Formerly under the Facebook brand, Meta acquired image-sharing platform Giphy for $315m in 2020. Giphy’s successful model of easily accessible, high quality gifs and search engine appealed to Meta due to its vast library and the ability to implement into Meta’s product offering, but British regulators have fears over the platforms working together due to Meta’s already growing social media portfolio.
Although the purchase of Giphy was far from the largest acquisition the social media giant has ever completed (the company purchased WhatsApp for $19bn in 2014), it is its first high-profile deal which government officials have attempted to reverse.
Meta likely to appeal the decision, though history says it will be upheld
The UK’s Competition and Markets Authority (CMA) has ruled that the acquisition was unfair. In August, the CMA said that competition would be negatively impacted if the acquisition was to be upheld, as Meta’s control over Giphy could allow it to cut off competitors access to GIFs. As a result, on November 30, the ruling stated that Meta must now sell Giphy following the decision.
The impact on Meta will not be particularly damaging, but the company has said it is considering its options and could very well appeal the decision. However, the company was already in hot water with the UK regulator as it was fined $70m in October 2021 for failing to outline the company’s compliance with the initial enforcement order (IEO), a standard practice for all acquisitions in the UK.
Competition a real threat to Meta’s growth
As a result of the colossal size of Meta and its ever-growing presence in a variety of industries, the company will face stringent rules the larger it becomes. Facebook’s revenue in 2020 was over $85bn. Advertising revenue among all social media platforms in 2020 was $41.5bn, and through acquisitions like that of Giphy, Meta’s market share would only ever expand and therefore it faces challenges from regulators.
The CMA’s decision is the first of its kind, with the British regulator having not ever reversed a completed deal among the big tech companies. This means it could set a precedent for companies that dominate tech market share like Meta, Alphabet and Amazon, for future acquisitions.