The experience of Deliveroo shows how not all platforms are equipped for volatility, any notion of platformisation must take this into account. This, among other themes, will be subject of discussion in a workshop hosted by PERC on 26-27 Nov 2020. To participate, see our Call for Abstracts.  

The pandemic produced unforeseen volatility and Deliveroo, a UK food delivery platform, has faced it like few other companies. On the verge of bankruptcy in March, the company is now looking to hire 15,000 new gig workers after a massive surge in demand. This is more than just a peculiar, individual case. Rather, it is emblematic for the funding infrastructure on which the platform economy rests and the intermediary logic that is propelled by it. The way in which the pandemic amplified these characteristics gives us clues about the platform economy’s future trajectory and the progression of platformisation.

Many platforms remain unprofitable for an extended period of time. What seems to defy any sound logic of running a business is made possible by a robust flow of risk capital. Venture capital (VC) funds are enabling this ‘growth before profits’ strategy. They do so by making equity investments into a portfolio of highly risky companies without a proven product and high growth prospects. This approach pays off if a small number of portfolio companies generate outsized returns.

Deliveroo might turn out to be one of those. To this day, the food delivery company has raised a total of $1,5 billion from investors and was valued at $2 billion in 2017. Besides that, it grew at breakneck speed with a revenue increase of over 100,000% between 2013 and 2016. This amount of funding was necessary to sustain its eye-watering losses, which reached $284 million in 2018.

Considering the absence of profits, one might wonder how such lofty valuations can be justified. As valuations reflect all future earnings expectations discounted to today’s value, platforms have demonstrated an outstanding ability to put themselves at the centre of investors’ imagination of the future. Platforms’ intermediary position between different groups of end users plays an important role here. As the mediator between different user groups (in Deliveroo’s case restaurants, riders and diners), they make themselves indispensable as the number of users grows. Deliveroo is operating on a commission-based business model, i.e. charging restaurants for every transaction they facilitate, which is potentially highly lucrative once a company dominates its market. Besides that, intermediaries are in an excellent position to collect and analyse data that travels across their platforms.

When the UK went into lockdown in March 2020, the above-mentioned characteristics of the platform economy amplified two divergent effects. When revenues started plummeting, unprofitable platforms found themselves burning through their cash reserves at a much faster rate than expected. Only the Competition and Market Authority (CMA) lending provisional approval of Deliveroo’s latest funding round averted bankruptcy, on the basis that the company was a failing firm. Despite that, 15% of Deliveroo’s permanent workforce were made redundant.

On the other hand, the importance of platforms as intermediaries increased during lockdowns. Positioned between different groups that faced disruptions to their everyday lives and business, platforms became essential to coordinate adaptation to the ‘new normal’. This was aided by their highly questionable treatment of workers leaving many without PPE, the desperation of restaurants to quickly join a delivery infrastructure, and customers having few options besides ordering takeaway.

Against this background, the question arises whether the pandemic has lastingly boosted platformisation, “the penetration of the infrastructures, economic processes, and governmental frameworks of platforms in different economic sectors and spheres of life.” This is an important question, as it would mean that platforms advance into new territory and more power is concentrated in private hands.

If platformisation is understood in the cultural sense, the reorganisation of culinary practices is readily apparent: Already before the pandemic, Deliveroo suggested menus to restaurants based on the data they gather about food trends. Restaurants are optimised for takeaway and accessibility for riders. For many, the logical consequence of these developments are dark kitchens that entirely do away with restaurants’ front end. Deliveroo’s latest hiring spree suggests that consumers’ adaptation to this vision of dining has been fast-tracked by the pandemic.

In the economic sense, one notices that platforms have moved into the provision of more and more essential services. Deliveroo partnered with supermarkets like Morrisons and M&S to provide food for people in isolation. Whether this service can be sustained after the pandemic remains to be seen. It surely would, in combination with the surge in normal food deliveries, raise the question when platforms effectively become utilities and should be regulated as such.

Perhaps the most worrying aspect is that it’s not entirely clear whether the new setup is sustainable for any party involved. Selling food is a small-margin business and restaurants hardly make enough on every order given that Deliveroo charges a commission of up to 35%. Meanwhile riders are not hired as employees but contractors, missing out on essential worker protections. And despite this squeeze, Deliveroo has been unprofitable for most of its history. Except for a small increase in convenience for diners, this setup doesn’t seem to be working for anyone at the moment.

Lastly, how far platformisation can proceed appears to depend on the willingness of venture capitalists and similar investors to fund the vision of a fully platformised economy and society. While many platforms doubtlessly benefitted from the changes to everyday life in the past six months, platforms in sectors like home rental and micro mobility largely fell out of favour. This underlines the importance of financiers in stirring the fate of platforms.


Nils is a PhD candidate at the Department of Politics and International Relations at Goldsmiths. He also coordinates the PERC graduate network.