I think the platform needs to be niche and not-built-for-scale by design. This doesn't gel with the VC backed route. I absolutely think there's room for a few 1-2M revenue businesses here that could be built by a motivated self funded small team.

Maybe the middle is an unstable equilibrium? You’ll either get a race to the top or to the bottom?

I have no idea but it seems like a plausible idea.