An aggregator business model can be classified as a sort of platform business model, however, with its specific features. For instance, the aggregator might act as a middleman. Still, it monetizes the eyeballs on the platform (advertisers subsidize the aggregator) while keeping a tight control on the whole experience of users.
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The birth of the aggregator
There isn’t a single way to define aggregator business models. The person who most popularized this term was Ben Tompson from stratechery.com, as he explained in the graphic below:
This is a great way to classify aggregator business models.
In this guide, we’ll look at a few key differentiators, to define an aggregator business model, but also to distinguish it with the platform business model based on my observations.
Is the aggregator a platform?
Before looking at how an aggregator might be different from a platform, let’s specify that the aggregator can be comprised within the platform business model, however, it has very specific features.
Middleman vs. invisible hand: intermediation rather than interactions
In an aggregator business model, the company which acts as the aggregator doesn’t work to make users on the platform interact freely. Rather it has tight central control. In short, the aggregator controls how the company will scale.
Therefore, while in a pure platform business model the platform scales by becoming invisible (a smooth experience is one of the keys to trigger network effects).
In an aggregator model, it’s the aggregator that keeps interacting with the two or more parties involved (Google shows users a search result page, and the same Google handles the ad inventory; users and advertisers don’t interact with each other to set the price).
For instance, Google as a search engine is more of an aggregator, where the company centrally enriches its index and builds up its rankings. As a side effect, there is still an ecosystem of publishers and advertisers born as a result of this aggregation process but it’s not proximate.
Therefore, the aggregator acts like a middleman but rather than monetizing directly by getting a cut it might monetize via advertising.
Central control vs. Network effects: top-down vs. bottom up
One of the key elements of platform business models is network effects. Or put it shortly, for each additional user joining the platform, that becomes more valuable to the next one.
While in a platform business model this is the essence, in an aggregator business model instead, it’s the aggregator that centrally scales up the platform. Going back to Google’s case, the company performs wide and core algorithms change to substantially influence how the search engine will give back results, at scale.
Subsidized and asymmetric vs. taxed and symmetric
The aggregator might leave the service free forever, and sell the eyeballs through a sort of attention-based model. Thus, advertisers or companies pay to get visibility on top of the aggregator’s platform.
The pure platform instead acts like a government, getting a tax on each transaction. While the aggregator makes the service subsidized by a key customer (companies paying for visibility on the platform) and the service is free.
A platform business model by acting more like a state – once it makes sure some key guidelines are followed (safety of the network, lack of spam on the platform, stable and liquid infrastructure, and so on) – the rest is left to the key players’ interactions.
Case studies
Food Delivery Industry
UberEats
- Role as an Aggregator: UberEats partners with restaurants to display their menus and facilitate the order process. Customers can browse various food options, place orders, and get deliveries, all within the app.
- Monetization: UberEats charges restaurants a commission on each sale and also charges customers a delivery fee.
Travel and Hospitality
Expedia
- Role as an Aggregator: Expedia aggregates information from various hotels, airlines, car rental services, and more to provide travelers a one-stop platform for all their booking needs.
- Monetization: Expedia earns commissions from hotels and airlines for bookings made through its platform.
Job Boards
Indeed
- Role as an Aggregator: Indeed pulls job listings from company websites, other job boards, and offers companies to post directly on its platform.
- Monetization: Indeed earns revenue through premium job listings, where companies can promote their job posts for better visibility.
Real Estate
Zillow
- Role as an Aggregator: Zillow aggregates real estate listings, providing details about homes for sale, rent, and more. It also offers tools for buyers, sellers, and renters.
- Monetization: Zillow earns through advertising by real estate agents, premium listings, and services like mortgages.
News and Content
- Role as an Aggregator: Flipboard aggregates news, articles, and content from various publishers and provides users with a personalized reading experience.
- Monetization: Flipboard earns through advertisements displayed to its users.
E-commerce
Shopify
- Role as an Aggregator: While primarily an e-commerce platform, Shopify has an app store where third-party developers can offer tools and integrations for Shopify store owners.
- Monetization: Shopify earns a share from the sales of these third-party apps to its users.
Music
SoundCloud
- Role as an Aggregator: SoundCloud allows artists to upload their music tracks, making it available for listeners worldwide. It aggregates various artists, genres, and tracks.
- Monetization: SoundCloud offers a premium subscription for listeners and also earns through ads.
Educational Content
Udemy
- Role as an Aggregator: Udemy allows educators and professionals to create and sell courses on its platform. Users can browse, purchase, and learn from a vast array of topics.
- Monetization: Udemy takes a percentage of course sales.
Ridesharing
Lyft
- Role as an Aggregator: Lyft connects riders with drivers. Users can request rides, and nearby drivers can accept the request.
- Monetization: Lyft takes a commission from each ride fare.
Professional Services
Upwork
- Role as an Aggregator: Upwork connects freelancers with clients. Clients can post jobs, and freelancers can bid or apply for them.
- Monetization: Upwork earns a commission from the freelancer’s earnings.
Key takeaways
- It’s not always easy to differentiate between aggregators and platforms and in some cases, the two might overlap. Indeed, an aggregator is a platform, but with specific features.
- An aggregator might act more like a middleman, however, rather than monetizing directly by getting a cut, it might monetize the eyeballs on the platform.
- A pure platform business model instead acts more like a state, and as such it will collect a tax for enabling the key players to interact almost freely (key guidelines are set by the central platform).
Key Highlights
- Introduction to Aggregator Business Model: The aggregator business model is a type of platform business model with specific features. It acts as a middleman and monetizes the platform by controlling the user experience and leveraging advertising to subsidize its services.
- Birth of the Aggregator: The term “aggregator” gained popularity through Ben Thompson of stratechery.com. The graphic introduced by Thompson helps to classify aggregator business models based on key differentiators.
- Aggregator within the Platform Model: While an aggregator can be part of the platform business model, it has distinct characteristics that set it apart. It exercises tight central control and interacts with multiple parties rather than enabling free interactions between users.
- Middleman vs. Invisible Hand: In an aggregator model, the company acts as a middleman, controlling how the platform scales and interacts with users. Unlike pure platform models, the aggregator doesn’t become invisible but remains actively involved in the platform’s functioning.
- Central Control vs. Network Effects: While platform models rely on network effects, where the value increases with each additional user, aggregator models scale up the platform through central control. Aggregators, like Google, perform core algorithm changes to influence search results.
- Subsidized and Asymmetric vs. Taxed and Symmetric: Aggregators may offer free services subsidized by advertisers who pay for visibility on the platform. In contrast, pure platform models act more like a government, collecting taxes on each transaction and facilitating free interactions among key players.
- Differentiating Aggregators and Platforms: Distinguishing between aggregators and platforms can be challenging as they might overlap. An aggregator is essentially a platform with specific features and a focus on centralized control and advertising-based monetization.
- Aggregators as Middlemen with Advertising Monetization: Aggregators function as intermediaries between users and advertisers and monetize by selling advertising space on their platform.
- Pure Platforms as States with Tax-Based Monetization: Pure platforms act more like states, setting key guidelines for interactions among users and collecting taxes for facilitating those interactions on the platform.
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