Jabes Twitter Musings [Special Edition] - April 28th
Chapter 3: The Power of Aggregating Abundance
If you recall the last chapter, we looked into abundance, the unintended consequence of zero distribution costs.
Because the internet lets you distribute anything for free, anyone can distribute. Because anyone can distribute, everyone begins to distribute. Ben Thompson says “it's the first time there is not just output at scale but input at scale.”
In this new world, the barriers to entry shift from distribution to discovery.
Why? Because we generate soooooo much supply that we rely on new forms of discovery to surface good and relevant content. This is where a lot of the tech "aggregators" made a name for themselves. They used discovery as a differentiator.
Google is the prime example. To understand what Google did right, let’s look at what Yahoo did wrong.
Yahoo used to have a directory with every website on the internet. This was great when there were only a limited number of websites to surf. But as the internet added more www's at an exponential rate, we needed a new way to surf them.
This is where Google stepped in with the PageRank algorithm. It found a way to surface the best websites based on linking. Google got better the more websites that were added to the web. Not more clunky like Yahoo.
Facebook is another example of an “aggregator” making noise with a new form of discovery. Facebook was able to make use of infinite content by introducing the feed. An endless stream of content, personalized for each individual, and at scale never seen before (2.8 BILLION MAU as I write this). It seems like a common pattern today but that was not always the case.
Because of the PageRank and Feed breakthroughs, Google and Facebook created an amazing user experience for everyone. For free I might add!
People choose to go to Google and Facebook (and Amazon and Netflix and Uber and Spotify and Zillow and Airbnb and TikTok) because they want to. Not because they have to. Talk about owning the demand.
And let's toss it over to Bill Gurley for a quick quote about the internet, "Owning demand is way more important than owning supply."
Over time, suppliers started to recognize that all of their traffic was coming from Google or Facebook. As a response, they started optimizing their content to better fit the "aggregators" needs so they could squeeze out even more traffic. Search optimized pages. Short engaging photos / videos / memes. This only increased the aggregators power. And so the flywheel spins!
Thompson writes, "Aggregators don’t make content, because they don’t need to. Rather, by providing functionality consumers value, they become the most efficient way to reach those same consumers, which means that creators bring their content to the Aggregators."
Said another way, aggregators harvest everyone’s work and help funnel eyeballs to it. The idea is that there is value in this because discovery is the key point of the value chain to control in a world of abundance.
When aggregators hold the keys to discovery, they become the front door to the internet, where users start their journey with them.
When you are the front door you have quite a bit of influence over what gets discovered behind that door and what does not. These "aggregators" become the data power brokers for advertisers. Advertisers begin to throw their money at the "aggregators" because it's like shooting fish in a barrel.
Look no further than the tweets showing how much digital ad spend goes to Facebook, Google and Amazon.
Great. So I've proven "aggregators" have all this power because they provide functionality consumers value. But what does this mean for the content creators aka the supply side of this equation?
For the most part they have two options. They can either sell the content themselves (which is difficult) or give it to an "aggregator" for free and make money off advertising (which is easy).
Most suppliers go the free route and take the ad dollars. Because they are giving their content to the "aggregator", they are playing by their rules, remember? They need to make sure everything is perfectly SEO optimized or super engaging so it gets shared on social.
But when everyone takes this approach they all start competing by stuffing keywords and writing web pages for robots. Or trying to make something so engaging that it becomes click bait-y and extreme. In a way they dumb it down to appeal to the "aggregators" in an attempt to reach as many people as possible.
This leaves an opening for a world of niches.
See you next week.
-Jabe Jableson