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Facebook Have Bought Giphy For $400m - Why Did The Tech Giant Do It?

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Earlier this year Silicon valley giant Facebook announced that it would be acquiring the GIF meme based company, Giphy, for a sum believed to be $400million.

Facebook's dominance in social media is not only attributable to the fact that they were one of the first social media companies, but is largely due to their aggressive pursuit of up and coming companies who were taking a sizeable chunk of the market share.

Whatsapp, Instagram are the two prominent examples of apps that were making significant inroads to Facebook's dominance. After both of their acquisitions, Facebook turned their another rising star, Snapchat, before getting rejected.

As we all know Mark Zuckerberg doesn't take rejection well. In response to the Snapchat failure, Facebook went on to build Instagram Stories...demonstrating that if you don't join them they will go after you.

We Got History

This aggressive takeover strategy is actually a very astute approach and one that is predicated on past mistakes of other social media companies, namely MySpace.

MySpace was one of the first social media companies to gain a mainstream audience during the mid 2000s and the company's future looked to be in safe hands following Rupert Murdoch's takeover. Their over-confidence was perhaps symbolised in their flat-out rejection of a proposed purchase for the up-and-coming, new kid on the block, Facebook.

The proposed deal was going to be for $75 million dollars...ouch.

The rest, as they say, is history and MySpace has seen a very public and long drawn out decline into the tech wilderness. It got so bad that Murdoch vowed never to invest in a social media company again.

This was something that stuck with the young Zuckerberg and as he didn't want to become the next MySpace, hence his proactive approach to acquiring companies he believes are going to be the next big thing.

Giphy the new Instagram?

When the news of the purchase of Giphy came out in May, many were puzzled as it didn't really fit in with the previous acquisitions.

Not only is over 50% of Giphy traffic already coming from Facebook, the product itself, GIF images, are easily reproduced and is something Facebook have the ability to do in house, very quickly.

So why buy it - are Facebook just buying everything that gets close to a billion dollar valuation?

Giphy's capacity for advertising is limited as it would detract for the nature of the product, i.e. a quick, easy, lightweight meme type image to express a quick message.

Would memes really be as popular if you had to watch a commercial before you see it?

Disney did attempt an innovative way to monetise the image format when promoting the new Star Wars by adding Star Destroyer's over user generated memes but if they had nothing to do with the underlying image they looked completely out of place. Advertising via this platform doesn't seem to be something that would work.

If they can't really be monetised why has this deal gone through?

The Most Valuable Commodity - User Information

Although their product could be reproduced by Facebook in an instant, what makes Giphy stand out from their competitors is that they are the first choice of the major social media companies.

Twitter, TikTok, Apple, Snapchat all use the platform and the acquisition will give Facebook some incredible insights in to their competitors users data.

Memes and gifs have exploded in use over recent years and they have sparked a new wave of creativity to promote messages in business, life and politics. If Facebook can get a detailed insight of the personality of those using the product on all platforms, it could have huge implications for their own marketing platform and if that is the case the acquisition may have already paid for itself.
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