Aggregator Business Model: What Is It and How It Works

The aggregator business model has transformed industries decimating some firms. Taxis, hotels, groceries, insurance, travel and many other industries now have a dominant aggregator.

The Value Proposition of An Aggregator Model

Customer Value Proposition

The value for a customer is based on time, money and trust. Aggregator business models provide value through several key factors:

• TIME: Let’s face it hopping across sites and trying to compare prices would be very time-consuming. Aggregator business models save customers time. This not only reduces the search time but also offers the consumer an instant and often, customizable list of similar products/services to compare.
• EASE OF USE: By using comparison tables and filters aggregators help customers to make selections based on their needs. In turn, this makes it easier to make decisions.
• TRUST: Often aggregators also aggregate reviews from a multitude of customers or have their own rating systems. This provides a large pool of reviews and helps the customer to choose a trusted product or service.
• MONEY: By comparing the prices across the market and balancing that with reviews, customers get the best price vs quality assurance or the best good/supplier for their budget.

Value Proposition To Partners

Partners benefit from having to get customers without the cost of marketing. Since most marketing activities work on acquiring a small percentage of customers which then finally purchase there is often a high-cost per acquisition. The benefit to a partner is that they only pay a commission when a customer buys. In this way, the providers get more customers without spending an arm and a leg for the marketing.

Why Digital Has Fueled The Aggregator Model

Digital enables aggregation models to scale because of the following reasons:

• Marketing: Direct access to consumers across multiple channels at scale.
• Distribution and On-demand: Digital products can be distributed at low costs (near zero costs per unit) but not zero costs.
• Transactions Costs: In a digital world the total costs associated with transactions are relatively low but not zero.
• Modularity: Digital apps can be changed in an instant and this will be reflected in the user experience. Modularity provides greater degrees of personalization that cannot easily be attained in the physical world.
• Scaling: Zero/Low marginal costs of scaling digital services or products.

How Aggregator Sites Make Money

Customers make purchases through the online aggregators and with each order, the aggregator firm gets the commission.

Examples of The Aggregator Business Model

Aggregators operate across various specialized sectors:

• Digital music aggregation industry
• Search Aggregators
• Travel Industry Aggregator Business Model
• Taxi Aggregator Business Model