Whoever Generates the Demand Captures the Value

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

The Internet RevolutionI already explained what happened to newspapers when distribution erased local newspapers moats in the blink of an eye; as I suggested at the beginning, though, this was not an isolated incident but a sign of what was to come. Back in July I laid out how the acquisition of Dollar Shaving Club suggested the same process was ha... See more

In a response to a critique of Aggregation Theory, Ben Thompson wrote “And sure, at some point the Aggregator may integrate backwards into distribution or supply, but the foundation of their power comes from aggregating demand, something that was not possible before the Internet.” I agree that these companies’ power comes from aggregating demand, b... See more

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.

"All parts of our economy were previously based on scarcity. In almost every case, that scarcity has disappeared. The way you win on the internet is to be the starting place where people go - Google, Facebook, these aggregators - or you're highly differentiated and you leverage the fact that you have zero distribution to reach anyone."