LOS GATOS, Calif. ( TheStreet) -- Netflix (NFLX - Get Report) awarded a $1 million prize to a team of engineers that met an initial challenge: to improve the company's rating-prediction algorithm by 10%. Netflix was pleased enough that it immediately launched a new million-dollar contest focused on improving new users' experience. Hosting a contest to garner input from the public is gaining favor among small businesses. And for entrepreneurs, winning such a prize can result not only in cash prices, but in publicity.
Email-security startup StrongWebMail.com offered $10,000 to anyone who could hack into its chief executive's email account. In June, several technology news sites reported that a team of hackers had won the challenge in a matter of hours. While a public hack may seem humiliating to a security company, it's a clever way to get free advertising and quality-assurance testing at the same time. "It gave us a chance to test out our platform to see where there were vulnerabilities," says Ryan Disraeli, vice president of marketing at StrongWebMail.
"Contests are a nice way for companies that might have limited resources to get a cheap security review of their applications from thousands of security experts," says Dennis Fisher, editor of Threatpost, a computer security news blog. "Even if they have to pay a prize of 10,000 or 20,000 bucks, that's a fraction of what a full-scale security code review would cost from a top firm. And that doesn't even count the free publicity they get from the contest."
It's also a way to drive site traffic and, for software developers, to encourage product adoption. Startup Twilio, which makes tools for building phone applications, attracts developers to its site with a weekly contest in which the winner receives a Dell (DELL - Get Report) mini-netbook.