Confraglidation

I was at a meeting the other day with some colleagues who were discussing market prediction. In particular, they were trying to figure out whether a certain market would end up fragmenting or consolidating.

A fragmented market is one in which there are many players. One example would be shoes. There are lots of companies around for you to buy shoes from, and there is no clear dominant player among shoemakers.

A consolidated market is one in which one player ends up with all the marbles. An obvious example of this is internet search. Sure, there are other search engines around, but at least here in the U.S. pretty much everyone uses Google.

Listening to this discussion, it occurred to me that sometimes it’s not so simple. A market can be consolidated in one part of its supply chain, but fragmented in another part of that supply chain.

For example, for PC games Valve’s Steam is the dominant player for delivery. Yet there are an enormous number of suppliers for the games themselves.

Similarly, all of the apps that run on your iPhone come to you via Apple’s App Store. Yet there are many providers for the apps themselves.

To cite yet a third example, Amazon is clearly trying to be the universal delivery system for everything. Yet Amazon is certainly not in the business of creating all of the many things it would like to deliver.

So it seems that in our modern internet age, we are entering an era of what might be called confraglidation. The market for delivery is becoming ever more consolidated, whereas the market for providing content is becoming ever more fragmented.

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