15 Fifteen months ago, Facebook said it was buying the popular GIF search engine Giphy for about $400 million. The UK’s Competition and Markets Authority has launched an antitrust investigation into the acquisition and may have found that the deal is doomed.
In a preliminary findings report published Thursday, the CMA said the deal should be unwound because it will “negatively impact competition between social media platforms.”
The following is the CMA’s reason for blocking Giphy.
“Millions of posts on social media sites include a GIF. GIF quality and choice could have a significant impact on how users use these sites and whether they choose to switch to Facebook. These platforms are limited in choice because most of the major social media sites competing with Facebook use Giphy GIFs, and Google’s Tenor is the only large provider of GIFs.
CMA prognosticated that Facebook’s ownership over Giphy could cause it to block access to other platforms to its GIFs. It could also change the terms of access. For example, Facebook could ask Giphy customers (TikTok and Twitter) to provide more data to access Giphy GIFs. These actions could boost Facebook’s already substantial market power.
The CMA does not support the logic behind someone switching to Facebook for GIFs. The CMA claims that Giphy ended those plans when Facebook announced the deal, which lowered competition in the market.
In past submissions to CMA, Facebook refuted the idea, citing internal documents Giphy and is submitted to the agency. In May, Facebook wrote in a filing to the watchdog that Giphy had “no meaningful audience of its own” and was already “reliant on Facebook for a significant proportion of its user traffic.”
According to sources familiar with the matter, Giphy had raised $150 million in funding in its eight-year history but struggled to make a profit. It also did not have the funds to pay for the purchase price it received from investors. It agreed to be sold at a lower price than its prior valuation by investors, indicating that it was no longer viable as an independent company.
“We disagree [with the CMA’s] preliminary findings, which are not supported by the evidence,” a Facebook spokesperson said to The Verge, adding the company “will continue working with the CMA to address the misconceptions that the deal harms competitors.”
GIPHY’S EMPLOYEES ARE STUCK IN A HOLDING PACKET
Since the announcement of the deal with Facebook, Giphy’s over 100 employees have been in a holding mode. According to someone familiar with the arrangements, they have not been permitted to become Facebook employees. However, Facebook has been paying Giphy’s bills to keep it running. Facebook already paid for most Giphy stock under the terms of the deal, but a portion that was withheld to ensure employee retention is still in doubt. (A Facebook spokesperson declined to comment to discuss financial matters related to Giphy.
Regardless of whether Facebook allows Giphy to be bought by it, this deal shows that Facebook may have ended its era in social media-related acquisitions. Its latest version customer to be acquired for $1 billion platforms that provides customer service for businesses called. Multiple countries are currently reviewing the antitrust status of this acquisition, and it could be blocked. Facebook has only been able to make acquisitions in the past few years. Related to its virtual and augmented reality efforts.