Facebook’s Meta Is Forced To Sell Giphy 

Charles Oladimeji
On Tuesday, Meta, the parent company of Facebook, reluctantly divested its animated image creation division, Giphy, following the issuance of a conclusive ruling by U.K. competition regulators.
Meta’s Official Logo. Photo: Dima Solomin | Unsplash

In 2021, Meta acquired Giphy for a significant sum of $315 million. However, due to the intervention of the Competition and Markets Authority (CMA), Meta was compelled by regulatory forces to sell Giphy completely to a suitable buyer. Shutterstock was quick to swoop in and recently emerged as the buyer, acquiring Giphy Inc. from Meta for a reduced amount of $53 million.

This sale represents a considerable financial setback for Meta, considering the original investment made by Facebook during the acquisition. The decision to sell Giphy was driven by the CMA’s assessment that allowing Meta to retain ownership of Giphy could potentially harm competitors like Snapchat Inc. and Twitter, who heavily rely on Giphy’s content. It garnered support from numerous tech enthusiasts who opposed Meta’s monopolistic agenda and approach.

Meta’s Move To Reduce Expenditure 

Facebook Previously Acquired Giphy. Photo: Pixabay | Pexels

Similar to other major tech companies, Meta has actively pursued strategies to reduce expenditures and boost profitability. Primarily, this has involved discontinuing underperforming projects. Despite declarations dating back to 2012, that sharing GIFs was outdated, GIFs continue to maintain significant popularity across various online platforms. For several years, Meta engaged in a protracted conflict with the CMA concerning the ownership of Giphy.

Although Meta may have intended to phase out Giphy eventually, being compelled to do so by a UK regulatory authority was not the preferred course of action. Giphy had a flourishing advertising business that Meta chose to discontinue after purchasing the company. Concerning social media companies, the primary concern was Meta’s ability to control access to a highly popular GIF search engine and database.

There was apprehension that Meta could either restrict its competitors’ access to Giphy or demand user data from them as a condition for utilizing Giphy’s GIFs on their respective platforms. Despite Meta’s appeal, the CMA reaffirmed the ruling, necessitating the reversal of the acquisition and compelling Meta to divest itself of Giphy’s global operations. Meta made a statement that “we are disappointed by the CMA’s decision but accept today’s ruling as the final word on the matter. We will work closely with the CMA on divesting Giphy.”

Future Tech Acquisitions 

Meta Headquarters, Menlo Park, California. Photo: Isriya Paireepairit | Flickr

The clash between Meta and the CMA is groundbreaking, as it marks the first time a global regulator has undone a major tech company’s acquisition. This incident strongly suggests that such actions will become more commonplace. Previously, Meta did not take the CMA seriously, as the company had been fined multiple times for disregarding the CMA’s initial enforcement order and neglecting to provide the required updates.

In fact, the CMA stated that it was the first time they had to penalize a company for deliberately withholding essential information. Many tech companies were caught off guard by the situation, as they hadn’t anticipated a UK regulator’s ability to influence a decision involving two American companies. The European Union (EU) has been making significant efforts to regulate the largest tech companies. Their Digital Markets Act is set to take effect in November, followed by the Digital Services Act in 2024.

Two years ago, the UK established a dedicated unit within the CMA to oversee digital markets, aiming to implement a new regulatory framework for the most influential digital firms. It’s crucial for other tech companies, especially those from the United States, to pay attention to these developments, as they could face similar consequences as Meta and Giphy. Countries worldwide, including the UK, are actively combating excessive dominance and monopolies within the tech industry. 

Do let us know what you think about the sale of Giphy by Meta in the comments section below.


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