Ben Thompson talks a lot about the role aggregators and platforms have played in reshaping the economy, particularly since the tech revolution of the late ‘90s. In a post about Amazon and Shopify (“Shopify and the Power of Platforms“), he breaks down how and why “platforms are aggregators most effective competition.” If unfamiliar, these are valuable terms to know – not just to understand the corporate strategies of massive companies, but to understand how our current jobs and ultimate careers fit into the mix.
First, we really have to understand the terminology. Imagine a department store and a shopping mall:
The department store is an aggregator. It finds all of the items it will stock, negotiates with the suppliers for pricing, and puts them on a shelf at a markup to sell. A customer can take a toaster, a nice pair of slacks, and a replacement blade for the lawnmower to any cash register in the store to be rung up.
The mall is a platform. It finds all of the retailers, negotiates rents, and opens the doors to the public. Because the retailers negotiate with their own suppliers and have their own cash registers, they’ve been aggregated by the mall who has provided them, in exchange for rent, with a platform to conduct business on.
Aggregators are the ultimate bulk buyers, flipping products to end customers. Platforms are the ultimate curators, flipping customer traffic and locations to the retailers. We can’t quite say that aggregators aggregate supply and platforms aggregate demand (they’re not forcing the customer’s to show up), but that’s not a terrible way to start thinking about the logic either.
Back to the real world: Amazon is a modern aggregator. The website (and the all-powerful digital shopping cart) sit on top of a commoditized pool of suppliers. Shopify is a modern platform where few customers are even aware that they’re shopping at one of their 820,000 online stores. Once we know the terminology, we can see the supplier/customer relationships they describe, everywhere.
For our own jobs and careers, we want to be aware of what our companies are doing in their own industries and against their/our competitors. We want to know who the suppliers are, what’s driving pricing, where the cash registers are, where the customers are coming from, and how rent is being paid. If we’re at an aggregator, how are “we” driving supplier pricing down and maximizing distribution? If we’re at a platform, how are we attracting the right product/service offerings to attract the right clientele to drive the highest/most profitable rents?
If we find ourselves at odds with the strategy or on a project that is, we want to be able to switch. As companies grow, we’ll also see the dreaded culture clash that emerges when aggregators and platforms collide. These terms help us to understand that confusion and look for jobs and projects across the industry that can survive the mix.
Stratechery, and Exponent (when they release new episodes) are out there to help make sense of what otherwise may appear to be senseless corporate strategies. Knowledge is still power. A few terms can go a long way to bringing our worlds into focus. On the career side, see also my post about surviving platform shifts at work, and Alex Moazed’s work on Modern Monopolies.