On May 15, 2020, Facebook Inc. announced its acquisition of GIPHY, an online database and search engine for short looping videos without audio, known as GIFs. The proposed deal is raising concern for some that GIPHY could increase Facebook Inc.’s access to consumer data and provide insight into users’ activities on competitors’ platforms, both of which could potentially give it an advantage in the digital advertising market. Facebook Inc. is currently under scrutiny by Congress and antitrust authorities.
The Impact of Facebook Inc.’s Acquisitions on Its Position in the Digital Advertising Market
Facebook Inc., founded in 2004, is primarily known for Facebook, a website and app where users can share information, photos, and other content with other selected users or the general public. Its revenue comes primarily from selling ad placements to advertisers who wish to reach users of its platforms. In 2019, advertising accounted for 98.5% of its $71 billion of revenue. Because advertisers can target individual users with digital ads, owners of websites and apps, such as Facebook Inc., have incentives to collect consumer data to improve ad targeting by better identifying users who are likely to be interested in a particular ad.
Facebook Inc. has expanded its business with at least 85 acquisitions since 2004. Some of its well-known acquisitions include Instagram, a photo-sharing platform, in 2012, and WhatsApp, an encrypted messaging platform, in 2014. Facebook Inc. is reportedly spending $400 million to acquire GIPHY. The amount is relatively small compared to some of its past acquisitions: it spent $19 billion for WhatsApp and $1 billion to purchase Instagram.
Acquiring additional platforms may give Facebook Inc. greater access to users’ information. It can collect information from more users if the acquired platform’s users do not use its other platforms. Acquisitions can also help it obtain richer data about individuals by combining information obtained across its platforms. However, GIPHY’s business design may make it difficult for Facebook Inc. to obtain individual user data.