Whenever a new online medium gains momentum — whether it’s photo-sharing (Instagram), messaging (WhatsApp), live video (Meerkat), ephemeral stories (Snapchat) or social audio (Clubhouse) — Facebook is sure to follow. So it was no surprise when the company announced last week a near-clone of Substack, the fast-growing newsletter platform that connects notable writers directly with subscribers.
But how, skeptics wondered, could Facebook — whose relationship with journalists is notoriously frayed — compete against a start-up that has built its reputation on catering to writers’ needs?
The answer, it turns out, is by offering them financial terms that Substack can’t match. Substack makes money by taking a 10 percent cut of writers’ revenue. Facebook’s cut of subscriptions on its newsletter platform, Bulletin, will be a tidy zero percent, at least for now. And it paid best-selling authors such as Malcolm Gladwell and Mitch Albom to sign on for the launch. “The goal here is to support millions of people doing creative work,” Facebook chief executive Mark Zuckerberg told reporters.
Those familiar with Facebook’s track record could be forgiven for suspecting that the company is motivated by something more than altruism here. Bulletin may indeed be a useful tool for writers, many of whom will surely welcome the pressure on competitors to lower their fees. But it is also emblematic of a tactic that Facebook and other tech giants have often employed to quash competitors as they expand their business empires into new markets.
From Google Photos to Apple TV Plus to an Amazon subscription service that offered discount diapers, the world’s wealthiest companies routinely launch new products free or at money-losing costs that smaller rivals can’t manage without going out of business. Whether that’s an unfair business practice that merits antitrust scrutiny or just good old-fashioned competition depends on whom you ask — but the tide may be turning toward the former.
For decades, U.S. courts have taken a hands-off attitude toward what was once known as “predatory pricing,” partly on the theory that lower prices are good for consumers regardless of the motivation. If a company wants to take a loss on a product in hopes of gaining market share, the free-marketeer’s thinking goes, that’s its prerogative. A problem arises only if it later corners the market and raises prices — in which case, new competitors should spring up to force them back down anyway.