right decision to announce Qwikster in a blog post. I do think Hastings is making the best decisions he can to position Netflix for the “streaming” future.  One thing is absolutely certain, being “open” and “social” is incredibly hard, and we are only beginning to see how powerful customers can be in this brave new world of social media.

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Crowdsourcing is a way to outsource a task to an undefined community of people.  This kind of task has traditionally been assigned to a single contractor, but the internet has enabled large groups of people to participate – often to broader, more creative effect.

Usually taking the form of an open call, crowdsourcing may or may not include a monetary reward. Perhaps the best way to understand it is through examples of how companies and individuals have used crowdsourcing to accomplish large tasks:

• In January 2008 the State of Texas installed 200 mobile cameras along the border of Texas and Mexico to allow anyone with an Internet connection to watch the border and report sightings of alleged illegal immigrants to border patrol agents.

• In June 2008 RYZ launched. RYZ is a crowdsourcing footwear company that allows any member to submit designs and critique and vote on other members’ designs. Then the top vote-getters are produced as actual shoes.

• Photo Web sites such as Flickr and Shutterstock use crowdsourcing to add to their libraries of free stock images for the public to use.

• In an ongoing effort to improve their DVD rating system, Netflix started a crowdsourcing initiative in 2006 with a $1,000,000 prize for anyone who could improve the system by at least 10%. Contest participants can download vast amounts of anonymized data from Netflix to test their proposals. Netflix also is offering annual progress prizes of $50,000 to keep the crowds motivated, and increase their chances of reaching the optimal 10% improvement rate.

Update – 5/22/09: We recently used crowdsourcing ourselves when launching our newest SmartBrief newsletter, SmartBrief on ExecTech. Read our blog post about how we tapped SmartBrief on Social Media readers for suggestions and feedback about this new addition to the SmartBrief family.

Photo credit, James Cridland

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