Giphy Under Threat? Possible Facebook Divestment Unpacked

In recent times, GIFs have become a staple on social media and messaging platforms everywhere. These days, GIFs are an important part of almost every type of communication app, whether it’s for work, dating, or keeping up with friends.

Behind all the funny reaction GIFs of most of your favorite online platforms is the GIF search engine,Giphy . With the largest library of independent GIFs in the world, it’s no surprise that Meta (formerly Facebook) is fighting to have ownership over it.

That is, before the UK’s Competition and Markets Authority (CMA) decided to block Giphy’s sale. So, why did the CMA do it?

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Giphy’s Acquisition by Facebook

With millions of people using Giphy through its platforms, Facebook made a strategic move to acquire it for $315 million in May 2020. However, the CMA has now blocked this acquisition in a bid to protect fair competition among tech companies.

Aside from the social media and messaging platforms under Facebook, Giphy also services social media sites like TikTok, Snapchat, and Twitter with its database of GIFs. In addition, Giphy is also available on messaging services like iMessage, Slack, Signal, and Telegram.

It’s important to note that many of these services are direct or indirect competitors of current Facebook-owned companies.

According to the CMA, Giphy’s acquisition by Facebook can lead to several limitations that will affect the competitiveness of other social media and messaging apps.

The CMA believes that the acquisition could lead to less traffic for its competitors and create a preferential treatment for platforms owned by Facebook instead.

After all, there’s nothing stopping Facebook from putting caps or removing access to its full library of GIFs for its competitors.

Meta’s Appeal to Keep Giphy

Since Giphy’s acquisition,the Facebook group of companies has been renamed to Meta . However, its subsidiaries like Facebook, WhatsApp, and Instagram maintain their original branding.

When Facebook first attempted to acquire Giphy in mid-2020,50% of Giphy’s search engine traffic already came from the Facebook group of companies, with half coming from Instagram. In its defense, Meta notes that Giphy has “no meaningful audience of its own” and has been unprofitable since its founding.

Related:Facebook Buys Giphy: Should You Worry About Your Personal Data?

Meta claims that its powerful infrastructure, talent, and resources are crucial to Giphy’s overall growth and capacity to improve its services. With its support, Meta grounds its appeal on its ability to serve everyone, including its competitors, by developing Giphy to its full potential.

Unfortunately, the investigation has not been going smoothly for Meta. According to apress release by the CMA , Meta has repeatedly failed to provide the required updates regarding its compliance, which resulted in a $70 million fine.

Notably, this is the first time the CMA has ever fined a company for “consciously refusing to report all the required information.” Aside from this, there was also an additional fine of $700,000 due to Meta’s swapping of its Chief Compliance Officer twice without prior approval.

Why Giphy Plays a Key Role in a Healthy Social Media Ecosystem

Similar to any language, the way internet users express themselves changes with time. From simply saying “haha” to using emojis and stickers, GIFs play a big role in how the next generation of internet users share their thoughts or feelings.

For this reason, it’s no surprise that the CMA called Meta out on its possible monopoly on GIF database, Giphy. While not inherently profitable, its expansive library and existing integrations across platforms make it a force to be reckoned with.

While the results of Meta’s appeal is still not out yet, Giphy will definitely remain as a heavily used feature for every platform that it is available on. For now, we can be sure that Instagram, WhatsApp, and Facebook will have the perfect GIF for every reaction.

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