Facebook’s acquisition of Giphy would reduce competition in the display advertising market space. Also, Giphy is no longer a potential challenger. This is what the UK’s Competition and Markets Authority (CMA) decided.
Display advertising suffers because of the acquisition
So, the CMA concluded that Facebook’s purchase of Giphy is causing a loss in competition.
The panel members expressed concern that Facebook could limit other platforms’ access to Giphy GIFs. Thus, it would drive even more traffic to their own websites.
At this moment, the company’s websites account for 73% of user time spent on social media in the UK. The members also noted that the social media giant could change the terms of access for other social media platforms. In their opinion this might happen in order to obtain more user data when their competitors want to use Giphy GIFs.
Facebook ”killed” Giphy’s advertising services
Giphy was launching innovative advertising services before the merger. These new tools allowed companies to promote their brands through visual images and GIFs. So, the CMA appreciates that the merge seriously affects digital advertising.
The CMA believed that Giphy’s advertising services may have competed with Facebook’s own ads. They would have also encouraged innovation from other companies in the market.
Facebook terminated Giphy’s advertising services at the time of the merger. CMA sees this as troubling, because Facebook controls nearly half of the £7 billion display advertising market in the UK.
So, the Authority consulted with interested businesses and organizations. Thus, it concluded that the only way to address its competition concerns is for Facebook to sell Giphy. Moreover, it mentioned it should sell it in its entirety to an approved buyer.
According to Stuart McIntosh, chair of the group, the tie between the two companies „has already removed a potential challenger.” So, this affected the display advertising market.
He also added that this might allow the social media giant increase its already huge marketing power. This would happen by ”controlling competitors’ access to Giphy GIFs.”
Moreover, he thinks this action would protect „millions of social media users and promote competition and innovation in digital advertising”
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