On Friday, Facebook announced that it bought GIF sharing network Giphy. Giphy makes searching for and sharing animated GIF images easy. It’s already built into a number of chat services, including Facebook, Slack, and many more. Now, Facebook says it’ll be a part of Instagram. This could mean more GIFs on your feed, but it could also mean other services will have to license Giphy’s search service. Axios reports that Facebook spent $400 million on the deal. Facebook would recuperate that expenditure through increased use on their platforms, licensing, and advertising revenue.
A bipartisan group of senators, including former presidential candidates Senator Elizabeth Warren (D-MA), and Amy Klobuchar (D-MN), as well as Senator Josh Hawley (R-MO) have spoken out against Facebook’s purchase of Giphy. Facebook is already a large, monopolistic company that some, including Senator Warren, believe is in violation of antitrust laws. The company gobbles up competitors and uses its position to squash competition it can’t purchase.
It seems that’s happened again. Will anyone stop it this time?
Hurting Competition
Giphy claims that their search will not become exclusive to Facebook as part of the deal, though it still could in the future. Instagram reportedly accounts for 25% of Giphy’s traffic, with Facebook’s other apps accounting for an additional 25%. For now, the other half won’t notice a change, but seeing as those users are competitors to Facebook, such as Twitter, TikTok, Tinder, and Skype, Facebook could exert control over their competition now. For example, they could require that users of these services share some data with Facebook through their API, allowing Facebook to track users across services. The value this would add to Facebook’s ads over their competition is immeasurable. It could lead to the collapse of the revenue structure of other companies.
Vertical Integration and Antitrust Laws
Left: Mark Zuckerberg. Photo Jessica Chou/NY Times. Right: Chris Hughes, Facebook cofounder. Photo Damon Winter/NY Times.
Vertical integration is one of the biggest examples of monopolistic behavior. It’s when a company buys up their suppliers, allowing them to lower their prices for themselves. They’ll charge other companies more, effectively ensuring that only the company that has vertically integrated their supply chain can prosper. This happened with the large railroad monopolies in the United States. Now, it’s happening in tech.
Facebook doesn’t just buy out suppliers though. They’ve directly purchased competition. When the VPN they purchased revealed that Instagram and WhatsApp were siphoning off users, Facebook bought both companies. Facebook shows a clear pattern. If they can’t buy a company, they push it out of business with their power over the online supply chain.
Politicians Skeptical
![Screenshot of a Facebook post with a video that shows "[These three companies] Run the Internet" with an image of a box with a lowercase 'a' (Amazon), a magnifying glass with a 'G' (Google), and a speech bubble with an 'f', Facebook.](https://i0.wp.com/leafandcore.com/wp-content/uploads/2019/03/Screen-Shot-2019-03-18-at-8.27.48-AM.png?resize=491%2C454)
Elizabeth Warren has been outspoken about breaking up big tech monopolies. However, she’s not alone this time. In fact, even one Republican has spoken out against the deal.
“Facebook keeps looking for even more ways to take our data. Just like Google purchased DoubleClick because of its widespread presence on the internet and ability to collect data, Facebook wants Giphy so it can collect even more data on us. Facebook shouldn’t be acquiring any companies while it is under antitrust investigation for its past purchases.”
– Republican Josh Hawley, of Missouri
A spokesperson for Elizabeth Warren called out the timing of the purchase. Because this is happening during a crisis, Facebook is attempting to avoid the scrutiny such a deal deserves.
“Facebook’s acquisition is yet another example of a giant company using the pandemic to further consolidate power – this time it’s a company with a history of privacy violations gaining more control over online communications”
– A spokesperson for Elizabeth Warren
This mirrors a complaint earlier made by a group of democrats, including Warren and Klobuchar, as well as Rep. Alexandria Ocasio-Cortez (D-NY) and Rep. David Ciciline (D-RI). Earlier last week, they pushed to halt all large mergers during the COVID-19 pandemic. Republicans haven’t been on board. They’ve stated that preventing such large mergers would be damaging to the economy. That’s why it’s surprising that Hawley has sided with Democrats when Facebook is concerned. Of course, Republicans are distrustful of the network, as Facebook has, on numerous occasions, spoken about banning hate speech and implementing fact checking, two movements that Republicans take issue with. However, Facebook has refrained from taking action on hate speech.
These politicians may attempt to block the merger, but similar attempts have failed recently. T-Mobile and Sprint, for example, recently completed their merger. This took away two of the more affordable cellular carrier options in the United States, and will likely lead to an increase in pricing for service.
The Facebook monolith grows, as do other tech monopolies. Without the support from politicians on both sides of the isle, tech in the United States will continue to be expensive and lacking in innovation. Profitable stagnation will define American technology.