Facebook, Inc. announced plans to acquire GIPHY for $400 million. Instagram already integrates with GIPHY today, primarily so users can add GIFs to their Instagram Stories. In its announcement, Facebook says it plans to “further integrate [GIPHY’s] GIF library into Instagram and our other apps” and notes that half of GIPHY’s traffic today comes from a Facebook-owned app.

For those unfamiliar: GIPHY is a GIF library that more than 500 million daily active users frequent and view more than 11 million hours of GIFs daily. It integrates with a huge swath of apps: Facebook, Inc.’s own apps (Instagram, WhatsApp, Messenger, etc.), TikTok, Twitter, Microsoft Teams, and Slack, to name a few. It is a ubiquitous tool that makes sending reaction GIFs a breeze. Here’s our favorite:

(Source: GIPHY)

But there’s more to this acquisition than reaction GIFs. While Instagram head Adam Mosseri says this acquisition isn’t about GIPHY’s data, the reality is that GIPHY is capturing data that Facebook will find useful on both competitors and users:

  1. Competitors. As GIPHY’s privacy policy (last updated December 13) states, it collects users’ IP addresses, device IDs, and cookie data — which means GIPHY can track users across the many apps that have integrated GIPHY into their interfaces. Facebook could mine this data to learn how users interact with rival apps and make product decisions based on this intel — such as when it launched Instagram Stories, a copycat of Snapchat Stories.
  2. Users. Additionally, Facebook, Inc. can stitch together a Facebook user across the GIPHY-integrated apps she is using, deriving insights such as behaviors, affinities, and browsing histories. This makes Facebook an even more powerful advertising platform with increased hypertargeting abilities  which marketers will embrace. In a truly dystopian outcome, Facebook, Inc. could inject tracking pixels into GIFs, tracking how users engage with websites that have embedded GIFs. (Facebook noted that GIPHY does not use tracking pixels or cookies.)

Given the number of apps using GIPHY’s API or software development kit, this doesn’t bode well for competitors or privacy-conscious users. But secure messaging app Signal offers a possible way forward for working with “GIPHY by Facebook.” Signal encrypts the communication between the app and GIPHY’s API so that “the GIPHY API service sees the search term but not who you are.” That said, we expect that apps — particularly ones that compete with Instagram, Messenger, and WhatsApp — will sunset their relationships with GIPHY to avoid oversharing with Facebook, Inc.