Act 1: From Linear Businesses to Aggregators and Back — Packy McCormick

This is one key insight in Ben Thompson’s famous Aggregation Theory: modern marketplaces get their power from aggregating the demand side. And that’s a much better position than the old way of trying to own the supply side.

Ben Thompson described this phenomenon in his signature aggregation theory. Pre-internet, you captured profits by controlling supply. Now, post-internet, you capture profits by aggregating demand.

An “aggregator” is a company which aggregates demand in a vertical and has three key features: 1) it has a direct relationship with its customers, 2) it has effectively zero marginal costs for serving users and 3) its costs to acquire customers fall over time. Level 1 aggregators acquire supply (Netflix). Level 2 aggregators don’t own their supply ... See more