Facebook may be forced to sell Giphy one year after buying it
arstechnica.com
arstechnica.com
Something bodies like the CMA often struggle to get is the "evidence of harm" which validates their concerns.
Your story is a real example of a competitor or business actor being harmed in precisely the way the CMA hypothesised. It's absolutely worth writing a response to them, explaining your story and what happened, and whether you support their proposed remedy.
Facebook and all their lobbyist friends will be submitting responses saying they entirely disagree and this action will cripple the digital economy and nobody will gain from it. You can explain how you are a rival in the ecosystem, and were actively harmed by their actions that the CMA has hypothesised could happen. Having people affected get in touch and do this can really help the CMA to justify standing firm with their findings in the face of the lobbyist doomsayers.
Please take the effort to document this and write the CMA.
If you do, I'll send you $100. I know that's not much, but this is important and worth the effort.
CMA = Competition and Markets Authority (a UK regulatory body)
https://en.wikipedia.org/wiki/Competition_and_Markets_Author...
You should. These kind of situations are exactly what they'll need to show to move this forward.
History has proven such a commitment isn't worth the paper it's written on, and the UK watchdog is right to assume Facebook would change its mind down the road.
It's grating to see the web app being intentionally limited just to pump their giphy usage numbers.
Like when they said it was impossible to cross data from Facebook and WhatsApp (both services ask for your phone number!), and when they later promised never to cross data between the two.
I can understand if the CMA could apply stipulations to the deal to address their concerns like "You must offer an API to other platforms that matches your internal usage."
But Giphy is a money-losing company that can't exist independently any longer. Forcing a sale to another company/investor when they have zero leverage is a negative outcome for the Giphy team and product.
That's just business. No one says a business has to be successful or profitable.
It's not that different from environmental regulations that stop companies from just dumping toxic waste in rivers. Properly disposing of waste might make a business unsuccessful.
I'm not saying it's wrong in some general philosophical sense, but you've taken a useful phrase and turned it into a useless one.
Mafias can run businesses without government regulation or consent, with employees, payroll, logistics, even internal regulations - a black market is still a market.
In other words, if you want good outcomes, you sometimes need the government. (Yes, I realize the government can make things worse and not only better; this is also true of the private sector.)
How far language has shifted, that it has instead become a term to refer to a market where nobody removes them.
Like telling Apple it’s not allowed to vertically integrate its mobile appliance or guarantee a curated walled garden as part of its market offering.
Just people's incomes, livelihoods, pensions, etc.
1. These are great ways to create and be able to cash out for founders
2. These are great ways to grow something you cannot because small companies dont have as much money, and because jumping from one VC round to the next is very risky.
3. Many of these companies create immense global value and could not possibly have gotten to where they are w/o the resources of a FAANG (think YouTube, WhatsApp) -- and if you think otherwise, where are the competitors? (I mean...this isnt like cell phone contracts, you can switch chat clients or video streaming sites easily)
Something that the CMA has recently become incredibly aware of is the power of network effects (and how they can be used to create a moat around one innovative and well-funded early-mover that prevents another equally innovative company from succeeding in the same way).
Especially where the network effect is used with deliberate non-interoperability in mind (chat clients, and the corresponding protocols that all originated from XMPP, but diverge sufficiently to prevent interoperability, as an example), they seem increasingly interested in the competition factors at play, as it allows one dominant player to entrench that dominance and can lead to an uncompetitive marketplace.
Where default settings are used to win marketshare across markets (see browser defaults, search defaults, etc.), this is one of the specific areas they like to investigate and act on.
At a recent talk, one of the heads of the CMA explained their goal here - it isn't to ruin the tech sector, but rather to ensure that new and innovative tech companies can succeed today, and in the future, without today's entrenched tech players having a de-facto veto on their success, or the ability to acquire and sink or subsume them.
The CMA doesn't want to see innovative new companies forced to get the permission of entrenched players (through platform business models and other control-yielding constructs we see being created today) to innovate - this is one of the reasons they're also looking very closely at Apple and their app store platform model, since it disallows competition and has been designed to give them a self-selected (not free-market) rent that helps them maintain their position. Decoupling the lock between the phone and the app store platform would force price competition and lead to new and innovative options, and a more dynamic market.
While this seems an unpopular view in the tech world, it's probably worth contextualising that in 2012, the average lifespan of an S&P 500 listed company was 15 years, and this has been falling since the 1920s... Today's tech giants shouldn't last forever, and newer S&P companies tend to out-perform older ones. A dynamic market that doesn't allow FAANMG to try to preserve themselves forever will likely see more growth and opportunities in the long run.
At the same time, though, i'm seeing literal pursuit against innovation.
I'll note WhatsApp specifically. Before WhatsApp, sending an SMS to my grandmothers overseas cost $0.25 per message. Domestic SMS were $0.10. My college networking professor testified to the atrocity of markups by the telcos (http://content.time.com/time/business/article/0,8599,1921373...) which were something like 5000%
Worse, there was no guarantee the message actually arrived. There was no double-checkmark GD, so you had no idea if it arrived. If it didnt arrive, both carriers would claim nothing was wrong, and just reaching customer service would be an hour on hold; you still got charged. Good luck calling grandma overseas, it would be a $50 for a one hour call unless you signed up for yet more un-cancellable international calling plans.
We could argue that WhatsApp should have worked with the carriers and created something interoperable, but i'd argue that the status quo before WhatsApp was downright criminal exploitation of the masses, especially the poor. WhatsApp created a new system, perhaps not using standard protocols, but it works. It has worked 100% of the time for me AFAIK.
Have you considered that the real opposition here is not from any customer but rather from the status quo of older companies unable to retain monopolies?
RE WhatsApp, I don't disagree it has done a world of good in disrupting the telcos. RE the CMA (the example from before), they definitely dont' give entrenched interests like telcos an easy ride (https://www.gov.uk/government/news/cellnex-and-ck-hutchison-... for one that looks to be blocked from selling their tower assets to Cellnex). They're not afraid of shying away from big interests like in pharma either (https://www.gov.uk/government/news/cma-fines-pharma-firm-ove...)
I definitely think WhatsApp has moved the needle and been a genuine power for good for disrupting meaningless usage-based billing. You can see this in mobile networks - at least in the UK, many don't even bother to meter and bill for calls and SMS now, since WhatsApp has utterly disrupted anything other than "unlimited". By eliminating the billing systems for most use, you also cut costs of running the network!
I think the question for competition regulators comes down to whether or not it's "healthy" (from a competition/societal perspective) for WhatsApp to be bought by Facebook, the owner of FB, Instagram and Giphy. And to then be able to acquire anyone else that emerges. It's interesting to see the CMA focus on Giphy's advertising offering being withdrawn post-acquisition, and suggests to me they might be focusing on tangible "acquire-to-disrupt".
As an innovator, acquisitions are obviously an important exit route to create a liquidity event, but I do fear that the market focuses too much on acquisitions from a limited pool of companies, and that we need to see a broader spectrum of acquirers, so we don't end up with a "Standard Oil" type situation. Acquisitions aren't the only exit route, though any move to limit acquisitions will (at least for the short term) likely reduce late-stage company valuations due to fewer options for founders. It seems likely that restrictions or increased scrutiny on M&A would likely lead to more tech IPOs down the line.
So what you're saying is, you'll note as someone who has benefitted from the current system.
> any of these companies create immense global value and could not possibly have gotten to where they are w/o the resources of a FAANG (think YouTube, WhatsApp)
Huh? Both of those were immensely valuable and successful before they were acquired by a FAANG. In fact, subjectively, the user experience on YouTube - which is, of course, the ACTUAL value of YouTube - has gone downhill since they were purchased. And WhatsApp was an extremely successful competitor to a Facebook product before Facebook purchased them.
> if you think otherwise, where are the competitors?
Stifled by the anti-competitive practices of the FAANGs?
I wonder if you might be a tad bit biased. Just a tad.
Yes, this is hackernews. I'm noting that having a consistent group of buyers for small technology companies is a good thing for...well...hackers. This entire forum is hosted by YC which fosters small technology companies. The entire forum has a bias -- most of us are technologists, many are entrepreneurs, many are small technology business entrepreneurs. I'm specifically noting that having consistent M&A is a benefit to all hackers -- and note that M&A is a choice, but it is nice to have a choice. You do realize that 30yrs ago, most hackers were relegated to the back-room while others accrued all the winnings right?
Also, not sure if you've run a small company before, but its easy to create good technology with value and be unable to actually have a profitable business. Two major reasons are 1. many users dont want to pay the break-even cost, 2. legal and administrative costs for customer agreements, master servicing agreements, advertistors, etc
Before Google acquired YouTube, they were bleeding cash on network/hosting fees. There was no monetization strategy, and unless money was going to be airdropped monthly, they would probably have shut down. They had <1% of the content they have today. They could theoretically go from VC round to round, but it isnt clear how that is better than an acquisition where the business was fostered into what it is now.
Finally, w/r/t competitors. YouTube isnt like my mobile phone bill, or my broadband bill -- i'm not locked into a 2yr contract. Switching to a competitor is as easy as opening another tab on a browser. Which competitor do you suggest that offers equal value and how is YouTube hurting them?
I watch classical concerts on YouTube. I suppose I could go buy a flight to London and purchase opera tickets, but i'm not sure if that is a better deal. I could rent DVDs of performances, but the selection at the local video store is nil. I can line up examples.
There are just some services that are simply not profitable until you reach a massive scale.
Frankly, whether YouTube would've succeeded on its own or not is irrelevant, as is whether Giphy would succeed on its own or not.
1. https://www.wsj.com/articles/viewers-dont-add-up-to-profit-f...
They are bought and integrated or killed by giants.
In this case this sets precedent that no other social media operation can buy Giphy. Who else could buy it and somehow make it work as a losing money asset in that case?
This is essentially the government saying: "you have to sell this back to someone but you cannot sell it to other social media companies, so you probably have to sell it for pennies to some private equity or shut it down". In what free market economy does that make sense at all?
Luckily FB can afford to lose 400MM, but what a horrible precedent this sets for the M&A activity in the tech industry.
Who says that "financial reasoning" trumps other concerns, like privacy, accessibility, or human rights? Reducing everything to financial gain/loss analysis may sound nice in your Accounting 101 class, but in the real world people exist.
Even the CMA's statement is focusing solely on competition concerns.
I'm not dismissing any other potential concerns that may arise from this, but I fail to see how this isn't just a case of "FB bad so let's fuck with FB".
Someone already mentioned it here, but why didn't Google's acquisition of Tenor received similar scrutiny? Just to be clear, I'm not arguing in favor of FB or anyone. My argument is against governments disrupting free market through unfalsifiable hypotheses of how an acquisition is gonna unwind and impact the competive landscape.
In this particular case it's clear to me that financial reasoning is needed to force the reversal of an acquisition.
Google didn't try control competition by locking down tenor.
Says who? And even if they couldn’t exist independently they could still be acquired by another company.
Edit: Actually I kind of walk this back. I don't think Tenor has ever stopped providing the same service in an open manner (i.e. via their API), which would be needed to make the argument that there is a competition concern somehow.
In the realm of social media, FB is much more dominant.
Companies that are more dominant, almost by definition deserve more anti-trust scrutiny.
The closer a company is to being a monopoly, in that specific market, the more that anti-monopoly laws will come in to play.
When it comes to large deals there is always a lot of politics that comes with it well beyond the economics too.
Do you think Facebook are going to even look at a complaint coming from somewhere like the Estonian competition regulator, that represents 1.3 million people? I doubt it, but when it comes from the EU that represents 446 million people it's a different story.
It's also good for business too, as you only need to meet one set of regulations instead of one for each country.
Is it just selling what people have searched for? (Or I suppose, informing facebook)
Is there really enough data in gif search patterns to be monitizeable?
*Yes*
(And I ask as someone in the UK; not trying to bash, genuinely curious about regulators and international issues)
Facebook acquires Instagram, WhatsApp and Oculus. Regulators: crickets
Heck, it's entirely independent of the United States to boot.
We don't want another AOL|TimeWarner - we also don't want another _Dark Sky_...
Hence the stronger action against them now.