Facebook's $400 Million Acquisition of Giphy

By Francesca Bandini, Kristofer Gvenetadze (Bocconi University), Ilya Korzinkin (University College London), and Christopher Shim (University of Cambridge)

Overview of the deal

Acquirer: Facebook Inc. (NASDAQ: FB)

Target: Giphy

Implied Equity Value: N/A

Total Transaction Size: $400 million

Closed date: May 15, 2020

Target Advisor: N/A

This acquisition marks Facebook’s second and final attempt to acquire Giphy for an estimated $400m. The two companies already crossed paths in 2015 when Giphy integrated itself into messenger and allowed users to get access to its database, download GIFs and paste it directly into Messenger. However, at the time, the two companies could not reach an agreement for a potential acquisition since Giphy still needed room to grow and did not want to exclude eventual partnerships with other companies.

Through this acquisition, Facebook will get access to Giphy’s library and integrate it into Instagram and other apps it owns. Despite this full integration, Giphy will still retain its own branding and allow users to have the same access to its library that they had before without any restrictions.

As GIFs are gaining momentum and becoming a new creative way for people to express themselves, this acquisition represents a strategic opportunity for Facebook, which during the last years has made private messaging its main priority. Furthermore, since more than half of Giphy’s traffic comes from Facebook’s family of apps, being fully integrated and getting access to its strong advertising firepower could transform Giphy from a popular add-on into a profitable core element.

“Giphy makes everyday conversations more entertaining, and so we plan to further integrate their GIF library into Instagram and our other apps so that people can find just the right way to express themselves.”
- Vishal Shah, VP of Product at Instagram

Company Details (Acquirer - Facebook Inc.)

Facebook Inc. (NASDAQ: FB) is an American technology company that dominates the Internet industry by offering a series of platforms where users can communicate and interact with each other. With more than 1.73bn daily active users, Facebook is not only the biggest and most popular social network, but also a social media conglomerate. Ever since its formation in 2004, the company has increased its global presence and product portfolio through a series of strategic acquisitions, with WhatsApp, Instagram, and Oculus among the most significant targets.

Founded in: 2004

Headquartered in: Menlo Park, CA

CEO: Mark Zuckerberg

Number of Employees: 48,268

Market Cap: $600.819 Billion

EV: $539.28 Billion

LTM Revenue: $73.36 Billion

LTM EBITDA: $32.54 Billion

LTM EV/Revenue: 7.35x