Aggregators and trust

TL;DR:

  • The ability to match demand and supply (allowing for mutual discoverability) thanks to their ownership of demand is only one of the two advantages of aggregators, the other being the ability to allow counterparts who do not know each other to transact with each other.
  • In the markets where the supply of aggregators operate, centralization was caused by the demand using popularity of suppliers as a proxy for their trustworthiness.
  • As a consequence of the fact that aggregators can provide the otherwise missing trust element between a customer and a product or service provider who do not know each other, and thus popularity becomes a negligible factor in the users’ choice of a provider, the distribution of profits in markets in which the supply of aggregators operate flattens over time, whereas the market at the above layer (the aggregators’) centralizes.
  • The importance of the trust element opens up the possibility of a new threat to aggregators: whereas their self-reinforcing dominant position on the match-making side is hard to be disrupted, this isn’t true for their position on the trust-enablers one. In particular, the share of their profits that come from replacing costs to act in trust-less environments is open for disruption from any new entrant with an innovative trust-minimization technology, such as dry technologies.
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