As watchdog orders Meta to sell Giphy, have we seen the last of the gif?
Billion Dollar Boy’s Ed East dissects the UK competition regulator’s recent ruling and considers whether reintroduction of gifs as a potential ad tool could open up new revenue streams for Giphy.
Without us really noticing, gifs have been on a slow and secret decline right in front of our eyes – like a reversing Homer Simpson, retreating into a bush. This week’s ruling by the Competition and Markets Authority (CMA) to force Meta to sell gif platform Giphy may be the final nail in the coffin.
Ever since it purchased Giphy back in 2020, Meta has been defending the $315m acquisition against accusations from the UK competition regulator that it could harm social media users and advertisers.
The final ruling on Tuesday found that the deal could be limiting access to gifs for other social media platforms, “making those sites less attractive to users and less competitive”. The decision is designed to break up Meta’s monopoly in the UK market – it owns almost half of the £7bn display advertising market in the UK, with Meta platforms also accounting for 73% of user time spent on social media.
So, what next for Giphy and Meta?
The CMA review found that: “The only way to address the significant impact the deal would have on competition is for Giphy to be sold to an approved buyer."
And while Meta seems clear on its next steps, having reacted to the news quickly by announcing it "will work closely with the CMA” on divesting Giphy, the decision does leave both looking like the gif of a confused John Travolta from Pulp Fiction.
Earlier this month, in its filing with the CMA, Giphy appealed against the breakup of the deal arguing that no other company would buy it – essentially, an admission by the company that it’s facing extinction due to declining popularity, which is an unusual move for a multimillion-dollar business.
But the stats don’t lie. Giphy’s valuation is down by $200m from its peak in 2016 and the collapse of the Meta deal leaves it in a potentially vulnerable position.
Are gifs too uncool to survive?
The decline in valuation reflects an overall decline in the use of gifs since the deal, with Giphy itself saying they had “fallen out of fashion”, with younger users describing them as a ‘cringe’ content form ‘for boomers’. Cue Chrissy Teigen grimacing at the 2015 Golden Globe Awards…
As a result of the collapsed deal, we may see their fall from popular culture quicken. Despite the CMA’s decision theoretically democratizing gifs by allowing more platforms to feature them, it’s unlikely they will be adopted by the platforms currently most popular among younger generations of consumers, such as TikTok and BeReal.
Replacing the need for gifs, video-first platforms such as TikTok offer advanced and user-friendly editing functions, which have made it increasingly easy for users to record, compress and send video content formats.
Younger users are also using social media platforms such as BeReal to interact with each other in a very different way, preferring to share original and authentic content rather than recycling the same old gifs you tend to see over and over again with outdated references from The Office US to Barack Obama.
Across other platforms, the popularization of emojis has also allowed users to quickly express emotions, further cementing the fate of gifs.
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How the industry and Giphy will adapt
But all is not lost for Giphy and the marketing industry. In its ruling, the CMA has said it is considering allowing UK companies to promote their brands through gifs – a service that has previously been available in the US. This could potentially open up new revenue streams for Giphy and create new advertising opportunities for brands.
The CMA also found that the deal with Meta had “removed Giphy as a potential challenger in the UK display advertising market, preventing UK businesses from benefiting from innovation in this market”. The reintroduction of a potential ad tool for UK businesses and the ability to innovate could be further cause for celebration.
While it might be that gifs are no longer trending and their current trajectory is fizzling out, gifs do have a place – for now. They’re still a common feature in my conversations with friends and family, and if that makes me a boomer then so be it.
But if gifs are to remain relevant and not only survive but thrive post-CMA ruling, Giphy will have to adapt and brands will need to be smarter with how they incorporate gifs and target gif content based on audience age demographics.
Ed East is the founder and group CEO of Billion Dollar Boy.