Following an investigation, the CMA has raised concerns about the merger between Facebook (which is the largest provider of social media sites and display advertising in the UK), and Giphy, the largest provider of GIFs. If the CMA’s competition concerns are ultimately confirmed, it could require Facebook to unwind the deal and sell off Giphy in its entirety. There are two elements to the CMA’s concerns: the impact on social media platforms; and on digital display advertising.
Social media platforms
The CMA has provisionally found that Facebook’s takeover of Giphy will have a negative impact on competition between social media platforms.
Each day, millions of posts on social media sites include a GIF. The CMA says that any reduction in the choice or quality of the GIFs could significantly affect how people use the sites and whether they switch to a different platform, such as Facebook. As most major social media sites that compete with Facebook use Giphy GIFs, and there is only one other large provider of GIFs (Google’s Tenor), these platforms have very little choice.
The CMA provisionally found that Facebook’s ownership of Giphy could lead it to deny other platforms access to its GIFs. Alternatively, it could change the access terms. For example, Facebook could require Giphy customers, such as TikTok, Twitter and Snapchat, to provide more user data to access Giphy GIFs. This could increase Facebook’s market power, which is already significant. The CMA estimates that Facebook’s platforms (Facebook, WhatsApp and Instagram) account for over 70% of the time people spend on social media and are accessed at least once a month by 80% of all internet users.
Digital display advertising
The CMA says that before the merger, Giphy was offering innovative paid advertising in the US, which had the potential to compete with Facebook’s own display advertising services. This allowed companies to promote their brands through visual images and GIFs. Giphy was also considering expanding its advertising services to other countries, including the UK. This would have brought a new player into the advertising market and a potential challenger to Facebook. It would also have encouraged greater innovation from others in the market, including social media sites and advertisers. However, Facebook terminated Giphy’s paid advertising partnerships following the deal. This means that an important source of potential competition has been lost.
The CMA says this is especially concerning, taking into account Facebook’s existing market power in display advertising. The CMA assessed that Facebook has a share of around 50% of the £5.5 billion display advertising market in the UK.
As well as being investigated by the CMA, the merger is also being reviewed by other competition authorities. The CMA is working with those agencies. It now welcomes responses from interested parties to its provisional findings by 2 September 2021 and its notice of possible remedies by 25 August 2021. These will be considered before the CMA issues its final report, which is due by 6 October 2021.
