it is one thing to sit on top of an existing industry and, well, be a media company/lead generation tool. There have been a whole host of businesses that did exactly that, and while there is plenty of money to be made, without some sort of integration into the value chain of the industry itself they simply aren’t transformative. To put it another way, aggregation doesn’t transform value chains; integration does.
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
More broadly — and this really gets at why Zillow is different — Aggregators that change industries (including Aggregator-like Amazon and Apple that deal with physical goods) integrate the customer relationship with however it is their industry generates revenue; Zillow, on the other hand, was completely divorced from the home selling-and-buying process.
Just being a tech layer vs. changing the industry one is in:
Zillow has long been a better bet than Redfin, which has admirably IPO’d with a business that basically adds a tech layer (and thus superior lead generation) to a traditional real estate agency; the reality is that simply adding a tech layer doesn’t change industries — that requires new business models.
What Zillow’s future will say about other tech companies in similar situations such as Spotify:
how Zillow fares will result in lessons that may be applicable broadly. Think of Spotify, for example: I was a bit bearish on the company last month because of the power of Spotify’s suppliers; the bull case is that Spotify’s ownership of the customer relationship will allows the company to build out the capability to sidestep the record labels even as the record labels can’t punish Spotify because they need them. That’s exactly what Zillow is testing right now: just how much power comes from being an Aggregator, and how much an industry can be transformed when that power is wielded.