Meta, the parent company of Facebook, has sold Giphy, an animated graphics company, at a significant loss following an order from the UK competition regulator to divest the startup due to competition concerns. Stock image service Shutterstock has announced that it will acquire Giphy for $US53 million ($80 million) in cash.
Giphy, which boasts 1.7 billion daily users and partnerships with major platforms such as Facebook, Instagram, WhatsApp, TikTok, and Twitter, will continue to provide content to Meta’s platforms under the deal.
Shutterstock sees this acquisition as an opportunity to expand its audience reach beyond professional marketing and advertising use cases and delve into casual conversations.
CEO Paul Hennessy believes that incorporating Giphy into Shutterstock’s offerings will facilitate this expansion and cater to a broader range of users.
The transaction is expected to be finalized next month and could potentially result in a substantial loss for Meta. Meta initially acquired Giphy in 2020 for a reported sum of $US400 million ($605 million).
The UK’s Competition and Markets Authority (CMA) launched an antitrust investigation into the acquisition due to concerns about the potential negative impact on competition in the UK market for GIFs, which are widely used for messaging and social media posts. In 2021, the competition watchdog ordered Meta to reverse the deal.
Despite Meta’s appeal, the UK regulator maintained that selling Giphy to an approved buyer was the only way to prevent a significant detrimental effect on competition in the market.
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Meta, formerly known as Facebook, has accepted the UK Competition and Markets Authority’s decision regarding the acquisition of Giphy.
While declining to comment further on Shutterstock’s acquisition, Meta stated in an October statement that it was disappointed with the UK regulator’s ruling but acknowledged it as the final word on the matter.
The company remains committed to exploring alternative opportunities, including acquisitions, to foster innovation and provide choices to users worldwide.
The CMA’s decision to block Meta’s acquisition of Giphy sets a significant precedent in the tech industry, as it marks the first time the watchdog has sought to unwind a tech deal.
This landmark ruling reflects concerns that the acquisition would harm social media users and advertisers by stifling competition in the animated images market.
It also establishes a framework for similar regulatory actions, as evidenced by the recent blocking of Microsoft’s purchase of Activision Blizzard over concerns of impeding competition in the fast-growing cloud gaming sector.