Platforms, Aggregators, and Business Strategies | Ben Thompson on Invest Like the Best with Patrick O’Shaughnessy

Check Out the Invest Like The Best Podcast Episode Page & Show Notes

Key Takeaways

  • The smartphone is the true personal computer:
    • “You have this device with you that has a large enough screen to do work done is small enough to be pocketable” – Ben Thompson
      • Expect to see more  specialized devices like AR glasses and smartwatch in the future, but the smartphone will still be the main device people use
  • What makes a company an aggregator:
    • Has relationships with users
    • Zero marginal cost of serving users
    • Decreasing acquisition costs over time
  • Spotify’s master plan to take over the podcast space:
    • “They’ll say, look, we have all these customers, we monetize better because we understand these customers better. You need to come onto our platform and use our superior, we will monetize you better. And then suddenly they become the center of this where they have a critical mass of users who they understand better and they pull podcasters on and start getting this sort of a virtuous cycle and becomes sort of the center of podcasting.” – Ben Thompson
  • Apple had the opportunity to do this but they passed on it: 
    • “ iTunes doesn’t host podcasts. A lot of people don’t realize this, but it’s sort of the directory where everything is and the more important thing is the Apple podcast player is the biggest podcast player. Had Apple chosen to leverage that particularly a couple of years ago, they could have built this whole thing, built an ad network, but…it’s just not what Apple sort of does and so they sort of just let it be” – Ben Thompson
  • Disney is able to charge a lower subscription fee for their service than Netflix because Disney can monetize their customers in more ways than Netflix (ex: cruise lines, amusement parks, etc.)
  • Ben is bullish on local journalism but only if they report on important local events instead of constantly posting non-essential articles
    • “I don’t need more content. What I’m looking is to feel informed and you deliver the experience of feeling informed oftentimes by telling someone nothing here, go spend your time somewhere else and you’ve actually checked that.” Ben Thompson

Intro

Disruption & Future of Tech

  • Every business eventually gets disrupted
    • Windows was one of the most dominant monopolies ever but it has been overtaken by iOS and Android 
  • The smartphone is the true personal computer:
    • “You have this device with you that has a large enough screen to do work done is small enough to be pocketable” – Ben Thompson
      • Expect to see more specialized devices like AR glasses and smartwatch in the future, but the smartphone will still be the main device people use
  • Which companies are best placed to build the specialized applications of the future?
    • “I already mentioned iOS and Android on the handheld. In the cloud, it’s Amazon and Microsoft and Google to an extent.” – Ben Thompson

Effects of the Pandemic

  • How did the pandemic change the world?
    • It accelerated the trend of more people working online and also increased the valuation of tech companies
      • “If this thesis is correct that the trend is these companies become even more foundational and critical to everyday life, then the pandemic ought to help their valuations because it’s accelerating that shift” – Ben Thompson

Defining Aggregators

  • Platforms and aggregators are two different entities
    • The Apple store is a platform while Google’s search engine is an aggregator
      • Google helps people search through information to find what they need
        • Websites are motivated to improve their SEO to rank higher on Google search
  • What makes a company an aggregator:
    • Has relationships with users
    • Zero marginal cost of serving users
    • Decreasing acquisition costs over time
      • “Think about Google, the more people use Google, the more data there is in the system, the more feedback loops there are, that makes sort of the search results better and that attracts more users and so even the marginal user is the products getting better over time.”  – Ben Thompson
        • Examples of other aggregators: Facebook and Netflix

Spotify Is Trying To Become An Aggregator

  • Podcasts do a terrible just of monetizing their content: They either read a general ad out loud which takes time and the ad isn’t specifically tailored to individuals or they use a person’s IP address to serve a local ad
    • Spotify is moving to the podcast space and since they already know a lot about listeners (music preferences, address, etc.) they’ll be able to serve Facebook-type targeted ads
      • Once Spotify starts serving better ads, more podcasters will want to move their content onto Spotify because they’ll earn more revenue
  • Spotify’s master plan:
    • “They’ll say, look, we have all these customers, we monetize better because we understand these customers better. You need to come onto our platform and use our superior, we will monetize you better. And then suddenly they become the center of this where they have a critical mass of users who they understand better and they pull podcasters on and start getting this sort of a virtuous cycle and becomes sort of the center of podcasting.”  – Ben Thompson
  • Apple had the opportunity to do this but they passed on it: 
    • “ iTunes doesn’t host podcasts. A lot of people don’t realize this, but it’s sort of the directory where everything is and the more important thing is the Apple podcast player is the biggest podcast player. Had Apple chosen to leverage that particularly a couple of years ago, they could have built this whole thing, built an ad network, but…it’s just not what Apple sort of does and so they sort of just let it be”

Netflix & Disney

  • Over the years, Netflix has moved towards owning its supply chain. They now produce, own, and distribute their content.
  • Disney is able to charge a lower subscription fee for their service than Netflix because it can monetize their customers in more ways than Netflix (e.g: cruise lines, amusement parks, etc.)
    • “It’s so valuable given the other ways Disney can monetize those customers that you have to think about Disney plus, not just as being a potential moneymaker, but as a phenomenal sort of top of the funnel tool. A lead generator for the entire business.” – Ben Thompson

Walmart, Shopify & Amazon

  • Walmart is beating Amazon in grocery services because Walmart already has existing grocery infrastructure
    • However, Amazon is beating Walmart at e-commerce because Amazon was born as an e-commerce company and has reached a massive scale already
  • With Shopify, businesses are able to open up their own stores so they don’t have to sell with Walmart or Amazon
    • “Shopify goes in the opposite direction in that it enables suppliers to have their own direct relationship with customers. They can set up their own store.” – Ben Thompson
      • This cuts out the middleman and allows business owners to have a direct relationship with customers
        • The same is true of email: it allows you to go around Google or Facebook and interact with your audience directly

 The Future of Media

  • “Future publications will be very, very narrow and they’ll take advantage of the fact that their…addressable market is the entire world and I just need to get X number of subscribers wherever they might be and I will succeed.” Ben Thompson
  • Ben is bullish on local journalism but only if they report on important local events instead of constantly posting non-essential articles
    • “I don’t need more content. What I’m looking is to feel informed and you deliver the experience of feeling informed oftentimes by telling someone nothing here, go spend your time somewhere else and you’ve actually checked that.” Ben Thompson
  • One future business model of individual media creators could to be have a bundle where you could pay X amount to subscribe to several great independent writers

Additional Notes

  • On the internet: controlling demand is more important than controlling the supply
  • Amazon has infinite shelf space
    • Google has infinite advertising space
  • Building infrastructure requires massive amounts of capital which naturally builds a moat around the business (e.g: AWS, Stripe)
    • It also becomes a platform that people could use to build a layer of products on top of it
  • Doing business with other countries is a two-way street. For instance, the US can influence China, but China can also influence the US.
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Notes By Alex Wiec

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