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Meta has no choice but to sell Giphy at $262M loss to Shutterstock

The deal

Shutterstock announced today its definitive agreement to buy Giphy for $53 million, seven months after Meta said it would accept the CMA’s ruling that it must divest Giphy. Shutterstock said the deal is expected to close in June and is “subject to customary closing conditions.”

The deal should assuage trepidation from Giphy, which encouraged the CMA to enact behavioral ordinances rather than force Meta to sell Giphy. The animated images company feared GIFs just weren’t as cool as they were in 2020, and so the platform would mostly attract “weak or inappropriate” suitors.

“User sentiment towards GIFs on social media shows that they have fallen out of fashion as a content form, with younger users in particular describing GIFs as ‘for boomers’ and ‘cringe,’” Giphy told the CMA in August.

Giphy urged the CMA, which had to approve Meta’s Giphy sale, to wait for a buyer with “industry knowledge and experience managing a group of young tech engineers, product managers, and staff.”

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Shutterstock gettin’ Giphy wit it

It’s unclear how “young” Shutterstock’s team is, but Giphy’s library will at least be an appropriate inclusion in the stock image provider’s library. Meanwhile, Shutterstock hopes to expand more into consumers.

Shutterstock plans to incease its API ecosystem with Giphy’s 14,000-plus API/SDK integrations. It will gain 1.7 billion daily users implementing more than 1.3 billion searches daily and generating 15 billion daily media impressions, including across the Giphy website and app, today’s announcement claimed.

The New York City-headquartered company will also add new partners, since Giphy is integrated with business platforms like Microsoft Teams and Slack and social media ones like TikTok and SnapChat. Meta has also signed a deal to continue leveraging Giphy’s API.

Further, Giphy has partnered with media entities, including Disney, NBC, and Netflix, and sports leagues, like the NFL. Shutterstock hopes to use these to grow its marketing and advertising potential by getting consumers to use relevant GIFs and stickers in “casual conversations,” Shutterstock CEO Paul Hennessy said in a statement.

“We plan to leverage Shutterstock’s unique capabilities in content and metadata monetization, generative AI, studio production and creative automation to enable the commercialization of our GIF library as we roll this offering out to customers,” he said.

According to CNBC, Shutterstock shares rose almost 2 percent during Tuesday’s morning trading.

Meta’s loss

After losing its appeal, a “disappointed” Meta accepted the CMA’s ruling, which represented the first time a global regulator undid a finished Big Tech deal, as noted by CNBC.

The CMA argued that Meta, which also bought WhatsApp and Instagram, could restrict competitors from accessing Giphy content, threatening monopolies in the GIF and social media marketplaces.

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The regulator also emphasized Giphy’s growing display advertising business, noting that Meta owns nearly half of the UK’s display advertising. However, Reuters in October reported that “Giphy had no presence in the sector in Britain.”

Giphy had also argued that competitors Tenor and Gfycat were allowed to be acquired by Google and Snap, respectively.

Regardless, Meta is poised to be out $262 million, plus the nearly $69.6 million fine the CMA imposed in October 2021 after making merger moves without approval and the $2 million fine it followed up with in February 2022.

“It was Facebook’s decision to complete the merger before getting CMA clearance,” Tom Smith, a former CMA legal director and current partner at London’s Geradin Partners, said, according to TechCrunch.

“You can complete your merger, but the trouble is, if you do complete your merger, you take the risk that the CMA will start investigating after the fact and make life difficult for you by making you keep the two companies separate, and possibly at the end of all that, make you sell the company you’ve just bought.”

All this lost money may not make a giant like Meta lose too much sleep, but there’s a broader concern about what the forced sale of Giphy means for future Big Tech acquisitions and tech innovation.

“This could result in reduced investment and startup formation in the digital economy, internationally as well as in the UK, given the CMA’s extra-territorial reach,” Kayvan Hazemi-Jebelli, competition and regulatory counsel for the Computer and Communications Industry Association Europe, told Ars Technica in October.

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Microsoft is already feeling the impact of the CMA’s reach as it searches for a way to acquire Activision after the CMA blocked its acquisition last month.

For its part, Meta in October said that, despite the CMA’s ruling, it would continue to look into acquisition opportunities related to the UK and beyond.