(2015-07-21) Thompson Aggregation Theory

Ben Thompson on "Aggregation Theory".

The last several articles on Stratechery have formed an unintentional series... In retrospect, there is a clear thread. In fact, I believe this thread runs through nearly every post on Stratechery, not just the last three. I am calling that thread Aggregation Theory.

suppliers can be aggregated at scale leaving consumers/users as a first order priority. By extension, this means that the most important factor determining success is the user experience: the best distributors/aggregators/market-makers win by providing the best experience, which earns them the most consumers/users, which attracts the most suppliers, which enhances the user experience in a virtuous cycle.

Previous incumbents, such as newspapers, book publishers, networks, taxi companies, and hoteliers, all of whom integrated backwards, lose value in favor of Aggregators who aggregate modularized suppliers — which they don’t pay for — to consumers/users with whom they have an exclusive relationship at scale... Google, FaceBook, Amazon, Netflix, SnapChat, Uber, Airbnb...

What is important to note is that in all of these examples there are strong winner-take-all effects.

The Uber and Airbnb examples are especially important: vacant rooms and taxis have not been digitized, but they have been disrupted. I suspect that nearly every industry will belatedly discover it has a critical function that can be digitized and commodified, precipitating this shift.