Differentiation and Value Capture in the Internet Age

A subtext to last week’s article, Tech’s Two Philosophies, was the idea that there is a difference between Aggregators and Platforms; this was the key section:It is no accident that Apple and Microsoft, the two “bicycle of the mind” companies, were founded only a year apart, and for decades had broadly similar business models: sure, Microsoft licen... See more

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.

Every additional customer accrued a cost, whether that be the marginal cost of serving them or the opportunity cost of not serving a different customer. Given that, it was, as Christensen noted, perfectly rational to focus on the most profitable ones.However, something else momentous happened around 20 years ago: the emergence of the Internet. As I... See more

What followed was probably my first clear articulation of Aggregation Theory, albeit without the name. The point about effectively infinite competition, though, is a critical one. Neither reach nor timeliness were differentiators, but rather commodities; the companies that dominated on the Internet were those — Google and Facebook in particular — t... See more

I like to say that I write about media generally and journalism specifically because the industry is a canary in the coal mine when it comes to the impact of the Internet: text shifted from newsprint to the web seamlessly, completely upending the industry’s business model along the way.Of course I have a vested interest in this shift: for better or... See more