Meta sold Giphy: A prized acquisition for Shutterstock?

Meta's sale of Giphy proves to be a valuable acquisition for Shutterstock, as it expands the creative platform's capabilities. Discover the significance of this strategic move and the potential it holds for Shutterstock's future endeavours.

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Meta, Inc. (NASDAQ: META), the parent company of Facebook, is frequently making headlines due to its continuous financial setbacks, whether it’s in terms of revenue or market capitalization. CEO Mark Zuckerberg’s dream project, the Metaverse, has already cost the tech company so much more than originally anticipated. Adding to their financial woes, Meta sold Giphy to Shutterstock, Inc. (NYSE: SSTK) at a loss of $262 million.

The development leads us to the question of why has Meta decided to sell Giphy, given that it is the world’s largest repository of GIFs and stickers, attracting over 1.3 billion daily search queries and facilitating over 15 billion daily media impressions.

Meta sells Giphy: A loss-making acquisition

Facebook acquired Giphy for approximately $315 million in November 2021. The acquisition aimed to enhance the user experience on Facebook and Instagram by introducing a new level of visual expression.

One interesting fact is that prior to the acquisition, Facebook disclosed that half of Giphy’s traffic originated from the Facebook family of apps, with Instagram playing a significant role in driving this engagement.

However, despite its immense popularity and user engagement, the social media giant had to sell it for just $53 million.

Experts believe that the sale of Giphy is not a strategic decision by Meta, but rather a response to a regulatory order that came from Britain’s Competition and Markets Authority (CMA) in October 2022. This authoritative body mandated Meta to divest Giphy in order to prevent potential anti-competitive behaviour and ensure fair access to Giphy’s content for rival platforms like Snapchat Inc. and Twitter.

In addition, CMA also hinted that Meta’s acquisition of Giphy might have been motivated by a desire to stifle Giphy’s emerging display advertising business, which had the potential to provide UK businesses with a greater variety of options for display ads. Meta, however, denied this, stating there is no evidence supporting this claim.

The CMA, in a press release, highlighted that Meta already held a substantial share, approximately 50%, of the UK’s £7 billion display advertising market.

Consequently, Meta had to sell Giphy at a significant loss of $262 million within two years of its acquisition. Today, Shutterstock revealed that it has entered into a definitive agreement to acquire GIPHY, Inc. from Meta Platforms, Inc. for a cash payment of $53 million upon completion, which includes working capital.

“There is a high risk that the only purchasers interested in acquiring the Giphy business (if any) will be weak or inappropriate. 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 said.

What’s in it for Shutterstock?

The acquisition of Giphy by Shutterstock signifies an exhilarating milestone in the company’s evolution as a comprehensive creative platform. With this strategic move, CEO Paul Hennessy expresses immense enthusiasm as it extends Shutterstock’s influence beyond professional marketing and advertising realms, and forays into more informal conversations.

What sets this acquisition apart is Shutterstock’s intent to harness its distinct competencies in content and metadata monetization, generative AI, studio production, and creative automation. By leveraging these strengths, the company aims to monetize its extensive GIF library and present customers with exceptional creative possibilities.

Nevertheless, amidst the excitement, Shutterstock maintains a pragmatic outlook regarding this acquisition. The company recognizes that Giphy’s contribution to its overall revenue in 2023 will be marginal. Therefore, Shutterstock is fully dedicated to implementing targeted monetization strategies throughout 2024. This demonstrates their acknowledgement of the long-term potential and value of Giphy, as they strategically plan to optimize its revenue-generating capabilities in the forthcoming years.

Interestingly, Shutterstock’s shares rose as much as 4% premarket.

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