Product improvement or access to valuable data: why is Facebook buying Giphy?

Facebook buys Giphy: It is not the first time that Facebook has taken over a company that generates virtually no revenue, but instead operates an extremely powerful and frequently used service. The GIF platform that has now been bought out was already heavily integrated into Facebook's apps and is now to be integrated more deeply there. But is that the only reason for the takeover?

Facebook pays 400 million US dollars for Giphy, as Axios reported on Friday afternoon last week. A little later, the deal (not the rumored purchase price) was confirmed by Facebook: “Giphy makes daily conversations more entertaining, that's why we're planning to integrate your GIF library even more strongly into Instagram and our other apps, so that people are exactly right for them Providing forms of expression, ”writes Vishal Shah, Product Manager at Instagram, in a blog post. The Giphy workforce will become part of the Instagram team.

25 percent of Giphy's traffic comes from Instagram

Giphy was deeply anchored in Instagram before. Anyone looking for GIFs and “stickers” in Instagram's story camera mode will get results from Giphy. And Instagram users apparently do that often and a lot: "50 percent of Giphys traffic comes from Facebook's app family, half of it from Instagram alone," writes Vishal Shah. GIF creators, whose image files uploaded to Giphy rank high in the GIF tab in Instagram's app, can receive millions of impressions overnight.

After being more of a characteristic of tasteless web design in the early days of the web, GIFs have experienced an enormous renaissance over the past decade and have become an indispensable part of web culture. According to Google Trends, since June 2015 GIFs have been searched more often than Jesus.

According to its own information, Giphy is the second largest search engine

Giphy is probably the most widely used GIF library on the web. On its “About” page, the company explains that it delivers more than ten billion pieces of content to more than 700 million users every day. "We are the second largest search engine after Google and serve almost one billion users a day," said founder and CEO Alex Chung in October 2019.

Google bought Giphy competitor Tenor in March 2018. At that time, the tenor announced that the company had already exceeded the mark of more than 300 million users in 2017 and is recording twelve billion searches a month. This information can still be found today on Tenor's About page. In the meantime, the numbers are actually likely to have risen significantly, because Tenor is also integrated into Google's Gboard keyboard app, which is installed as the standard input interface on some Android phones.

What is the reason for the takeover?

The third relevant player in the GIF area is the Gfycat platform. Their last information on user numbers is from April 2018: The platform has 180 million users per month, CEO Richard Rabbat told Techcrunch at the time.

Not surprisingly, then, that Facebook is securing the strongest provider with Giphy, given the popularity of GIFs among users and the fact that Giphy is already heavily integrated into Facebook's platforms anyway. If another company were to secure access to this service, this could possibly result in Facebook not being able to make GIFs available on its platforms in the same width and with the same usability. But is that the only reason for the takeover?

Is it about tracking pixels?

Well-known figures from the US tech and VC scene suspect other motifs. "There are two reasons Facebook buys a consumer company. Eyeballs or data, ”Techcrunch editor-in-chief Matthew Panzarino wrote on Twitter in response to the deal. John Gruber, with “Daring Fireball” probably one of the best-known and most renowned Apple bloggers in the world, picks up the tweet and adds his own thoughts: The deal means that many of those messaging apps that previously had an integration of Facebook will be included in many of the messaging apps in the future For security or data protection reasons, they would have integrated a Facebook tracking pixel - for example in Apple's messaging app.

In order to understand Gruber's statement, you have to know that Giphy's GIF search is integrated into many other platforms and apps. The platform operators provide other developers with an API, i.e. an open interface, as well as an SDK (software development kit, which makes it easier and more configurable to integrate a service into another app).

Does Giphy make Facebook users findable in other apps?

The API and SDK will continue to be offered after the takeover by Facebook, nothing will change, both Vishal Shah from Instagram and the Giphy team hurry to assure in a blog entry about the deal. Both parties probably want to appease developers' fears that Facebook would have access to Giphy's GIF library for itself and therefore want to cut it for others.

Some representatives of the US tech scene apparently believe that it is precisely this access to other apps and their users that makes Giphy so interesting for Facebook. "Since this is now even more important, a reminder that Giphys SDK requires developers to access the tracking ID of the respective device," writes Dominik Hofmann, founder of the social video app Byte and the one bought by Twitter (and now discontinued ) Short video platform Vine after the deal became known on Twitter. And, to a user who asks for an explanation of his first statement: "Facebook can track competitors and you even better."

Giphy's standard SDK is built into 587 Android apps

The Device ID, which Hofmann means at this point, is a unique number for every smartphone and tablet. Since Facebook should know the personal name and device ID of an enormous number of users through the "Family of Apps" (which includes WhatsApp in addition to Instagram), it would theoretically be possible to find users in other apps via Giphys SDK .

An evaluation made exclusively for OMR by the app intelligence service provider 42 Matters shows that the standard SDK from Giphy alone is integrated in 587 Android apps. This includes many camera and some dating apps, but surprisingly also the app from the payment service PayPal. According to 42 Matters, Giphys SDK is integrated into 91 apps in Apple's iOS world - including the iOS PayPal app, the video editing app Unfold and Dominik Hofmann's social video app Byte.

A list of the ten most downloadable apps out of a total of 587 apps for Android, in which the Giphy SDK is integrated (source: 42 Matters)

Large social apps like Tiktok have official partnerships with Giphy

Other large social apps such as Tiktok, Snap and Twitter are not included in the list - and yet those who currently use these apps will find a Giphy integration in them. "We can see if an app has integrated Giphy's standard SDK, but many companies like TikTok and Twitter are probably integrating Giphy in a deeper (and server-controlled) way," says 42 Matters founder and CEO Andrea Girardello. "Twitter, for example, has integrated Giphy in its own way and communicates with the Giphy servers via JSON." Such individual implementations are very difficult to record, if at all.

"We are represented in every messaging app in the world, in Snap, Instagram and WhatsApp," said Giphy founder and CEO Alex Chung at a conference in December 2018 (the partnership with and integration in Tiktok was announced in August 2019). “We are basically the superset of all these companies because we are embedded in each of them. We can basically reach anyone on the Internet at any time. "

"One question: If you were a messaging app, like Slack or iMessage or Twitter or Signal, and had integrated Giphy - would you be just as happy that your usage data went to Facebook as when it only went to Giphy?" Josh Elman of the venture capital firm Greylock Partners in a tweet following the Giphy acquisition. Greylock is one of the more reputable VC firms in Silicon Valley. The company has also been involved in Facebook in the past; currently, for example, on the Discord messenger app.

Signal and Telegram deny data transfer to Giphy

After the announcement of the deal, some messaging apps, in which a GIF search based on Giphy is integrated, stated that no user data will be passed on to Facebook. When a user asked on Twitter, Telegram replied that Giphy only found out the search term - "No data is shared and Giphy does not know who you are".

The operators of Signal pointed out on Twitter that they have been accessing the GIF platform via a so-called proxy server since the integration in 2017, thereby protecting data protection. “Still, you can see usage data, just not on an individual level,” Greylock VC Josh Elman tweeted in response.

Does Facebook want to spy on competitors?

And this is probably precisely where the great fear of various competitors lies. Because Facebook now has a history of spying on competitors with dubious methods - in order then either to buy them up or to copy their most successful features.

In 2013, Facebook took over the Israeli app development company Onavo. Among other things, it offered an app for download in the app stores, with which users could use a "virtual private network" and thus send their data to the network via a third-party server. This is actually supposed to guarantee more security and data protection - but as the Wall Street Journal first reported in 2017 (Paywall), Facebook recorded the entire network traffic and then evaluated which apps and features are particularly popular with users. This was not immediately apparent to the users.

Israeli app Onavo identified WhatsApp as a takeover target

Based on the knowledge gained through Onavo, Facebook is said to have bought WhatsApp, for example. Confidential Facebook documents that the British authorities made public in 2018 show that Facebook had found out using Onavo that US users send significantly more messages via WhatsApp than via their own product Facebook Messenger.

Facebook is also said to have observed the development of Snapchat with the help of Onavo. After Snapchat turned down a $ 3 billion takeover offer, Facebook used Instagram to copy Snapchat's Stories feature.

Competition authorities are investigating Onavo

Another Instagram feature may also be based on findings from Onavo data: boomerangs, mini-videos that are played forwards and backwards and (similar to GIFs) in a loop. The startup Phhhoto invented a similar feature in 2014. The app gained ten million users - and was then copied from Instagram. In 2017 Phhhoto was discontinued.

In February 2019, after multiple critical reports, Facebook deleted the Onavo app from the app stores. Nevertheless, it is still currently a concern of the competition authorities - both in the USA and in Europe.

US Senators criticize the Giphy takeover

The Giphy takeover has also brought Facebook into the focus of politics once again: As The Verge reports, three US senators raised antitrust concerns after the transaction became known - including the Democratic Senators Amy Klobuchar and Elizabeth Warren, who will be in the next election for had wanted to run for the presidency.

Instagram CEO Adam Mosseri has meanwhile denied to Axios that data is the reason for the takeover of Giphy: “The fact that so many people always think of data the same way shows me how important data protection is, but also how things are often overly simplified. “Rather, the reasons for the takeover were to be able to keep Giphy running through the takeover, to get the creator ecosystem of the platform as well as insights into which GIFs are particularly popular at the moment.

Update, May 22nd
We have supplemented the article with information on the number of Giphy SDK integrations in the iOS environment and a quote from 42 Matters CEO Andrea Girardello.