Meta & Giphy | image credits BBC

Giphy Inc., a popular platform for sharing animated images commonly referred to as GIFs, which was acquired by Meta Platforms, Inc. in 2020 in a deal worth $400 million will now be sold to Shutterstock Inc.

Meta, the company behind social media platforms Facebook and Instagram faced regulatory scrutiny from UK’s Competition and Markets Authority (CMA).

Shutterstock Acquires Giphy for $53 Million

According to a Tuesday announcement, Shutterstock and Meta have reached an agreement for the former to acquire Giphy in a cash deal worth $53 million. This means that Facebook will be absorbing a massive loss after making only 13% of the money it put up to buy the GIF search engine.

In 2022, the UK competition watchdog requested that Meta sell Giphy amid fears of the acquisition harming “its rivals and removing a potential competitor in advertising,” Reuters reported in October.

According to a related report by TechCrunch, the regulator had initially demanded Meta sell Giphy in November 2021. However, Meta vehemently fought the order in court, delaying the sale by at least a year.

“There is a high risk that the only purchasers interested in acquiring the Giphy business (if any) will be weak or inappropriate,” Meta argued as it fought to keep Giphy under its umbrella. “Each of Adobe, Amazon, Apple, Bytedance, Kauishou, Snap, and Twitter indicated their willingness to discuss the opportunity but none of these discussions proceeded beyond initial contacts.”

Meta would later agree to sell the company in October after the competition authority lodged the first successful campaign, forcing an American tech behemoth to sell a company it had already bought.

Despite Meta agreeing to divest its ownership in Giphy, the CMA issued another order in January, which set the timelines for the sale to be concluded. It is generally believed the Mark Zuckerberg-led tech giant was given six months to relinquish its ownership in the GIF search engine platform.

Furthermore, the competition bundled a condition in the order that Meta should sell its entire stake in Giphy in one transaction.

Another headache Facebook’s parent company faced was selling to a party that would keep Giphy’s business in operation and that the regulator was expected to approve the new owner.

Although Shutterstock shares, trading under the ticker SSTK, had fallen by 1.46% at market close on Tuesday, they traded 0.79% higher after hours, as observed on Yahoo Finance.

Shutterstock is not expecting a windfall in Giphy’s revenue this year; however, it would be going back to the drawing board to ramp it up starting in 2024.

“This is an exciting next step in Shutterstock’s journey as an end-to-end creative platform,” Shutterstock CEO Paul Hennessy said.

Shutterstock Makes Good on Its Expansion Plans

Shutterstock, one of the top global providers of high-quality licensed images, videos, and music, empowering creativity through an extensive, diverse content library and user-friendly digital platform, said it would embark on a roadmap that allows it to expand the scope of the content types it currently offers.

Jarrod Yahes, the company CFO reaffirmed the goal in February which may also explain the decision to buy Giphy. The acquisition allows Shutterstock to hit the ground running offering animated images via the GIF search engine.

This particular deal also came at the right time, giving Shutterstock the upper hand in the negotiations, knowing very well that Meta was in a tight corner to sell Giphy within the shortest time possible.

Considering Meta, which has been exploring AI deeply, bought the GIF platform for $400 million in 2020 only to sell it at $53 million less than three years later, Shutterstock was determined to squeeze the American tech for the value left in Giphy.

Meta Sold Giphy Without the CMA’s Approval

According to Tom Smith, a former legal director at the CMA but currently a partner at the London-based law firm Geradin Partners, only Meta is to blame for the situation the company found itself in with the CMA.

In the UK, companies are allowed within the law to complete mergers without the CMA’s green light. However, Meta should have considered the possibility of problems cropping up, especially being one of the largest tech companies in the US.

“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,” Smith added. “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.”

Although Shutterstock is exploring its options in artificial intelligence following the launch of ChatGPT and other related chatbots like Bard, the company’s main focus remains human-generated images.

Giphy’s acquisition is also not a magic bullet, with Shutterstock expecting minimal revenue contribution from the GIF search engine over the next six months.

“Giphy is expected to add minimal revenue in 2023 with focused monetization efforts taking place over the course of 2024,” the company said.

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