breaking up a formerly integrated system — commoditizing and modularizing it — destroys incumbent value while simultaneously allowing a new entrant to integrate a different part of the value chain and thus capture new value.
Why aggregation matters is that it is the means by which new integrations are achieved:
- Netflix leveraged its position as an aggregator of video content into the integration of the customer relationship and content creation, undoing the integration of linear channels and content creation
- Airbnb/Uber and other similar services integrate the customer relationship with the driver/homeowner relationship, undoing the integration of cars/property with payment
- Google and Facebook integrated content discovery with advertising, undoing the integration of editorial and advertising
Zillow is embracing a model that, should it be successful, tears down the status quo: this will not only enrage Zillow’s customers, but also endanger Zillow’s primary revenue stream.
Thompson outlines evolving his method of explaining trends in technology. While his initial thoughts on aggregation theory captured most of the story, Zillow’s recent news expanded his thinking such that aggregation must leverage integration to transform value chains. This pivot does not discount his previous mindset but gives an opportunity to reflect on older insights and use the new frame of reference going forward.
Zillow, Aggregation, and Integration via Stratechery
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