Aggregators are the New Monopolies

Aggregators and their Power

“Big Tech” companies have been called the new monopolists of today, being categorized similarly to the oil tycoons or robber barons of old. Yet the description of these companies and their underlying problem are more complex.

For those who never took economics a monopoly: is a firm or person with market power, a price setter.

Aggregators on the abstract level rely on the creations of others, so why do they have power? The answer is critical mass. Once at this point they can be used to set prices (higher or lower), push out competition and eventually move into other industries.

The reason why aggregators have power is that once they reach this critical mass, the suppliers of content become trapped. You stay to maintain your business, if some defect away from the platform you go out of business, while if your rival leaves but you stay you benefit greatly, yet if all leave the aggregator goes out of business.

Due to game theory, no one will ever leave due to the consequences of defection; a prisoner’s dilemma of sorts. Yet due to the number of parties, this is the Byzantine General’s problem. Simply put: the inability to coordinate different groups effectively and privately.

In short the monopoly regardless of where the supply comes from becomes a market maker, since groups cannot coordinate cooperation they have no power. This is one of the many reasons why censorship has grown.

Aggregators and Censorship

This phenomenon of Aggregators may contribute to the idea of echo chambers within media. Every major aggregator is making moves towards censorship of certain kinds of content. With the ability to control on supply these companies are shaping not only public discourse, but the Overton Window as well. This creates a grey area regarding freedom of speech. Where some ideas are banned, but the aggregator monopoly may constitute the public square.

While smaller aggregators are offering non-political filters, they will survive if the value they provide equals or exceeds political filters. Which some may think is obvious in this time of political strife, however, many people vote with their dollars. In the short term, speech will continue to be censored until the aforementioned powers of aggregators are limited.

The New Monopolies and Breaking them up

While we have new monopolies, the unilateral breakup would not only break up the value created, but also be politically and socially unpopular. They are not the typical monopolies of the olden days, for they don’t technically control supply or even demand. Rather they manage supply around demand. Not to mention, public opinion of them is higher (currently) than monopolies of old. Thus a longer-term approach needs to be taken to ensure minimal damage and public outrage.

Aggregators gain and maintain their power in several ways:

  • Network effect
  • Dualistic or more ways of revenue.
  • Monopoly

The network effect would be the best way to break an aggregator monopoly. Although the group would have to solve the Byzantine General’s problem and prevent defection.

Removing the duality or multiplicity of revenue generation will hamper aggregator growth. Private labelling versus listing fees. Making legislation punishing aggregators for non-neutrality is a legitimate consideration. Limiting aggregators to certain domains would also allow for value to be created, but not totally destroy the gains from aggregation. Limiting amazon to physical products or preventing Spotify from acquiring more podcasting. In short breaking hydras into behemoths.

Breaking up these global aggregator monopolies will not stop the rise of aggregators. Rather aggregators are part of a much larger trend of personalization and curation.

The Rise of Paywalls

Private content is springing up faster than most would like. It seems almost against the ethos of the internet. Yet in some ways, it has become a necessity in order to combat the deluge that is the internet. The flood of content is overwhelming and many cannot handle it. Thus individuals are turning to aggregators to reduce the noise from their lives. For business purposes, paid content gets companies out of the minimal margins of advertising.

Private or Paywalled content can be seen as donation locked content, subscriptions and memberships. Yet to simply say it is just that would be an injustice, these paywalls are actually aggregators. The individuals who are against paywalls likely use aggregators such as Amazon, Netflix, Uber, Airbnb, Spotify, Steam, Pinterest, or other streaming services. Even eBay, Etsy, Tinder and Twitter are aggregators.

Twitter and Pinterest are perhaps the most interesting of all the aggregators as they are individually curated. So why do many complain about paywalls yet subscribe to other aggregators?

Fungibility

People are wanting tailored content and curated content to save them time, money and effort. If you’re using and especially if you’re paying for a filter, you want exactly that. A refuge from the onslaught. Something commonly found loses its value, especially if it gets through a wall. Why pay extra for something commonly found? Thus exclusivity now rules the day.

Now exclusivity might be taken out of context; rather this could be anything from content, location, selection, convenience, to pricing. Regardless it must be something that is different and “valuable” enough to charge a fee.

People are paying for filters on life.

This idea of exclusivity runs counter to vitality and openness that is the mainstream culture of the internet. Although we have seen a rise in curated viral websites, videos, memes etc.

Businesses must decide if they want mass appeal or not. Often people or companies will choose a hybrid approach. Free content as a lure for higher priced goods. Yet counterintuitively they will likely find it is best to double down more on one approach than the other. As the Chinese proverb goes: “Those who chase two rabbits, catch none.”

Eventually, this rise in Paywalls and curation will lead to a war of content for “value” of scarce resources: time and money. Especially so if people continue to use their dollars, as proxies for political weapons. Thus Paywalled exclusive content will escalate into a war of value provision. However, you or the provider define “value”.

Coda

It is interesting to think about the future of paywalls and curated content. We may all end up creating our own echo chambers, personalized filters and narratives. Prisons of our own creation. Perhaps we maybe come so siloed we can no longer relate to one another. With technology we no longer need to live in this reality, we can create our own.