Market-Making on the Internet

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

This is the Aggregator’s advantage: particularly when it comes to media, whether it be print, video, or audio, suppliers are often motivated to simply reach the most people and make a living doing so. It is a fundamentally short-term outlook that is entirely understandable and defensible. That, though, leaves the Aggregator with an arbitrage advant... See more

Super-AggregatorsWhat makes Facebook and Google unique is that not only do they have zero transaction costs when it comes to serving end users, they also have zero transaction costs when it comes to both suppliers and advertisers.Start with supply: not only is the vast majority of online content accessible to Google’s search engine (unsurprisingly,... See more

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.

Great things are usually made by specialists, not by all of us. These specialists can create things that the rest of us want. This means that networks can emerge with two groups: one that supplies something valuable, and another which consumes that service. This is where the most valuable type of Internet company enters the game: aggregators.