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Why ‘platform cooperatives’ have yet to challenge Big Tech

As society grows wary of Big Tech's dominance, platform cooperatives offer an alternative approach. Why haven't they succeeded?

The concept of ‘platform cooperatives’ created ripples of interest when it was included in the UK Labour Party’s 2016 ‘Digital Democracy Manifesto’. Like the commercial platforms that now dominate many sectors of the economy, platform co-ops connect producers with consumers in transport, accommodation, culture, catering and other sectors. But, unlike Uber, Airbnb and other platform providers, they are mutually owned by participants in the platform.

Uber and Lyft drivers protest in Los Angeles, California, in April 2020, calling to receive back-wages and qualify for unemployment insurance. (Photo by Mario Tama/Getty Images)

The idea had been floated by former UK government deputy chief technology officer, Jerry Fishenden, in a 2015 article ‘Time for the rise of the platform mutuals?’ Fishenden wrote that behind the veneer of Silicon Valley ‘digital disruption’ lie traditional, hierarchical organisations that perpetuate social inequality.

But as the technology infrastructure that underpins digital platforms became commoditised, new models of ownership were becoming viable, Fishenden argued. All that was needed for “a flourishing, sharing economy of [UK cooperative retailer] John Lewis-like service providers that obsoletes the outdated tycoon pyramid model” was government intervention to level the playing field, he wrote.

It was a compelling idea but, six years later, private tech platforms are as entrenched as ever. Why haven’t platform cooperatives made more of an impact?

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Platform cooperatives in 2021

In fact, a number of mutually owned digital platforms have sprung up: Fairbnb, for example, is a travel accommodation app that invests proceeds into the communities in which it operates. TaxiApp is owned by a cooperative of taxi drivers; music streaming app Resonate is collectively owned by musicians, labels and fans.

Co-operatives UK, a trade body for cooperatives, has been working to identify and develop the digital cooperative platforms since 2017. CEO Rose Marley expects these platform co-ops to “steadily and exponentially grow over the next decade – disrupting, innovating and addressing market failures”.

“Marrying the cooperative principles with cooperative tech is a powerful opportunity to create a resilient and community-based infrastructure from which to build back better in a fair and equitable way,” she says.

Later this year, Co-operatives UK will launch an accelerator initiative for platform co-ops with its UnFound initiative. Programme manager Ludovica Rogers says that enquiries about setting up platform co-ops have quadrupled since the pandemic, with the majority related to crucial sectors such as health workers and food distribution.

“Through the UnFound accelerator, Co-operatives UK will support the bold new ideas digital cooperatives aim to develop in the economic recovery phase, as well as increase its digital expertise to support the broader cooperative sector,” Rogers says.

Platforms that help independent producers sell online have gained particular urgency during the pandemic, she adds. “The Open Food Network is an excellent UK and global example of this – providing a platform for small business as well as wholesalers to manage buying groups and supply produce through networks of food hubs and shops,” Rogers explains. “The platform has seen a rapid increase of membership during the pandemic.”

Competing with Big Tech

But these platform co-ops have their work cut competing with Big Tech rivals. The nature of the platform business model is that network effects give first movers a huge advantage. As a result, market sectors are typically dominated by one or two platform providers.

The tech giants also have deep pockets, mostly thanks to generous venture capital (VC) investment. (“Give me $8bn and I’ll disrupt any market dominated by small businesses you choose,” quipped Matt Ballantine, director of technology and transformation at Richmond Housing Partnership, surmising the challenge in 2016.)

Technology infrastructure costs may have fallen, but they still represent a significant expense for budding platform co-ops, says Rogers. VC investment has also helped the tech platforms pay for user acquisition, marketing campaigns, buying up competitors, and government lobbying to remove obstacles, she adds.

Dr Jamie Woodcock, senior lecturer at the Open University and author of The Gig Economy adds that deep VC funding and legally questionable employment practices have allowed platform companies to offer artificially low prices that no cooperatively owned rival could ever match – and that drives down pay for producers.

“The problem with this model – apart from the deeply unfair and negative outcomes for workers – is that the cost of labour is driven down, with platforms often competing on price,” he explains. “While this is initially carried by spending investment funding, it also creates an artificially low price for consumers, which will then be passed on to [workers]. For platform co-ops without venture capital funding to spend, this means that it is difficult to compete with platforms without putting pressure on workers’ pay.”

Where dominant capitalist platforms operate, it is very difficult for platform co-ops to compete.
Dr Jamie Woodcock, Open University

All of this means that platform cooperatives will struggle to make an impact in markets where private investors see the potential for returns. “Where dominant capitalist platforms operate, it is very difficult for platform co-ops to compete,” says Woodcock.

Big Tech backlash

Rogers nevertheless believes that platform cooperatives have an important role to play: being ready to serve the demand of users eschewing the Big Tech incumbents, and providing part of the antidote to the increasing scepticism and distrust of Silicon Valley behemoths.

“The first challenge to address is imagination,” Rogers says. “We are becoming so dependent on Big Tech that we are starting to believe that there are no alternatives to the big monopolistic platforms. Though platform co-ops are still few in number and small in scale, they show that another way is actually possible.

“We don’t expect platform co-ops to displace Big Tech. But we do think that, as people become more aware of the negative impacts of Big Tech, they will be looking for alternatives. And when they do, it’s important that those alternatives not only exist but are solid enough to absorb the new demand.”

As people become more aware of the negative impacts of Big Tech, they will be looking for alternatives.
Ludovica Rogers, Co-operatives UK

Platform co-ops would be more viable, of course, if governments chose to support them – or create them. This is not inconceivable, given the efforts that governments around the world are taking to contain the power of Big Tech.

“The state could play a much larger role in facilitating platform co-ops, or something that could achieve similar aims,” says Woodcock. “Rather than proposing platform cooperatives set up by groups of workers that compete with other platforms, we could envisage a democratic alternative of nationalised or state-run platforms.”

Rogers, meanwhile, calls on governments to involve platform co-ops when drafting policies aimed at regulating Big Tech so they do not negatively impact those trying to build alternatives.

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Investing in platform cooperatives

Looking back at his 2015 provocation, Fishenden concludes that the challenges facing platform co-ops are more political than technical. He argues that investing in platform co-ops could be an impactful way for large institutional investors to make good on their professed social commitments.

“It’s disappointing to see wealthy organisations that you might expect to have a social conscience – such as the big trade unions and the Church of England – not actively engaged given their wealth and political muscle,” he says.

“Instead of generating worthy-looking headlines criticising the big technology players and the gig economy, it would be more effective if they stepped up and made a practical difference. If a single union can blow the best part of £100m on a hotel project and the church has over £3bn in investments, they have the means to intervene, they just seem to lack the will.

“It would be good to see major national organisations demonstrate their commitment and relevance. If trade unions in particular want to reverse years of decline and renew and re-energise their relevance in the digital economy – particularly to empower gig workers and others who need a helping hand – why aren’t they investing in genuinely transformational digital infrastructure?”

Edward Qualtrough

Special projects editor

Edward Qualtrough is special projects editor for Tech Monitor.