Platform Extraction Economics and the Case for Cooperative Alternatives

Digital platforms extract value from communities at rates 3-10x higher than traditional businesses, draining approximately $45 more per $100 spent compared to local alternatives. This research quantifies the economic mechanisms that make platform extraction faster and more damaging than traditional corporate rent-seeking, analyzes the structural barriers preventing cooperative alternatives from emerging, and provides framing strategies to position cooperative infrastructure as market-compatible alternatives—not socialism. The evidence demonstrates that cooperative platforms are economically viable, with proven models like Stocksy (50-75% to creators vs. 15-20% at Getty), Drivers Cooperative (15% commission vs. Uber's 33%), In These Times and Mondragon (€11B revenue, 70,000 worker-owners) Wikipedia offering templates for community-controlled digital infrastructure.

Why digital platforms extract value faster than Home Depot ever could

The fundamental economic difference between traditional and digital rent extraction lies in information velocity, near-zero marginal costs, and algorithmic control. When Home Depot enters a community, it extracts value through quarterly profit repatriation and wage arbitrage—processes that unfold over fiscal cycles. Digital platforms extract value in milliseconds, with every transaction generating data that compounds their competitive advantage while simultaneously transferring wealth to distant shareholders.

Academic research has identified four specifically digital forms of rent-seeking that traditional corporations cannot replicate. Enclave rents derive from constructing digital ecosystems that lock users into particular techno-economic arrangements. Expected monopoly rents leverage present expectations of future dominance to performatively achieve monopolistic outcomes. Engagement rents monetize user attention through algorithmic segmentation. Reflexivity rents exploit the ability to change platform rules mid-game— Taylor & Francis Online something a physical retailer cannot do once a store is built.

The quantitative difference is stark. Civic Economics studies across multiple U.S. cities consistently show that independent local retailers recirculate 48-53% of revenue locally, while national chains retain only 13-14%. American Booksellers Association Amazon recirculates approximately 3.9-5.8%— IndieBounda roughly 10x difference. The Institute for Local Self-Reliance estimates that Amazon has displaced the equivalent of 136,000 storefronts and 1.1 billion square feet of retail space, American Booksellers Association with a net loss of 1.7 million retail jobs nationwide. IndieBound Amazon's marketplace fees alone extracted $155+ billion from sellers in 2023, Institute for Local Self-Reliance with the company's total take rate climbing from 19% in 2014 to 45% in 2023— The American Prospecta trajectory impossible for physical retail to match.

Nick Srnicek's foundational work on platform capitalism explains the mechanism: lean platforms like Uber and Airbnb "attempt to outsource nearly every possible cost" leaving only "a bare extractive minimum—control over the platform that enables a monopoly rent to be gained." This is why DoorDash can charge restaurants 25-30% commissions Switchgear Marketing on orders from customers the restaurant already cultivated, while providing no inventory, bearing no food costs, and classifying drivers as independent contractors to avoid employment obligations.

The tax architecture that enables platform extraction

The 2018 Supreme Court decision in South Dakota v. Wayfair fundamentally changed digital platform taxation by establishing that economic nexus alone—not physical presence—can trigger sales tax collection obligations. Bloomberg TaxAccounting Insights States can now require remote sellers meeting threshold requirements (typically $100,000 in sales or 200 transactions) to collect and remit sales tax. Sales Tax Institute Accounting Insights A 2022 Journal of Public Economics study found this increased state sales tax revenues by 7.9%. Wikipedia

However, platforms retain significant structural advantages. Property taxes apply only to physical assets, meaning local restaurants pay property taxes while DoorDash operating in the same market pays none. Worker classification allows platforms to shift the full 15.3% self-employment tax burden onto drivers while avoiding employer payroll contributions. Optima Tax Relief Most importantly, profit shifting enables platforms to locate intellectual property (algorithms, brand value) in low-tax jurisdictions. European Commission research found the average effective tax rate for tech businesses was only 9.5% versus 23.2% for traditional businesses. Tkfd

Chicago's approach to digital taxation illustrates both the possibilities and limitations. The city extended its Amusement Tax to streaming services, Getsphere creating a combined tax rate on Netflix of 17.75% (6.25% state sales tax + 1.25% city sales tax + 10.25% amusement tax). LegalClarity This generated $148.4 million in 2021, up from $40 million in 2017. Illinois Policy Chicago also applies an 11% Personal Property Lease Transaction Tax to SaaS and cloud software. Getsphere These taxes demonstrate that municipalities can capture some platform value, but they apply to consumer-facing services rather than the B2B marketplace extraction that characterizes Amazon, DoorDash, or Uber.

Marketplace facilitator laws now exist in all 45 states with sales tax plus Washington D.C., shifting sales tax collection responsibility from individual sellers to platforms. Sales Tax InstituteNumeral This simplifies compliance but doesn't address the core extraction problem—platforms still capture 25-50% of transaction value before any taxes apply, while local businesses facing the same tax obligations must also maintain physical locations, employ W-2 workers, and build customer relationships from scratch.

Why cooperative digital commons remain rare despite obvious need

The combination NTARI envisions—cleanroom development, Janus-facing architecture, AGPL-3 licensing, municipal mesh networks, and multilingual broadcast policies—remains rare because each component faces structural barriers, and combining them multiplies coordination complexity exponentially.

Capital access is the primary barrier. Cooperatives cannot accept traditional venture capital because they offer no equity stake with increasing share value and cooperative principles prevent outside financial control. Springer Stocksy United required $1 million in personal investment from co-founders because VCs had nothing to invest in. Resonate, the music streaming cooperative, raised only 20% of its €50,000 crowdfunding goal. Meanwhile, Uber raised $25+ billion before its IPO, enabling it to subsidize rides below cost for years to eliminate competition—a strategy cooperatives cannot replicate.

Network effects create winner-take-all dynamics that favor first-movers with capital to achieve critical mass. The Austin cooperative rideshare experience demonstrates this: when Uber and Lyft left Austin over regulatory disputes, Ride Austin thrived. When they returned, scale won. As platform cooperativism researcher Nathan Schneider observed: "It ended up losing out to scale...I've already got Lyft installed on my phone."

Municipal broadband preemption directly blocks one component of the NTARI model. 16-17 states have laws restricting or prohibiting municipal broadband, enacted at telecom industry behest. Nevada limits municipal telecommunications to cities under 25,000 people. Tennessee bars municipalities without electric utilities from providing internet. Communitynets A 2015 FCC attempt to preempt state laws failed in court. The Biden infrastructure law theoretically requires state BEAD plans to ensure participation from municipalities and cooperatives, but NTIA has not enforced this requirement.

Open source sustainability faces the free-rider problem. As the Open Technology Fund notes, "Despite the critical role that open source technologies play...they are perpetually under-funded and under-supported." The organization can only support "up to four projects" in sustainability grants of $150K-$400K, "forced to turn away hundreds of applicants each year." Maintainer burnout is endemic—the reward for creating valuable open source is getting overwhelmed by bug reports without compensation.

Several platform cooperatives have achieved sustainability despite these barriers. Stocksy (stock photography) reached $10.7 million revenue and profitability almost immediately by differentiating on curation quality and paying artists 50-75% royalties versus industry-standard 15-20%. Drivers Cooperative achieved $6.1 million revenue in 2022 (12x growth) Wefunder by charging only 15% commission versus Uber's 33%, In These Times giving drivers 8-10% more per trip. These successes suggest viable paths exist—but require exceptional execution, niche focus, or markets temporarily abandoned by VC-backed competitors.

Distinguishing cooperatives from socialism in clear economic terms

The economic distinction between cooperative ownership and nationalization is precise and defensible. Cooperatives maintain private property rights (held by members), compete in markets (not replace them), feature democratic governance (by users, not government), and distribute surplus to participants (not shareholders or taxpayers). Nationalization involves society-wide public ownership with centralized bureaucratic control and surplus distribution via social dividend to all citizens.

This is not theoretical—132 million Americans are credit union members, institutions holding over $2 trillion in assets that compete directly with for-profit banks. 42 million Americans receive electricity from rural electric cooperatives serving 56% of the nation's landmass with $45 billion in annual revenue. Wikipedia These are not government programs; they are private, member-owned businesses that emerged because investor-owned alternatives failed to serve certain markets.

Early free-market libertarians explicitly supported cooperatives. Thomas Hodgskin, Herbert Spencer, Lysander Spooner, Benjamin Tucker, and other 19th-century libertarian theorists "looked forward to the displacement, total or partial, of the wage system...in favour of an economy in which workers were generally either independent proprietors or members of labour cooperatives—a world without bosses." Bleedingheartlibertarians The Libertarian Party platform today explicitly defends "the right of individuals to form corporations, cooperatives and other types of companies." Wikipedia

AGPL-3 licensing uses intellectual property law to enforce terms, making it an exercise of property rights rather than a rejection of them. GNU.org explains: "You don't give up your copyright on it; the program is still copyrighted and you are its author. Rather, copyleft uses copyright law, but flips it over to serve the opposite of its usual purpose: instead of a means of restricting a program, it becomes a means of keeping the program free." Red Hat's $34 billion acquisition demonstrates commercial viability. MongoDB originally used AGPL, proving the model supports billion-dollar businesses.

The recommended framing emphasizes choice and ownership: "We believe in property rights—so much that we think users should own the services they depend on, not distant shareholders. We believe in markets—so much that we think consumers deserve more choices, including the choice to be owners. Cooperatives aren't anti-capitalist; they're what capitalism looks like when ordinary people exercise their freedom to organize as they choose."

The unit economics prove cooperative platforms can compete

Cooperative platforms demonstrate viable unit economics by eliminating investor return requirements. The Drivers Cooperative charges 15% commission In These Times versus Uber's effective 33.2% take rate, Economic Policy Institute enabling drivers to earn 8-10% more per trip while the cooperative remains financially sustainable. Stocksy pays photographers 50% on standard licenses and 75% on extended licenses—among the highest in the industry—while achieving profitability almost immediately on $1 million initial capital.

The difference in where surplus flows explains why cooperatives can offer better terms while remaining viable. Extractive platforms must generate returns for investors; Uber's entire business model requires extracting enough from drivers and riders to eventually satisfy shareholders who funded billions in losses during market capture. Cooperative platforms distribute surplus to members, meaning lower take rates don't compromise sustainability—they fulfill the mission.

Mondragon Corporation proves cooperative principles scale. This federation of 257 cooperatives employs 70,085 people, Wikipedia generated €11.2 billion in sales and €593 million net profit in 2023-2024, TU Lankide with a maximum 5:1 executive-to-worker pay ratio (versus 344:1 U.S. corporate average). Mondragon's internal bank, Laboral Kutxa, generated €222 million profit in 2023, Co-operative News demonstrating that cooperative finance can support cooperative enterprise.

Capital requirements for cooperative platforms are dramatically lower than extractive alternatives. OpenEdition Stocksy launched with $1 million; Drivers Cooperative secured seed funding from CDFIs, credit union loans, and crowdfunding Wikipedia totaling hundreds of thousands—not billions. Open source foundations reduce development costs by leveraging community contributions; Drivers Cooperative built its app on Google Maps, Stripe, and Waze infrastructure Wikipedia rather than custom-building everything.

Alternative success metrics reframe cooperative economics around community benefit rather than extraction. REI measures success partly by the $210 million returned annually to its 25 million members. REI Mondragon tracks worker retention during crises—when subsidiary Fagor failed, 1,710 of 1,800 workers were redeployed within the federation rather than laid off. Wikipedia Credit unions measure member benefit through rate advantages over banks, not shareholder returns.

Quantifying what communities lose to platform extraction

For a hypothetical city of 100,000 residents spending $28 million annually through platforms (DoorDash, Uber/Lyft, Amazon), platform extraction calculations show approximately $12-13 million leaving the community annually through commissions and fees alone. If the same spending went to local businesses with 48% retention rates versus platforms' 5%, the community would retain an additional $12 million in local economic activity—money that would circulate through local wages, local suppliers, and local tax bases.

The calculation methodology draws on Civic Economics' Local Multiplier Effect framework, which tracks direct impacts (business spending locally), indirect impacts (local suppliers' spending), and induced impacts (employee spending). Portland, Maine research found that shifting just 10% of consumer spending from chains to local businesses would generate $127 million in additional local economic activity—a 7x multiplier effect.

Specific extraction rates by platform reveal the scale of value transfer. Amazon's total marketplace fees reached $150+ billion in 2024, representing roughly 50% of what third-party sellers receive. The American Prospect DoorDash's Premier tier charges restaurants 30% commission— UpMenuGreg Brianand with typical restaurant margins of 10-15%, delivery orders often generate zero profit for the restaurant Switchgear Marketing while DoorDash extracts value from both the restaurant relationship and customer relationship the restaurant built. Uber's effective take rate of 33.2% Popmenu means drivers receive only 47.5% of what passengers pay after platform fees and driver expenses. Economic Policy Institute

Municipal software provides concrete cost comparisons. Cities, counties, and school districts spent $2.2 billion with Amazon in 2023— Institute for Local Self-Reliancenearly fourfold increase since 2016—despite alternatives like Phoenix maintaining near-zero Amazon spending for over a decade by prioritizing local suppliers, and Tempe cutting Amazon spending by 84% after similar policy changes. Open source alternatives to proprietary government software eliminate licensing fees while enabling customization—the Canadian government's 2012 transition from proprietary to open-source Drupal for its national web platform demonstrated the viability of this approach.

Conclusion

The economic case for cooperative digital infrastructure rests on quantifiable advantages in community wealth retention, worker compensation, and long-term sustainability. Platform extraction is not inevitable—it reflects specific institutional choices about ownership, governance, and surplus distribution that cooperatives structure differently. The $45 per $100 difference in local economic recirculation between cooperative/local businesses and extractive platforms represents an enormous transfer of community wealth Grassroots Economic Organizing that policy and institutional innovation can redirect.

The barriers are real but not insurmountable. Stocksy succeeded by combining founder capital with niche differentiation. Start Drivers Cooperative succeeded by targeting a market temporarily abandoned by extractive competitors. Mondragon succeeded through inter-cooperation among federated cooperatives sharing capital and labor. WikipediaInstitute for Local Self-Reliance Municipal broadband preemption can be challenged through federal advocacy or worked around through alternative infrastructure models. Open source sustainability can be addressed through government funding for public infrastructure, as Matrix.org Foundation and others advocate.

The framing challenge requires precision: cooperatives are not socialism because they maintain private property (held by members), compete in markets, and emerged from voluntary association rather than government mandate. Wikipedia AGPL licensing uses property rights to enforce reciprocity. Credit unions and rural electric cooperatives have operated within American capitalism for a century, serving Solar United Neighbors 170+ million Americans without requiring anyone to abandon market economics. The question is not capitalism versus socialism but rather which institutional structures within capitalism best serve community interests—and the evidence strongly favors distributed ownership over extractive platforms.