The aggregator business model has come to disrupt every industry. This model, frequently confused with other kinds of platforms, usually involves organizing, under one brand, a very populated sector, such as taxis, hotels, travel, groceries, food, and more. To make it simple, the aggregator may act as a sort of middleman, but unlike other platforms, it keeps tight control of the entire experience of its users. This was also enabled by the internet. The fundamental disruption of the Internet has been to turn the traditional value-chain on its head. First, the Internet has made distribution (of digital goods) free, neutralizing the advantage that pre-Internet distributors leveraged to integrate with suppliers. Secondly, the Internet has made transaction costs zero, making it viable for a distributor to integrate forward with end users/consumers at scale.
chart by stratechery.com This has fundamentally changed the plane of competition: no longer do distributors compete based upon exclusive supplier relationships, with consumers/users an afterthought. Instead, suppliers can be commoditized 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. Google
Facebook (and Ad Networks)
Amazon
Netflix
Uber
Airbnb
Let’s understand how this business model work, in more detail.
Contents
It is a networking e-commerce business model where this firm, known as an aggregator, brings together, at one place, information and data about a particular good or service offered by several competing providers. The aggregator makes the providers its partners, and sell their services or products under its own brand. The providers will never become aggregator’s employees. They’ll continue to be the owners, but sign a contract with the aggregator. The aggregator almost always doesn’t have any manufacturing structure or warehouse. It relies on its capability of marketing its partners in a win-win way, by creating a single domain which offers uniform quality and price, providing convenience to users.
Let’s take a look at how the aggregator business model can be designed on the business model canvas
Well, the sequence of steps is kind of simple:
As mentioned above, the revenue streams of the aggregator are the commissions. Because, as the aggregator provides the customers to the partners, then the partners pay a percentage of their earnings. For that, the partners quote a minimum price and the aggregator will quote the total price to the final consumer. The revenue can vary according to the industry, but also to the season, the place, etc.
The value proposition to the final customer, the buyer, can be summarized in time, money, convenience and safety. It’s much more convenient for the users to just browse one website, for example, and be able to compare prices. The aggregator also increases the possibility of finding the best offer, and the customer can feel safer by checking the rating and reviews about the providers. Regarding to the partners, the value proposition is reducing business costs. They only pay when they earn. And they don’t have to invest on all of the infrastructure of the business or on marketing.
There are many similarities between both business models and that’s why they are often mistaken. Both aggregators and marketplaces connect vendors and buyers together on a common platform, and service is nearly the same. Nevertheless, some differences can be easily identified, as follows:
Some of the most common aggregators are:
It’s very common to think that the aggregator business model has been born in the digital world, because the internet has given scalability to the business (think about Uber or Airbnb) and has made all the processes much easier, from payment to shipping. However, the aggregator business model is prior to the internet. There were many companies in the music industry, for example, that controlled artists and CD production (and that is not so far from today). In spite of that, the digital age has turned the aggregator into a disruptive business model, capable of changing the way we do business in any kind of industry. Just be there and watch it!
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