https://medium.com/@hagaetc/an-introduction-to-aggregation-theory-7cea63cc0e20
The framework explains how these companies leverage the internet to reshape value-chains, gain power and extract profits. It helps explain everything from how Facebook disrupts publishers to why Spotify is not simply a “Netflix for music”.
What is an Aggregator?
Aggregators have a (1) direct relationship with their users. … Aggregators have (2) zero marginal costs for serving new users. … Thirdly, aggregators are (3) demand-driven multi-sided networks with decreasing acquisition costs.
What’s an example?
A good example is how Google created a great search product that brought users (i.e. demand) there in the first place. Given that plenty of users went to Google, most websites wanted to be easily found on Google (i.e. the supply side) and thus adjusted their websites so that Google could better discover them. This in-turn makes Google’s search product and user experience better, which attracts more users and so the virtuous cycle goes.
The biggest aggregators often start out in markets where the supply side is fragmented. It’s typically the long tail of suppliers that start using the aggregator because they are more willing to accept any terms to reach new consumers. First, a large number of smaller suppliers get on board and the virtuous cycle works its magic for a while. Then the more established players come along and bring their supply to the platform.