- “To be clear, both roles can be beneficial — platforms make the relationship between users and 3rd-parties possible, and Aggregators helps users find 3rd-parties in the first place — and both roles can also be abused.”
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The always excellent Ben Thompson on regulating monopolies online, drawing a distinction between platforms and aggregators. His articles, as I have mentioned before, are always a delight to read, and this one in particular is a great collection of links to articles he has written before. Plus, this article is inspiration, if you will, for the links that follow.
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.. - “Columbia University law professor Tim Wu coined the term “network neutrality” in a 2003 paper about online discrimination. At the time, some broadband providers, including Comcast, banned home internet users from accessing virtual private networks (VPNs), while others, like AT&T, banned users from using Wi-Fi routers. Wu worried that broadband providers’ tendency to restrict new technologies would hurt innovation in the long term, and called for anti-discrimination rules.”
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An excellent explainer from Wired about Net Neutrality.
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.. - “For years, I winced at how Big Tech approached regulatory matters. When they wade into policy matters, they fail to see the bigger picture — and the younger the company, the worse they are at this. The hole that Facebook has dug for itself is entirely because its leadership seemed to believe that if they stayed within the letter of the current law they wouldn’t be regulated. This is a completely naive and ahistorical view. And this view has prevented Facebook from innovating in their own policy space. Without that policy innovation, we are left with essentially nonsensical suggestions to break up Facebook — which wouldn’t actually solve any of the issues anyone has with Facebook.”
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If you’re looking to do research in this field, you can’t not read Joshua Gans. This is just one of many excellently argued articles. Do read the whole thing!
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.. - The internet activist Nikhil Pahwa lists out his expectations about the future of internet regulation in India. Agree or disagree (as usual, I fall in the middle), it is worth reading.
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.. - “More generally, however, the bigger Google gets the more countries it has a physical presence in (servers, sales staff and support etc.) and thus the more leverage individual countries, especially large countries, will have to degrade the services that Google offers not just within-country but to the world.”
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Alex Tabarrok gives a fun example and a chilling analysis in the same short blog post.
Tag: aggregation theory
Tech: Links for 25th June, 2019
I have linked to some of these piece in the past, but this set of posts is still useful in terms of creating a common set of links in one place for you to understand how to think about Aggregation Theory. If you can afford it, I heavily recommend Stratechery!
- “What is the critical differentiator for incumbents, and can some aspect of that differentiator be digitized?
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If that differentiator is digitized, competition shifts to the user experience, which gives a significant advantage to new entrants built around the proper incentives
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Companies that win the user experience can generate a virtuous cycle where their ownership of consumers/users attracts suppliers which improves the user experience”
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Begin here: this piece explains what aggregation theory is all about, and why it matters.
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.. - “Super-Aggregators operate multi-sided markets with at least three sides — users, suppliers, and advertisers — and have zero marginal costs on all of them. The only two examples are Facebook and Google, which in addition to attracting users and suppliers for free, also have self-serve advertising models that generate revenue without corresponding variable costs (other social networks like Twitter and Snapchat rely to a much greater degree on sales-force driven ad sales).”
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Aggregators on steroids: what exactly makes Google and Facebook what they are? This article helps you understand this clearly. Also read the article on super aggregators itself.
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.. - “There is a clear pattern for all four companies: each controls, to varying degrees, the entry point for customers to the category in which they compete. This control of the customer entry point, by extension, gives each company power over the companies actually supplying what each company “sells”, whether that be content, goods, video, or life insurance.”
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This article explains the FANG playbook, and how they became what they are today: Facebook, Amazon, Netflix, Google.
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.. - “To explain why, it is worth examining all four companies with regards to:Whether or not they have a durable monopoly
What anticompetitive behavior they are engaging in
What remedies are available
What will happen in the future with and without regulator intervention”
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Ben Thompson states just above this paragraph that he is neither a lawyer nor an economist. But the last two questions in the list above show that he’d make a pretty good economist. He is, in essence, asking what is the opportunity cost of breaking up these firms. As the song goes: with the bad comes the good, and the good comes the bad.
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.. - “All those apps are doing is providing an algorithm that lowers search costs and makes booking easy. Expedia didn’t design, build and maintain the airplane that flew him to Sydney; build or operate the airport; train pilots; or find, produce, refine and transport the necessary jet fuel to power the plane over its continental voyage. Uber didn’t design and manufacture the car used to transport him to his hotel; find, produce, and process the raw materials that go into it (such as steel and aluminium); or actually drive him from the airport to his hotel. AirBnB didn’t design, build, maintain, or clean the house he stayed in, nor supply it with electricity. UberEats and OpenTable didn’t grow and process any raw foodstuffs, or use them to cook a meal, and TripAdvisor didn’t design, manufacture or operate any of the tourist attractions he visited.In fact, all these companies did was write some pretty simple code that made matching buyers with sellers easier and more efficient, and the real question that should be being asked is whether these platform companies are extracting too much value from the supply chain relative to their value-add, and whether that is likely to be a sustainable situation in the long term, or will invite potential disruption and/or an eventual supply-side/regulatory response.”
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BUT, on the other hand, perhaps this is just old wine in a new bottle?
EconForEverybody 