Three layers historically protected software suppliers: discovery (commoditized by Google), interface (proprietary UIs with years of learned muscle memory), and data. LLMs collapse the interface layer entirely — users never see supplier brands, interfaces, or origins when querying through an LLM. The web becomes “a backend database” and supplier competition reduces to pure data quality and API accessibility.
This extends The UI moat collapses — API quality becomes the purchasing criterion with the mechanism: it’s not just that APIs matter more, but that brand visibility itself disappears. MCP accelerates this by standardizing integration, eliminating the switching costs that previously protected suppliers through integration complexity. The implication is severe: companies lacking truly proprietary data face valuation compression from $20B to $5-8B. This is LLMs selectively destroy vertical software moats — 5 fall, 5 hold viewed through the lens of Aggregation Theory — “not incremental change” but the conclusion of a multi-decade arc.