Today, through its commitment to hardcore proprietary software development (and a few word-of-mouth-friendly Web 2.0 strategies), it’s succeeding in keeping its virtual shelves stocked.Today, through its commitment to hardcore proprietary software development (and a few word-of-mouth-friendly Web 2.0 strategies), it’s succeeding in keeping its virtual shelves stocked.

The development team at Zip.ca, which is owned by the Ottawa-based registrar Momentous.ca, is familiar with the rigors of a quick turnaround, said Kelvin Osborn, Zip.ca’s development manager. In three months, three developers built the Web site and its peripheral parts in-house, allowing Zip.ca to leap into the market in 2004 in the wake of the massive success of the American online movie rental company Netflix (Blockbuster jumped on the bandwagon in 2004, too). The only third-party component of Zip.ca’s IT operations was its CRM software, which is from Bozeman, Montana-based RightNow Technologies.

Since the developers were most familiar with Microsoft technologies, they ran everything on .Net applications and a SQL server database out of its data centre in Ottawa. “It’s a very robust environment, and very scaleable,” said Osborn.

This would prove useful come Zip.ca’s rapid expansion over the last three years. The company now has around 54,000 titles, which is a big step up from the 14,000 or so they had when they opened for business.
To keep their 37,000 customers and 380,000 discs in line, Zip.ca has spent almost $8 million to date on development, only a quarter of which was spent on the initial rollout. According to president and CEO Rick Anderson, Zip.ca is run on a fairly complex set of algorithms (comprised of a million lines of code): one for the assignment and one for the purchasing. The assignment software gets going at 9:15 a.m. every morning, and updates every 15 minutes all day, working out which DVDs need to be pulled out of which of the four distribution centres. The centre workers then scan the DVD, and plop it into the mail. The purchasing algorithm checks customers’ film requests against current inventory, and consults with DVD sources to check availability and price; it then drafts purchase orders.Even non-customers can use the ZipList, the saved list of movies they’d like to see. Cambridge, Massachusetts-based Forrester Research’s James McQuivey, a principal analyst who specializes in television and media technology, said that this taps into the real reason behind the success of the online movie rental business model.

“This is not so revolutionary – what actually keeps them coming back for more is that the (recommendations algorithm) makes them find movies they want to watch, and (Zip.ca) queues the DVDs up for them and saves them for the next time. That’s very hard to compete with,” said McQuivey.

Besides adding blogs and forums, Zip is exploring the Web 2.0 possibilities of online video – both user-generated and bought from suppliers like TotalVid, Roo, and Akimbo – which McQuivey labeled a smart move.

“When it comes to watching a movie, do you hope that two days ago the next movie in your (ZipList) was sent, or did you just want to dial up a movie and go and watch it?” said McQuivey.

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