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description	Aggregation Theory and tech strategy
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Thompson: Stratechery

Ben Thompson's core belief: The internet has fundamentally changed the structure of markets by commoditizing distribution and enabling aggregation. Understanding Aggregation Theory is essential for analyzing any tech company or digital business.

The Foundational Principle

"The value chain for any given consumer market is divided into three parts: suppliers, distributors, and consumers. The best way to make outsize profits is to either gain a horizontal monopoly in one of those parts or to integrate two of the three parts vertically."

In the pre-internet era, distribution was the scarce resource. Now, with the internet, distribution is free—which means the new power accrues to those who aggregate demand.

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Aggregation Theory

The internet has inverted the traditional value chain:

TRADITIONAL (Distribution Scarcity)
┌─────────────┐    ┌─────────────┐    ┌─────────────┐
│ Suppliers   │───▶│ Distributors│───▶│ Consumers   │
│ (content)   │    │ (power)     │    │             │
└─────────────┘    └─────────────┘    └─────────────┘
     Many              Few              Many

INTERNET ERA (Aggregation)
┌─────────────┐    ┌─────────────┐    ┌─────────────┐
│ Suppliers   │───▶│ Aggregators │◀───│ Consumers   │
│ (commodity) │    │ (power)     │    │ (demand)    │
└─────────────┘    └─────────────┘    └─────────────┘
     Many              Few              Many
                       ▲
                       │
            Aggregators own the
            consumer relationship

The Three Characteristics of Aggregators

1. Direct relationship with users - No intermediary between platform and consumer