Platform Cooperatives: Opportunities and Obstacles

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’

Author : Martijn Arets Position : Researcher at Copernicus Institute of Sustainable Development, Utrecht

University Corresponding author : Martijn Arets, m.arets@uu.nl

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’

Title of Paper

Platform Cooperatives: Opportunities and Obstacles

Keywords

Digital Governance, Platform Cooperativism, Sharing Economy, Gig Economy, Platform Cooperatives, Online Governance, Collaborative Consumption

Context and Problem Statement

Platforms connecting large crowds of (private) supply and demand by use of apps, algorithms and reviewing mechanisms appear in an ever growing number of industries. Although platforms used to restrict themselves to digital industries (like information searches, music, games and social media) and secondhand markets (as Marktplaats.nl), they’re nowadays also actively involved in industries of physical services like catering and hospitality (Airbnb, EatWith), transport (Uber, Deliveroo, Doordash), babysitting (AirBsit, Charley Cares), cleaning (Helpling), and practical gigs (Handy, Werkspot, TaskRabbit) in and around the house. Also, education, health care and all kinds of voluntary services could be organized as a platform in the near future.

Platforms are disruptive in a sense that they assume the function of a larger companies. Platforms are rapidly growing in before mentioned industries, indeed partially at the expense of revenue and autonomy of traditional providers like hotels, taxi companies, and energy providers. Factually, the platform –using algorithms, reviews, and big data– takes over the functionalities traditionally being offered by bureaucrats, such as planning, logistics and assessment.

Differently from traditional companies, platforms tend to a natural monopoly as the value of supply and demand increases along with the number of people already using the platform.

Virtually all platforms have been established with venture capital investments and strive to maximize their short-term profit. For this reason, they focus particularly on servicing precarious professions, where public values as consumer safety, social rights, and privacy of the supplier and customer are mostly not or insufficiently secured.

As a consequence of these problems and the forecasted growth of this platform economy, the call for stronger regulations becomes all the louder. One, still far-reaching, alternative is the development of governmental platforms. Others, Scholz and Schneider (2016) in particular, are looking for a third way: the way of platform cooperatives (‘platform cooperativism’). These are platforms owned and managed by their users, especially those who regularly use the platform as supplier and hence become dependent on the platform in meeting their daily needs. Certain ‘platform coops’ have been spotted in the transport and home services industries, as well as in the freelance photography industry, all in the USA. Besides these, there are initiatives in Germany (second hand market place) and the Netherlands (home sharing platform).

By both European cooperative organizations and trade unions interest is shown in this topic for some time already. Trade unions are considering platform cooperatives as solution in order to secure workers’ interests. Cooperatives regard platform cooperatives as a chance to broaden their horizon, connect local communities to a worldwide network, learn to how to better use digital governance tools, and to learn how to mirror cooperative principles onto an online environment. (Lomo 2017)

Research Questions

Our research aims to answer the question if –and under what circumstances– platform coops are an actual viable alternative to commercial platforms. We focus on the platforms in the sharing and gig economy and highlight the industries in which platform coops are already active.

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’

The associated subquestion are:

- Which platform cooperatives are already in existence (on a global scale), and how do they

differ amongst each other in terms of ownership relationships and governance?

- Which type of platform cooperatives operate internationally and how do they relate to one

another?

- What are the users’ experiences of platform coops and why are some viable but others not?

- Which platform coops add to social cohesion and which are just a source of conflict?

- How can platform coops scale up?

Methodology in regard of this research, an analysis of the landscape will be conducted based an extensive database with some data of 150 platform coop initiatives. Besides this, there will be a case study of 10 platform coops that facilitate a peer2peer transaction in the local services sector (cleaning, courrier, etc.) to get an understanding of the succes factors and motivations behind these initiatives.

Key Findings Although the research is still ongoing, the next findings can be shared as a draft:

Classification Although the assumption when starting the research was that platform coops are the ‘cooperative version of Uber and Airbnb’, I discovered that there p2p is only one of the 3 categories in the platform cooperativism movement:

1. platform co-op – ICA-compliant co-ops that manage an online platform, sharing ownership

and governance over it - digital first 2. co-op-run platform – ICA-compliant co-ops that manage and primarily do business through

an online platform 3. shared platform – Enterprises that share some meaningful ownership or governance over an

online platform

Possibly more interesting is to have a look at platform cooperatives (platform coop, co-up-run platform and shared platform) classified from a supply perspective on the nature of the transaction on how the stakeholders cooperate. This angle is missing in the analysis of the database by its creators:

Single supply to single demand (multi sided marketplace)

● c2c (like almost all co-up-run taxi platforms, Stocksy, Fairmundo, but also all worker coops that make use of software of Up&Go and Applicolis)

● b2c (like almost all car sharing coops)

● b2b (like Up&Go, Applicolis)

Collective supply to single demand

● crowdfunding platform

● data aggregation platform: members deliver individual data and benefit from the collective wisdom. (like MIDATA, Grower Information Services Platform, YieldPoint)

Collective supply to collective demand

● crowdsourcing platform

● collective buying

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’

Single supply to collective demand

● ‘traditional’ agency (like Co-op Source Foundation, Savvy)

● service provider (like Webarchitects, CoMetrics)

● software and hardware development (Softcoop.org, AbilityMate, ARK, CideSolid)

Single supply to single demand (multi sided marketplace) Focussing on the category Platform Coop in the category single supply to single demand, I have created a (under construction) definition:

Definition A platform cooperative can be described as a “multisided marketplace with an individual (peer) as demand in which the initiative is organized in a cooperative way and the primary enabler of both transaction and governance is online.”

Landscape The three key ingredients of a platform cooperative single supply to single demand are:

1. A cooperative entity, or the ambition to become one; 2. Digital first: digital is de main enabler for transactions and both ownership and governance

take place digitally; 3. A platform which facilitates the individual end client / consumer.

When we centralize platform cooperative single supply to single demand and repeatedly remove one of the three key ingredients, this landscape becomes visible:

● 1 + 3 = coop-run platform. Frequently, an existing cooperative deploys an app to better service their customers, but nothing changes fundamentally. One example of this occasion is a taxi cooperative investing in their own app, but retains a call center to and picks up clients out in the field;

● 1 + 2 = coop run SaaS platform. A cooperative who, frequently functions as an IT company, offers (cooperative) organizations a software solution (Software as a Service). One example of this occasion is Up&Go: an IT cooperative facilitating existing worker cooperatives in New York with an online booking and reputation tool;

● 2 + 3 = a traditional platform of which the ownership and governance is distributed among the users according a cooperative structure.

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’

Other findings:

- Platforms with cooperative structures usually have, in the case of a commission (‘fee’) model,

a lower commission than non-cooperative platforms. Besides, we also see examples of subscription models; - Platform cooperatives are frequently those platforms on which work and the full transaction is

performed digitally. Coop-run platforms seem to function better for platforms facilitating physical gigs, like taxi rides or home services; - Although platforms with a cooperative character secure the interests of the workers, it isn’t

always clear if this affects the other important stakeholder of the platform: the client and other indirect stakeholders in society; - The question is: In how far do platforms with a cooperative character profit from larger scales,

or do they rather prosper by modest sizes.

Contribution to the Academic Debate

Theoretically, necessary insights form the transaction cost theory about cooperatives as well as platforms exist, however not specifically on platform coops. Platform cooperatives are new and differ from traditional cooperatives in that capital assets usually remain in the hands of the individuals. Purchases and prices, however, can be commonly coordinated, as far as is allowed under current competition laws. So, new academic questions arise on how such platforms function, how these differ from traditional cooperatives, and which economical and societal benefits might be associated with these kinds of platforms.

Societal Relevance

The societal relevance is high, because (hyper local) platform coops could be an alternative to monopolistic platforms evading regulations and the democratic process (Van Dijck et al. 2016; Frenken et al. 2017). Also the SER (report ‘Mens en Technologie’, 2016) and the Rathenau-institute (report ‘A Fair Share, 2017’) point out the shortage of scientific insight in platforms and the urge to substantiate future policy scientifically.

Abstract research ‘Platform Cooperatives: Opportunities and Obstacles’