Hacker News new | past | comments | ask | show | jobs | submit login
U.K. regulators order Meta to sell Giphy (axios.com)
392 points by jeremylevy 48 days ago | hide | past | favorite | 408 comments



> Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies because you will not be able to sell them.”

This overlooks the traditional and perhaps now unpopular reason to start a company: making money by selling something useful. No need to sell the company. By the way, Facebook buys, does not sell.


Ironically, that statement is the strongest argument in favour of blocking the acquisition I've heard.

Any company so arrogant about its market dominance it assumes that the only way for an entrepreneur to succeed in building a company in its market is to sell to them deserves to be broken up.


Not to sound too obvious, but that is precisely the current state that is also ever increasing. As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation.

Even the subject supposed effort to prevent monopolization is not understanding the underlying issue, that competition (a form of freedom) has for all intents and purposes been totally subverted because rather than monopolizing an industry or sector, today's monopolists/cartels realized they should just totally supplant the whole market so people have no choice but to kiss their royal ring. That is something that has effectively been accomplished and society may just have not understood yet what's going on, or likely those who would be expected to ward this off were also totally compromised and corrupted ($$$).

What we need is reinstatement of conditions that lead to are allow competition. That may take on several different forms, e.g., (not to pick on Apple, but to use a recent example) that Apple must provide the same access to core integration (based on reasonable technical specifications anyone can meet) that AirTags utilize to competitors like Tile, including the whole apple device network (AirTags are real reason that SARS-CoV-2 "contact tracing" was snuck in to save us all, btw). Another example; Apple and Google, may not block or ban any user or any app that meets its general and public technical specifications and are not a violation of law and human rights like free expression, whether out vassal lord corporations like what users have to say or if an app is a competitor or does something they don't like or not. The alternative should simply be that Apple and Google can just build their own internet if they wish to violate people's rights on the public internet and communications … at the very least.


> As with seemingly most things, we are witnessing a reemergence of a system similar to what existed before the American Revolution, the feudalistic, aristocratic, monarchical system where you must show fealty to your vassal lord corporation.

This is not something new, but has always been the case. Capitalism is the 2nd iteration of feudalism. When the French revolution threw feudalism into jeopardy, the feudal lords - conservatives who sat in the right wing of the French parliament- hoped capitalism would rescue feudalism and help maintain social hierarchies. Democracy is seen as anti feudal and anti capitalist in its genesis, by giving everyone one vote independent of wealth. Earliest proposals for elections were only for Male land owners.

The founding fathers were capitalists for the most part.


Hell, some states required land ownership to vote in the USA up to the 1850s.


> "While constitutionally given the right to vote by the Fifteenth Amendment in 1870 and 19th Amendment in 1920, the reality of the country was such that most African Americans and some poor whites could not vote until the passage of the Voting Rights Act of 1965."

https://en.wikipedia.org/wiki/Universal_suffrage#cite_note-V...


Most of them owned rather than rented their labor, but yes they did start the US with the idea of suppressing mass universal democracy, calling it mob rule.


What kind of ahistorical criticism is this?

The US was the first modern democracy. Were they supposed to go from dictatorial monarchy to universal suffrage in one day or be condemned forever?

If you want to criticize something, criticize the fact that we still don't have universal suffrage. In many states, felons can't vote. Which is cynically claimed as denying them something as punishment for their crimes, but in reality is done to prevent the victims of mass incarceration from becoming a large voting bloc to end it.


This isn’t really true. Before the declaration of independence the people of the American colonies couldn’t vote in British general elections, yet the Parliament of the United Kingdom of Great Britain (as it was known then) had full legal rights to legislate for the colonies. This is due to the way the British constitution works, where Parliament has supreme power over everything, including the the Monarch, the Monarch’s government and any territories outside of the United Kingdom. This remains the same for all existing British overseas territories such as Bermuda and the Cayman Islands where there is no representation in Parliament.

The individual American colonies had legislatures for their own territory, with limited powers as defined in their charters. One example is the legislature of Virginia which has had elected members since its inception 150 years before American Independence and still continues to hold elections to this day.


This is kind of my point. Should we condemn the Magna Carta as well?

We should spend less time whinging about the people who did better than their fathers and more time doing better than ours.

The people allowing themselves to be consumed by "hate your neighbor" propaganda and mistaking that for a protest movement are getting played. Fight who's above you, not who's beside you.


I take issue only with the characterisation of colonial America as authoritarian. It was democratic and the King and his Governors had limited power. The issues leading to revolution arose mostly from the lack of representation in Parliament and a series of unforunate blunders in handling greivences on the part of HM Government.


Even now, things do eventually change:

"the Parliament of the United Kingdom of Great Britain [...] had full legal rights to legislate for the colonies. [...] This remains the same for all existing British overseas territories such as Bermuda and the Cayman Islands [...]"

You may wish to read this:

https://en.wikipedia.org/wiki/British_Overseas_Territories#G...

specifically "Following the Lords' decision in Ex parte Quark, 2005, [...] To comply with the court's decision, the territorial governors now act on the advice of each territory's executive and the UK government can no longer disallow legislation passed by territorial legislatures."

and the sections sketching the legislatures in Bermuda and Gibraltar.

e.g. "Individual overseas territories have legislative independence over immigration"


That is referring to the executive functions of the Crown. In some cases it was possible for a Government to create or block an ordinance for a territory without legislative approval.

There is no limit over Parliamentary power. The House of Lords had judicial functions (now The Supreme Court) which allowed it to act as the second highest court in the land under the Privy Council. No court can revoke an act of Parliament. Any limits on Parliamentary power over these territories is by convention. Another interesting aspect of the British constitution is that institutions generally follow agreements even if they lack a legal basis.

Something that might confuse Americans in particular is the use of the term “government”, which, within a British context, refers only to the executive branch of government. Also the idea of a strongly defined clear constitution is rather alien… as are checks and balances on the legislature.


The US was the first of the series of republican revolutions of that era and the most conservative of all of them (compare with the radicalism of 1789 France for example). There are things to admire about it, but I think it is better to call it a war of independence than a proper social revolution.

The reason to be critical today is we are _still_ living in that framework! We have to do better.


> We have to do better

What would a better structure look like? And I don't think things like national healthcare, less racism, etc. are included, because those could be implemented in the current structure. I think history shows that we have a demonstratively good system. We have high social mobility, high political stability (peaceful transfers of power, Trump notwithstanding), consistently strong economics, world-class institutions, etc. Our system has scaled fairly smoothly from 2.5 million to 325 million and has lasted almost 250 years. Which system has done better?

It's not clear if our system can survive the current polarization, which could be seen as city values vs rural values, and the system is specifically designed to balance those. So if the cities and the rurals both take up opposing, fundamentalist positions and refuse to cooperate, the system is not designed to handle that. But we've had a history of craziness, and so far, comes the times, comes the man. I'll bet on our system over a lot of other extant systems! And change is not always better. (And if the electorate has a lot ideological-driven motivations, as present, the odds of change being worse is pretty high. Ideological-driven change has historically been pretty bad.)


I'm a communist so take that for what you will.

I do think that if you stay within the system of liberal democracy, at minimum we need to implement a more modern constitutional order. We've learned a lot about liberal constitutions in 200 years.

However, practically speaking, the political machinery is so ossified that I think only marginal structural changes within the framework are possible (like court packing, electoral vote compacts etc). Political radicals have to do a lot of organizing to build a mass constituency that can make really dramatic alterations without empowering the right wing.


It is true that the French Revolution and subsequent counter-revolution were not as successful as the American Revolution was, and that the non-democratic features of the American system are a major reason for that.


> that the non-democratic features of the American system are a major reason for that

It's unfortunately unpopular to point out that we have ample evidence, from history and contemporaneously, that democracy per se doesn't work. It devolves into a populist, majoritarian and often authoritarian mess as reliably as (non-monarchical) dictators fall into chaos.

The men who founded our Republic understood this, which is why they explicitly created a system that balances the strengths and weaknesses of monarchy, oligarchy and democracy. (Hint: they're our three branches of government.) At some point, we wrote that balance out of our cultural history, and we're partly paying the price now.


There are many liberal republics and socialist republics doing fine all over the world. This is just trendy neo-feudalist rhetoric. The US is dissolving due to inadequate democracy where people feel they have no control over their government or life's destiny.


Are there any democratic 'socialist republics' not social democratic (or social market economy) ones but actually socialist? Scandinavian countries are definitely not socialist they have strong social safety nets and high taxes which results in a relatively high government spending to GDP ratio (44% in the US vs 58%, 54%, 53% in Norway, Denmark and Sweden) but that's about it. And if we're talking about "neo-feudalism" Sweden for instance has one the highest wealth inequality coefficients in Europe, it's even slightly higher than in the US, so from a purely cynical perspective they are just giving their 'peasants' enough to keep them quiet while a huge proportion of all private wealth in the country is held by a few families.


The US and European social democracies are not that different. Sure, the US government and the insurance/university lobbies screwed up education and healthcare prices - but all western countries steal an inordinate amount of money to profit creating citizens and waste them around giving little back to the country.

They're parasitic institutions


According to https://en.m.wikipedia.org/wiki/List_of_countries_by_income_..., the US is higher than Sweden now, before taxes and transfers, and that gap only widens if taxes and transfers, the primary mechanism governments have to reduce inequality, are taken into account.


I meant wealth inequality rather than income inequality.


Socialism is more of a process than a particular governmental form, but it does mean that the workers have control of society to the point that the capitalists are powerless (an inversion of the current situation). Other socialists would criticize me sharply for this, but I'm still trying to decide if stateless communism is practically achievable.

I was thinking in mind Cuba or Vietnam. I'm still trying to decide if China is still socialist or not, but there are good arguments in favor (they still control the commanding heights of the economy and are improving life for ordinary people at a rapid pace but things are far from perfect).


> liberal republics and socialist republics doing fine all over the world

These are policy preferences. One can have a liberal, conservative, socialist and/or capitalist monarchy, oligarchy or democracy. The latter talk to how power is divided. The former to how it used.

Naturally, some power divisions tend to lead to certain policy preferences. But that is a correlation

> just trendy neo-feudalist rhetoric

This is the cultural amnesia I'm talking about. These ideas aren't new. From Federalist No. 10:

"From this view of the subject it may be concluded that a pure democracy, by which I mean a society consisting of a small number of citizens, who assemble and administer the government in person, can admit of no cure for the mischiefs of faction. A common passion or interest will, in almost every case, be felt by a majority of the whole; a communication and concert result from the form of government itself; and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths. Theoretic politicians, who have patronized this species of government, have erroneously supposed that by reducing mankind to a perfect equality in their political rights, they would, at the same time, be perfectly equalized and assimilated in their possessions, their opinions, and their passions.

A republic, by which I mean a government in which the scheme of representation takes place, opens a different prospect, and promises the cure for which we are seeking. Let us examine the points in which it varies from pure democracy, and we shall comprehend both the nature of the cure and the efficacy which it must derive from the Union.

The two great points of difference between a democracy and a republic are: first, the delegation of the government, in the latter, to a small number of citizens elected by the rest; secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.

The effect of the first difference is, on the one hand, to refine and enlarge the public views, by passing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country, and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations. Under such a regulation, it may well happen that the public voice, pronounced by the representatives of the people, will be more consonant to the public good than if pronounced by the people themselves, convened for the purpose. On the other hand, the effect may be inverted. Men of factious tempers, of local prejudices, or of sinister designs, may, by intrigue, by corruption, or by other means, first obtain the suffrages, and then betray the interests, of the people."

[1] https://guides.loc.gov/federalist-papers/text-1-10#s-lg-box-...


You are right, but these are the very ideas I've been complaining are part of the US's constitutional DNA in this thread, so we'll have to disagree.


> these are the very ideas I've been complaining are part of the US's constitutional DNA in this thread, so we'll have to disagree

I think we agree. There is meat between the archetypal framework and the working, practical government. The framework is neutral. But the implementation details are not.

My core point is that more democracy = good is a misreading of American, and in fact world, history. We have a mixed system. Denouncing one system over another for being less democratic is thus a straw man.


> One can have a liberal, conservative, socialist and/or capitalist monarchy, oligarchy or democracy. The latter talk to how power is divided. The former to how it used.

I don't think you can make such a separation so easily. Legislative power is almost dwarfed by the power of capital. When you have a “liberal democracy”, the two parts are in constant conflict. (I don't mean to say socialist democracy wouldn't have similar problems, just that the structure of power is deeper than just elections.)


this is patently not true. It would do to remember that we are currently in version 2.x of the US, the US was started, mostly by the same framers, not with that idea of suppressing universal democracy (articles of confederation), and then they rolled back a tad bit on democracy (constituion).


Articles of confederation vs. constitution related to compact between the states vs the strength of the federal government. Most of the people who signed the decl. of independence owned slaves or were lawyers for people who do. I'll grant maybe a few more people in the constitutional convention might not have been slave holders.

However, it would be good to recall that during the era of good feelings, a huge number of presidents were slave holders from Virginia. That's who held the balance of power in the country. The constitution itself was a compromise over slavery, modeled after English government (house/senate -> commons/lords, pres/vice pres -> king/heir apparent). Voters were landed white male adults, senators were elected indirectly by the states, as was the president (and still is though we have papered over it!). Supreme court judges were given life terms to enable disruption from below to be smoothed out by prior appointments.

The whole idea of the country was to guarantee rights to the upper class and place the country under new management and diffuse lower class energy via grants of land in westward expansion. The "genius" of the constitution became apparent when the entire thing broke down only ~70 years later in a bloodbath over the issue, slavery, they papered over at the convention which was a direct affront to the rhetoric of the revolution.


By modern standards, we view their actions as morally wrong. Owning slaves is morally wrong. Only permitting white males to vote is morally wrong.

Yet, we also forget that the world then was not like the world today. Who received comprehensive education back then, the kind needed to run states and countries? Typically, the rich, and within that, men. The inequalities of the world in those times were immense and could not be mended in even one generation. Liberal countries such as USA fought against the powerful forces of British imperialism, with the promise of a better tomorrow for all citizens, however long that takes.

>The constitution itself was a compromise over slavery

If you've ever tried to make significant change in an organization of any type and size (including government), you MUST take inertia into account. What you claim was willful choice, I claim was inertia. Slavery was not banned in the Constitution because a few Southern states would have refused to sign it, their claim being such action would render economic devastation. The very day it became possible, the importation of slaves was federally prohibited by Jefferson. As slavery became increasingly restricted by the federal, the southern states dug in their heels and refused to change their labor practices. The eventual Civil War was one of economics, with the general population heavily propagandized by those wealthy slaveowners wanting to preserve their livelihood.

>diffuse lower class energy via grants of land in westward expansion

Your analysis is overly simplistic. Those grants of land to lower-class citizens ensured the new Western lands would be worked by citizens. It was great opportunity many lower-class citizens jumped on, especially those who didn't own land before. By relocating to a smaller community, a lower-class citizen became immediately more influential in their local community by numbers alone. Yes, it diffuses that energy, but that's not inherently bad. In different terms, I see that decentralization as an intentional, value-adding feature, not an unintentional bug.


> Yet, we also forget that the world then was not like the world today.

False. Contemporary preachers were regularly commenting that slavers were going to hell. They didn't have a different morality, just different economic incentives (i.e. they thought they could get away with it). Luminaries such as Jefferson even expressed that slavery was wrong, though he didn't actually free his slaves during his lifetime. Show respect for people of the past, they weren't stupid. It wasn't even that far into the future that the slavery abolition movement got going in other countries such as the UK.

> Those grants of land to lower-class citizens ensured the new Western lands would be worked by citizens.

The land was Native American land and this was only achieved via genocidal means.


>They didn't have a different morality, just different economic incentives (i.e. they thought they could get away with it).

Exactly, slavery was a significant economic factor in the world back then. It is no longer a significant economic factor in the world today. Also, don't think that preachers speak their message without understanding the nature of their congregation. The preacher chooses a message they feel the congregation should hear. Rare is the sermon which chastises the economic means of that church body's membership.

>The land was Native American land and this was only achieved via genocidal means.

Native American tribes were weakened by disease, defeated by technology, and subdued by law (the title of "Guns, Germs, and Steel" captures this point nicely, though I don't agree with all of Diamond's arguments). Would you judge one Native American tribe similarly should they commit genocide upon another tribe and take their lands? Based on your comments here, I suspect no, and I also suspect such is still considered morally wrong but less morally wrong than Western expansion through kinetic force.

Racist laws are morally wrong and must be eschewed. There is no doubt that Native Americans were eventually subdued by such laws, but it took decades of fighting for Native Americans to reach their low point. So, I submit to you a serious question to ponder: if two warring entities are technological equals, is their fighting "better" in some sense?


> diffuse lower class energy via grants of land in westward expansion

Which would make them property owners, and therefore eventually able to vote via the statehood process. Your premise is self-contradictory.


The Jeffersonian idea was to create a nation of self-sufficient yeoman farmers (they thought slavery would go away over time due to its heavy tobacco emphasis that was depleting the soil). The industrial revolution, the cotton gin, and other world historical factors made this vision (which was a vision of a faction, not the entire elite) implausible.

They wanted to do this to relieve popular pressure from below by creating "responsible" landowners that had a stake in the system. The landowners would continue to be white and male, but with an expansion of who gets to participate. The American system repeatedly does this under stress. A system that was actually liberatoratory would work in the interest of the people, not simply respond to threats.


> The landowners would continue to be white and male, but with an expansion of who gets to participate.

I also don't think this is quite right, either. There were black landowners, specifically in virginia, but other states too like maryland and louisiana, many of whom were yeoman farmers, and even a few who owned slaves, and were successful petitioners to suits heard at the house of burgesses, until the late 18th-century, but eventually it just became too convenient to be lazy and label "black == slave".

You could be a black landowner in connecticut and vote until 1814, well after the constitution was passed. It's kind of a common narrative that the US was born in racism, but I think it was more "the US did not know what to do with the issue of race and grew into racism" which is scarier, if you ask me.

correction: until the early 18th century, which is when the black codes were passed in Virginia. However, several other states allowed free blacks to vote around the time of the constitution.


Don't forget that many of Japan's large zaibatsu corporations were founded by former samurai clans during the Meiji Restoration.


Capitilism and feudalism share little in common. One is a means of exchange allowing basically any government to implement it. the other is an entire philosophy and implementation of governance and interaction.


> Capitalism is the 2nd iteration of feudalism.

The Whigs and Tories opposed each other in the UK parliament for a long time precisely because this is not the case.

There is a divide in the UK Conservative Party between Tories and Liberals.


The Communist Manifesto certainly sees things that way, but I don’t think capitalism has been like that in the USA since roughly Roosevelt’s New Deal. (I don’t want to suggest this happened everywhere at the same time: weirdly, my British history lessons don’t cover anything the British did or experienced between the two World Wars other than “Chamberlain was naïve”).

The iconic images of the downfall of Communism was the economic catastrophe, shops with empty shelves, etc.; Capitalism had a similar experience in the Great Depression, was changed by it, but the name remained.


> Capitalism had a similar experience in the Great Depression, was changed by it, but the name remained.

Unfortunately a lot of those New Deal changes were reverted since then. For one, the minimum wage was supposed to be a living wage one could raise a family on.


> the minimum wage was supposed to be a living wage one could raise a family on.

Do you have a source?


It's not capitalism, the reason we ended up with massive accumulation of wealth (which changed shape and form across time - Rockefeller is not Zuckerberg) is because of government corruption, intervention and monopoly creation.

New governments don't do anything but waste public money and create regulations which entrench the current lobbyists as the de-facto standard and prevent new competition from popping up.


All this is done in service to the capitalists, though. A stateless capitalism would be more direct, and do away with the few silly laws remaining that stand in the way of profits.


Yeah, now that you say it it does seem to be very close to "plata o plomo."

(Translating as literally "silver or lead": take this money or take a bullet)


This is how the entire VC market works either get bought or IPO.


Option 3 is to become very profitable and give big dividends back to those VC's... Few take that route though...


Option 3 is to become very profitable and then have Facebook create its own competitor and integrate it into their own apps, killing your business overnight.


I think you'll find that VCs aren't in it for dividends. If they were content with 10% per annum they'd play the S&P 500...

You can certainly build a long-term profitable business, but you wont find VC funding for that.


But some businesses that take VC funding could pay out 1000% dividends every year, especially businesses that don't take much initial funding and manage to become a monopoly in some small niche market and decide not to expand further.


It's certainly possible in niche cases, but if you tell a VC that is your plan, I thin you are likely to find a luke-warm response. Aiming at an acquisition is in many ways a surer bet that aiming for niche market dominance with outlandish returns


Because that's not what VCs want.


It's not ironic at all, nor is it very persuasive.

It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells. It would be interesting to see the breakdown of how many start-ups sellout, continue as an independent entity, or completely fail. Regardless, just because Facebook recognizes the business culture in the SF Bay area is not a persuasive argument for why they should be broken up.


> It's pretty well established truism by now that start-ups are a business model where the founders and angel investors become wealthy once the business sells.

It's a pretty well established truism that startups in most markets would have absolutely no difficulty at all in selling their business via many different exit routes if one particular player wasn't able to go through with an acquisition for any reason. If it was too early to go public the could sell to Instagram Inc or WhatsApp PLC, or a private equity firm that wants to get into a sector where many, many firms have become stable and profitable. Facebook's statement that if they're not allowed to buy, entrepreneurs [in their market] won't be able to sell [to anyone else] is a truism specific to the social media market Facebook dominates, and a direct consequence of it having the sort of monopoly power that gets them scrutinised by the Competition Commission.


There isn't any other way to make money from something like a gif hosting platform. Plenty of new companies get started all the same without being acquired.


I think that's the only way for a gif hosting/copyright infringing platform to succeed.

https://medium.com/@pasql/giphy-is-stealing-from-artists-689...

Other companies that exchange money for goods and services might have better luck.


Too many people are trying to create a startup with short-term success in order to get acquired. Get that $500m acquisition in the bag and then retire. Boom, done.


Or ya know, that startups talk about having an exit that's either getting bought by someone or an IPO. Nobody in the startup world seems terribly interested in building a lifestyle business.


Back in my day, businesses that made income by selling goods or services to customers were just called businesses, not lifestyle businesses.


Another crazy old idea:

Businesses that prioritize people over capital.


Or governments take care of people, businesses focus on selling products and services.


Or, maybe.... just maybe... both businesses and governments consider and prioritize the humans in the equation.


Businesses that don't prioritize winning in the market will be outperformed by businesses that do.

Let the government do the job of setting the boundaries on the market so they can do what's best for humans, and let businesses do the job of optimizing for victory within the market.

That's where their respective incentives lie, so that's what they do best at.

tl:dr; don't hate the player, hate the game.


Ok. That's what your economics textbook thinks. What do you think?

Competition is not the only way to get things done. Humans are definitely capable of collective action. You may recall a few weeks ago where hundreds of millions of Americans just said "fuck 2 AM, it's now 1 AM" early one Sunday. How would you harness that?


Those millions of Americans followed rules set by the government. That the game.

Make the rules do useful things. If you want business with social conscience, legislate it; don't whine for the uncaring hand of the free market to deign to suddenly show empathy.


Hey, here's a thought: why don't we get rid of such dehumanizing institutions and everybody just get along? How about we not commodify every single aspect of human existence, from birth to death?

How would you accomplish that?


I do not know how, hence needing a government to enforce rules.


How would you accomplish it using government as a tool? It's clear that most (all?) current governments are wholly inadequate to this task. What are the right rules, and how can government help the situation? What does society look like when you implement those rules and enforcement mechanisms?


You should read Atlas Shrugged


Yes, it's a very funny book once you get past the droning sentences and start seeing the core absurdity of its ideas. The gushing praise it lavishes on the rich has to be read to be believed.

As the old joke goes, there are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.


How do you think startups make money? We're talking about two different things -- one is the value the business provides to their customers which is selling goods and services, and the other is the value the business provides to the founders and investors which is profit.

Whether or not something is a lifestyle business is a shuffling around of who owns the business and gets the profit, not at all about how the business operates except as second order effects.


> How do you think startups make money?

Do you think most modern startups actually do make money?

A great many don't, they lose it hand over fist. Especially those that intend to grow fast and get bought (or IPO) fast. It worked for a number of current big names, and many smaller names that those big names since bought.


You're just describing a growth strategy. The whole time they're burning cash they're still providing value to their customers. Nonprofits don't make money either and still provide value.


Or undermining other similar businesses that actually have to make more money than they spend. After said businesses are gone, and the investor cash dries up, what benefit is actually left?


How does that work with other kinds of investments like loans? You don't "save up" to open a restaurant, you put together a business plan and go to a bank. VCs are just doing that but willing to take on riskier businesses in exchange for equity instead of interest payments.


I suspect you'll find few restaurants opening up with the intention of opening as many locations as possible as quickly as they can be built, all providing food at under cost for years on end until the local restaurant scene is sufficiently disrupted that McDonalds buys them to make them go away.


I mean you're essentially describing DoorDash + competitors and HelloFresh + competitors. But in the restaurant industry proper it's the same thing except your exit isn't to get bought by McDonalds but to secretly dominate the mid-high tier dining scene in a given area and collect all the profits. So they won't build a bunch of the same restaurants but will take on massive debt to buy everything in a trendy area. I didn't really expect that in 2018ish that there would be a pivot from these companies to a real-estate play so they don't even have to own the restaurants anymore but can force them to use the company payment system and suppliers but it makes total sense in a boring dystopia way.

"Support Local Restaurants! (being puppeted by a massive hybrid restaurant/real-estate conglomerate)"


Are the providing value or reallocating it from VCs temporarily in order to obtain enough market share to then extort consumers for higher prices (less value per dollar) later on?


> obtain enough market share to then extort consumers for higher prices (less value per dollar) later on?

Are there many examples of this extortion?

Casper and Blue Apron plummeted after adjusting pricing because they weren’t providing sufficient value. Uber became profitable. It probably lost some customers. But nobody I know felt extorted by it—those who didn’t like the new prices stopped using it.


>Are there many examples of this extortion?

Uber is definitely such an example - a lot of taxi companies disappeared because they couldn't compete with the scale of Uber with its subsidised prices.

Now Uber have significantly increased their prices there are a lot fewer alternatives to turn to.


> Now Uber have significantly increased their prices there are a lot fewer alternatives to turn to

Can you give an example of a city where Uber has a meaningful monopoly? Hell, I’ll even give you Uber and Lyft. Where the alternative modes of transport—be it private cars, public transport or taxis—are non-existent to someone who would have otherwise made use of them?


It's not that the alternatives are non-existent, it's that their cost (in dollars or some other parameter) have gone up a lot. For example, if you don't use Uber or Lyft in San Francisco, it takes a LOT longer to hail a taxi on the road than it used to.



> Nonprofits don't make money either and still provide value.

They can make a surplus? And then reinvest it to further their cause?


Which is also what growth companies do? They reinvest their own earnings along with outside investment, which is the same as nonprofits (via donations).


> businesses that made income by selling goods or services to customers were just called businesses, not lifestyle businesses

No, they were called shops. Where the business stops working without the owner-manager’s labor. “Business” referred to industrial-scale activity. (Before the industrial revolution, “commerce” was the broad term including trade merchants and shopkeepers.)

Similar to the industrial revolution’s change in nomenclature, the advent of modern computing has delineated small businesses, which include shops and shop-like tech firms, from enterprises, which are industry-like ones. Mom-and-pops thinking of themselves as businesses is a modern phenomenon.


If the owner-manager of Delphi goes home for the night, automotive parts do not stop being made. If the owner-manager of JBS goes home, McDonald’s still gets their hamburger patties. Semiconductors. Raw ore. Train wheels. All of those things were enterprise businesses, not shops, long before computers were heard of

Your response is through the same exact lens being critiqued. Even today there’s a vast economy of businesses, not shops, that fulfill key parts of the world economy and aren’t building for an exit. The idea that that’s weird/lifestyle is a modern, SV VC phenomenon and has nothing to do with computing nor the industrial revolution at all

This is obvious enough to most people that we sometimes wonder why we call startups businesses. Really they’re a new model of offshore R&D which often amounts to a hole into which to pour capital speculatively in hopes it will grow a tree


> “Business” referred to industrial-scale activity. (Before the industrial revolution, “commerce” was the broad term including trade merchants and shopkeepers.)

That sounds very weird to me because OED has plenty of meanings not related to industrial-scale activity that predate the industrial revolution. For example,

"In general sense: action which occupies time, demands attention and labour; esp. serious occupation, work, as opposed to pleasure or recreation.

c1400 Apol. Loll. 3 Hatyng to be enpliȝed wiþ seculer bisines. 1532 More Confut. Tindale Wks. 826/1 Occupied in honorable businesse. 1600 C. Percy in Shaks. C. Praise 38 Pestred with contrie businesse. 1653 Walton Angler Ep. Ded. 3 To give rest to your mind, and devest your self of your more serious business. ..."

And there's more of those where this came from, like "a task appointed or undertaken; a person's official duty, part or province; function, occupation" (dating back to Chaucer).


Yeah, that's one thing that's always bugged me about startups and VC.

There seems to be general agreement that two big problems we're facing in the economy are 1) a slow consolidation of businesses into a handful of mega-corps which span across many markets and 2) an obsession with short-term gains to appease investors and shareholders. Yet the startup world seems to be fixated on "exit strategies" which perpetuate those two problems.


Because founders and early stock-holding employees want to get paid out, move on to something else, and let someone else handle the long-tail maintenance of the business. This is valuable work in the economy because you want people who are good at starting businesses, proving markets, getting investors, yada yada to be doing that and people who are good at running businesses to do that once it has roots.

The intractable problem is that corporations with loads of capital are the ones equipped to run businesses long-term. I would love a world where an exit is turning the business over to the employees and a newly hired CEO in exchange for a payout from the business itself but massive corporations will pay more, have cash on hand, and won't default.


"This is valuable work in the economy because you want [...trimmed...] people who are good at running businesses to do that once it has roots."

In my experience, things tend to get dramatically worse for users when a business is acquired or sold, not better. Long-term sustainability also seems to be significantly decreased by acquisitions, not increased- even when the business isn't closed outright (e.g. Pebble). And, from your second paragraph, it seems like you recognize this too. So, yeah, you might want people who are good at running businesses to do that - but selling a business does not seem to put people who are good at running businesses in charge of it. If anything, it's the opposite.


There are markets where one potential acquirer being unable to do so doesn't completely scupper your chances of any exit though.

If the antitrust regulators came down on Microsoft again, I don't think we'd see their lawyers argue that there's no other route for B2B software vendors to cash out except to sell to them.


The media only talk about companies with investors. Investors want exits. Investors influence the media to talk about companies they’re invested in.


Or the intermediary making money out of the investors want exits, and only get paid when a deal moves through. For many investors they need neither exits, dividends or anything other than capital growth.


The intermediary is effectively invested, right? If you mean like a banker. IME, investors want a way to get their cash out. A private but successful lifestyle business isn’t going to get publicity.


Isn't there a selection bias going on here? The only entrepreneurs allowed in the club who don't fit the go-for-broke mold are those who make it there by being celebrities in other ways (thinking Fried/DHH or someone like Maciej Cegłowski).


Indeed, you have to wonder if the world might be a better place if mergers were just not allowed. There's a famous Adam Smith quote about people in the same business coming together to screw the consumer. Mergers are perhaps the ultimate collusion.

For instance, what if the default position was that mergers were banned, except where you could convincingly show that everyone is better off? For instance in dying industries where scale is necessary.


It's an interesting point, and ultimately kind of boils down to "Is a more profitable company good for consumers?"

To which the answer seems inarguably "Sometimes." Scale that reduces production costs (and therefore prices), yes. Or prices could be maintained and the increased profits given to shareholders, in which case no.

I think the broader question is "What systemic features exist that make giant companies more efficient than a network of smaller, independent companies?"

And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero.

The only reason to have a hyperscale company these days is to deploy capital at scale in loss-making enterprises in hopes of capturing market share... and I'm not sure that's something that's been healthy in aggregate?


> And to that, I'd argue that in the 21st century, not many. The market and communication B2B inefficiencies that drove conglomeration in the 20th century have most been reduced to zero.

There's still the efficiencies of mass production for physical goods. For digital services that include any element of social network, there's the network effect. I think these are still a significant factor in most markets today. For match-making services in particular, brand recognition is important; otherwise users have difficulty in _finding_ quality from a directory of smaller, independent companies. And arranging effective federation, while possible, is expensive and development of such systems is slow.


True. But I imagine what would evolve would be a few B2C "face" brands, backed by a web of unmentioned B2B companies that customers never directly interact with.

Which is essentially the dynamic now, except the B2C last mile companies can parlay their relationship and just buy everything high value upstream of them.

Which... I'm not sure is great for competition.

Anything that moved the market away from one in which all customers are "an Apple customer" or "a Google customer" or "a Facebook customer", with those companies unconstrained in their ability to leverage that, seems better.


A major reason to group companies together in a "hyperscale" company is to influence government regulation, which is where you can access real money and power.


The EU had a study that indicated that you need at least four competitors before price competition appears. Two or three act like a monopoly, almost automatically. The free market thing requires multiple players to work. So mergers that bring the number of competitors below four should be prohibited.

The US is down to three big banks, three mobile phone companies, and three drugstore chains, and they don't compete on price much. If an industry gets below four, maybe the companies should be given the choice of breaking up or converting to a common carrier or regulated public utility.


I think a world without mergers would cause a lot of trouble for companies nearing bankruptcy and especially their workforce. When a company is about to fall over because if cashflow issues, another can come in with its reserves and save hundreds or thousands of jobs. That's good for everyone.

I'd argue for a world with only limited possibilities for mergers, where mergers are a last resort rather than the goal of a startup. So many companies these days produce absolutely nothing of value in the hopes of being bought out by a big conglomerate.


A lot of money (including taxpayer money) would be spent on lawyers and courts figuring out how to "convincingly show that everyone is better off".


A lot of money is spent on useless things. This would be completely worth doing and may be the change in corporate law that we need.


Probably less in aggregate than is currently spent on lawyers figuring out how to structure these deals.


What does this even mean? No business is allowed to buy another business? This would force economic activity to be centered around wealthy individuals (even more than it already is).

People feel that wealthy individuals having majority control over big businesses is a bad thing (Bezos, Zuckerberg, etc), but your proposal would enshrine this in law.

For example think about the case of Steel, inc. vs John Smith. Steel, inc. is a corporation with a broad set of owners (hell, let's make it employee owned). It makes steel. John Smith is a rich guy who has bought controlling interests in a number of privately held businesses which are all in the steel industry.

John Smith will easily be able to outcompete Steel, inc. Steel, inc. is encumbered by your law, while John Smith is not. If John Smith's empire needs an ore mine, he can just buy it. If Steel, inc. needs an ore mine, the only thing they can do is find a new ore deposit, and buy all the machinery needed on the open market.

Your law mandates that all business be controlled by rich individuals instead of groups of shareholders.


It doesn't seem like much of a stretch to also stop allowing an individual to buy up multiple businesses like that. Starting lots of businesses is one thing, buying them up like Pokemon provides very little value to the world.

John Smith could still buy up controlling shares in various companies, but it's also not a big stretch to regulate that sort of thing too. I don't really buy the idea that we need huge corporations to protect us from the rich.


"Why don't we just ban all <insert business thing>!"

People always want a simple answer. Intervening in markets can be done successfully in some cases, but as a random member of the public you're never going to come up with a silver bullet.


Cartels would still exist.


This is kind of a dumb take.. mergers are often done to enable efficiency. A jet engine company might suck at marketing.


That's why ad agencies exist.


OK, so you hire an ad agency, which then needs its own IT department, it’s own HR and finance.. why not merge them in? If you ban mergers you’ll just have the people individually get poached


That doesn't really make things efficient because the different nature of the two industries will require some of the departments to stay different. Not to mention it removes a business that was previously providing marketing services from the market, and attaches it to a jet engine company.

I doubt that Giphy the Meta subsidiary uses the same IT department as Facebook.


This feels like a wilful misunderstanding.

FB doesn't claim selling the company is the only reason to start one.

But it is a top 3 "exit strategy" for startups, so limiting it would have a chilling effect on startup formation. How big that effect would be is probably a better avenue for counter arguments.


Where is the limit though? There are literally 1000s of other places to sell the company. It's only blocking one HUGE company from this one deal.


Do you have a few examples of those other places?

I'd imagine that anyone interested in buying Giphy would fall into one of two categories:

1. Large tech companies for which the same antitrust arguments would apply.

2. Companies that can't afford to pay anywhere near $400M for a GIF sharing service.


> Companies that can't afford to pay anywhere near $400M for a GIF sharing service

What makes a free GIF sharing service worth $400M dollars - apart from the data harvesting Facebook can do to better target users with ads.

We don't need to outlaw these sales, just outlaw the integration of data from purchased services, and then you'll see what the true value of the company is.


Imgur? Reddit?


> Imgur? Reddit?

Both of which fall under arguments 1 and 2


Of course it is a blatant lie just like almost everything they say now.

Giphy is free to sell itself to almost any other company on Earth except FB. This has no chilling effect whatsoever


Name another company that wants to buy it.


Good point, it's almost as if allowing large monopolists to have their way has a chilling effect on people wanting to compete with them.


It’s not the regulator’s job to find other buyers for Gyphy. There’s a million companies who could buy it, doesn’t mean they will. But the goal here from FB is clearly to monopolise data aggregation, which regulators rightly have to stop.


> limiting it would have a chilling effect on startup formation

I'm okay with that. Startup culture is toxic, and the world would be a much better place if the only legal reason to found a business would be to make a steady profit selling your product. If your company only exists so you can sell it (as in the company as a whole) to someone else, your company shouldn't exist.


What does Giphy sell. They certainly do not sell GIFs. Looks like they sometimes buy (license) them.

Giphy does not produce the GIFs. It is someone else's work.

Thus the only thing Giphy could sell is its "service" of running a server on the internet that serves GIFs.

How much is that service worth.

But they are not selling that either.

They are collecting (meta)data about users.

Maybe they inject ads.

What an incredible business model. Produce nothing, use other people's work as "bait", collect data, get an inflated valuation and sell the "business". This is almost as good as patent trolling.

Now, with this amazing model, how much revenue does Giphy produce, how much profit. Not even enough to pay for the server costs. It is funded by investors.

This is a game. And regulators can spoil it.


Meta argued that the regulator was “sending a chilling message to start-up entrepreneurs: do not build new companies without a viable business model because you will not be able to rely on a competition harming sale to a dominant market player for an exit.”

More realistic interpretation.


You understand that the goal of most VC-funded businesses is to get bought, right?


But do you understand that being in business is not a right and that if your business relies on harming consumers to make a profit then maybe it shouldn't exist?


I think we should consider outlawing "most VC-funded businesses" then. The sole reason anyone should ever start a business should be to make long-term sustainable profit, and anything else should be illegal.


That is great in principle, but sounds very difficult to enforce.


But it would take away any further excuses to the regulator like, 'who else are we going to sell to,' because the regulator could ignore that argument, it being unlawful to start a business just for the purposes of selling


It seems that it's relatively easy to enforce by blocking this type of acquisition, at least according to Facebook.


> "a competition harming sale to a dominant market player"

Fine except for those that rely on this.


what constitutes a market? Giphy hadn't generated any revenue it was operating off the $20 million of VC money. Or are you just trying to say big American tech companies shouldn't be allowed to buy companies?


> Or are you just trying to say big American tech companies shouldn't be allowed to buy companies?

Exactly. Not only should futher consolidation be prohibited under anti-trust, big tech should be forcibly broken up into several businesses.


The advertising market. Giphy has plans to make an advertising network which would compete with Facebook and force the latter to be more competitive (which at least may result in better outcomes for end-users of both products).


I’m pretty sure Facebook is more worried about competition from Snapchat than Giphy. Which is to say, not at all.


So, overall, fine. The few people that get hurt by this are the greedy VCs that invented this wasteful game, and the greedy founders who agreed to play it.


You can also sell them to the public. The real crux is that Facebook was the highest bidder, so it does lower potential valuations not being able to be purchased. All well in my books. I'm still salty about Red Hat optimizing the short term and becoming an IBM arm


It also screams their weakness: Facebook and its employees are so universally reviled that it’s politically tenable, perhaps even popular, to do things with them that one couldn’t with others.

Ordinarily, a British regulator telling two American firms what they can and can’t do would create backlash from the U.S. In this case, that would be shocking.


> This overlooks the traditional and perhaps now unpopular reason to start a company: making money by selling something useful.

Was Giphy even set up to be a business? It's just a database of gifs converted to video, for use in social media posts or Slack channels. Who would ever pay for that, besides a social media behemoth?


It's been set up to collect personal data and either build an advertising network (unsure how successful it would be) or sell to a highest bidder.

If this failed acquisition discourages future advertising/data collection companies it will be a major win for society.


They had some advertising thing, and getting paid by social media behemoths for integrations is what now gets them into trouble in a way?


Agreed. I also think that once you grow beyond one employee (yourself) as a founder, you acquire a deep moral and ethical (although not legal) responsibility to the wellbeing of your employees. The very notion/term "exit" has always made my skin crawl, at least in the context of "serial entrepreneurs".

Treating a company - a thing that often dozens, hundreds, or even thousands of people depend on for their livelihoods - as nothing more than an assert that can be bought and sold at the whims of a founder is fundamentally gross to me. Sure, not every acquisition leads to layoffs, but many (most?) do and I think that's abhorrent.

I know it's how the world works, but I don't think the culture of starting a company to get acquired for a nice "exit" should be celebrated and I think policy measures that can stop or diminish this culture are fundamentally good.


When I've joined startups in the past they've been up front about their exit strategies during interviews.

Everyone knows that they're making a risky bet that might end with the company folding or might result in a big windfall.


Yeah but those employees benefit from exits as well


Some of the employees may benefit from exits sometimes.

There is no shortage of exits that screwed the employees.


> as a founder, you acquire a deep moral and ethical ... responsibility to the wellbeing of your employees

No, everyone knows what they are getting into this is a horrible concept and should be pushed back against at every turn. If you want someone to be responsible for another adult petition the government to do it.


something that is missing is a bunch of VC companies these days are built to be sold. they don't have to have sustainable business meant for the long run.

here's PG > Our startup, Viaweb, was built to be sold. We were open with investors about that from the start. And we were careful to create something that could slot easily into a larger company. That is the pattern for the future. - http://paulgraham.com/bubble.html

and given YC is the arguably the largest and most influential accelerator - hence why most startups are build to sell to FAANG


But sometimes you need to sell your company because simply you do not have enough resources to fulfill your mission and vision.


Traditionally we would call that a failed business.


Instagram and YouTube were failed businesses? They sold to big companies in order to scale to billions of users and millions of SMBs because they didn't have knowledge nor human and financial resources for such task.


Maybe if they hadn't scaled to, oh, I don't know, THE ENTIRE PLANET, maybe some MORE companies could come in and build successful businesses in the space, and, hey, maybe even figure out how to federate and interoperate. I know, I know. Crazy talk.


> maybe some MORE companies could come in and build successful businesses in the space

This rejects that these businesses required scale to be successful, strengthening the claim that they were not “failed businesses.”


They only need scale if you accept the premise that they need to be the only provider in that space.


I wonder about youtube - I see people say it still loses money though I don't know if that's true, but if it is, then is it a successful business? It's an amazing feat no doubt, but other than that I don't know what to make of it as a business or a force in the world.


Youtube is printing money right now as traffic/computers are cheap which was not the case 10 years ago. It's a very successful (multi $B profit) business right now. They reinvest some profits into original content but it's probably peanuts compared to overall profits.


There's no way to know whether they would have failed without being acquired. That isn't the point being made though.


They didn't have the knowledge or resources to figure out that they can't indefinitely burn money and needed to sell user data and ads?


They were either failed businesses (if they couldn't have survived at all without becoming a worldwide phenomenon) or they were greedy (if they could have survived, but really just wanted it all).

Either way, the acquisition of either should never have been allowed.


Did Google and FB have to sell to stake to billions of users and millions of SMBs? no!


Products that can't be profitable as a standalone business but can be as part of a larger company's portfolio isn't really a useful definition of failed unless you redefine the term.


If they can’t be profitable as standalone businesses, by definition they’re failing as businesses.


A business can fail even with a good product. There are thousands of startups all over the world every year that can attest to that.


If the business has a value more than you put into it then you haven’t failed.


That's what the stock market is for.


Or just funding rounds.


Yes, but the stock market would be better as it would allow the public to invest. Funding rounds are just a way to let the rich and privileged get even richer.


No, you're wrong. They're still taking risks.

You see, when you have 1000 million and you invest 500 million in chunks of 1 million into 500 different companies, practically guaranteeing a return of >500 million [1], then you're taking a huge risk! Almost like the Average Joe/Jane investing on the stock market :-)

[1] Since it's supremely unlikely all 500 companies fail, and it's much more likely that at least 1 of them comes up with a decent return on investment.


If the regulator habitually stopped sales, I think Facebook would have a point.

But I think the regulator makes a good case for why there are very specific factors that suggest that this particular takeover is not a hood idea.

Full statement here: https://www.gov.uk/government/news/cma-directs-facebook-to-s...


How is it the UK reg has the power to do this? I thought Giphy was a US company.

Shame they didn’t have the balls to stop ARM getting bought originally too.


> How is it the UK reg has the power to do this? I thought Giphy was a US company.

Because both Facebook and Giphy are active in the UK market.

If they don't want to be subject to UK regulation then they're free to stop doing business in the UK.


This is an unsustainable position that will simply retard free trade, cause companies to refuse to hire people outside their home country, to the loss of everyone. It also breaks the moment two different countries decide they want mutually contradictory things (which happens all the time), and would result in people being forced to use non-innovative and poorly executing local clone companies instead of the best available services.


As an entrepreneur this gives me absolutely zero pause. I don't care if the fed splits up the thing that acquires me once I get acquired. I just want to get acquired. It's on meta to decide if they are flying too close to the sun.


There are many problems in the world that only a handful of companies have. You could make money joining those companies and helping them solve the problem as an employee. You could potentially make much more money by creating a company that solves that problem and then selling it to one of those bigger companies.


It's not even correct because you'll still be able to sell companies, just not to form monopolies.


Well good. Now get rid of GIF and make it H.264y. There is literally zero reason to use GIF anymore in 2021.


Giphy wasn't even GIF based. They were WEBP(?). The name comes from public perception: a short animated clip is a "gif", not a "two second video file with no audio track".

"Gif" as a word has been redefined to mean more than the file format.


GIF is just a concept here, but if you upload an animated .gif to just about any large image sharing platform, they will convert it to a video format and serve in a <video> element to save on bandwidth. I'm not sure who was the first to do this, perhaps imgur with their invention of ".gifv" url suffix? [1] However right-click -> save image as... on "gifs" ceased to be an option long ago.

[1] https://blog.imgur.com/2014/10/09/introducing-gifv/


> making money by selling something useful.

This one weird trick venture capitalists hate!


Meta and Giphy are nothing like startups, try a better argument.


This is a catchy take, but a silly one. The quote didn't say that the only purpose of a new company is to get acquired, it just said that it's chilling to have one option less available, which isn't wrong.


We're deprived from options on a daily basis thanks to these monopolies, so I guess we can live well with one less option.


That viewpoint makes sense, but I don't think really works against what I was saying. It seems like the OP was saying "this cost is fake/gross" and you're saying "this cost is worth paying".


I guess I don't get it. This is based on speculative misuse - that FB may in the future deny access to Giphy to competitors. So if you own a tool that your competitors may use then that's anti-competitive? Seems like that could apply to a lot of companies. Why not wait for actual misuse and base a case on that?

Also what's so special about Giphy? Seems it could be duplicated fairly easily by any serious competitor.

And competition being defined as other social media platforms? Pretty broad definition.

Seems FB hatred is making bad law. And that bad law will bite others not just FB.


> Also what's so special about Giphy? Seems it could be duplicated fairly easily by any serious competitor.

You're right, a reasonable regulator following the U.S. anti-trust regulations as they were written in the early 1900s would also require Whatsapp, Instagram, and Facebook to all be cordoned off into separate companies at a minimum.


Great, lets get on it then


I also think if we're being charitable, AWS would be split off from Amazon, and possibly sub-divided further, likewise for the other public clouds -- Google search and Google Cloud shouldn't be owned by the same entity, etc.


How so?

Facebook buying Instagram and WhatsApp is essentially them buying out their competition.

Google running a cloud service is more like renting out excess capacity – which is quite common across industries. Plus there's a lot of competition in the cloud space.


> Google running a cloud service is more like renting out excess capacity

If that were actually the case, then sure.

But it's not. Alphabet's Google Cloud services have whole data centers dedicated to renting to the public and Alphabet's Google and other businesses entities are their own customer.


There's a clear conflict of interest when owning the platform and services on top of it.

You'll be <<very>> tempted to do things to the platform to favor your own services.

The incentives are so strong I don't think we've even invented things to prevent this on a long enough time scale.


Yeah, a charitable reading of the old trust-busting laws and the motivations behind them would suggest that something like a search engine company should not have any products other than the search engine itself, lest there be a massive conflict of interest. If you have an interest in receiving incoming web traffic, you have a conflict of interest if you also own a search engine (or online advertising network, for that matter).


Not an expert in the law or in this case, but blocking large companies from acquiring other companies which operate in the same space in order to cement monopolies is a pretty fundamental part of what a competition regulator is there for, it's hardly "bad law" or some arbitrary campaign against facebook


How is giphy “the same space”?


Giphy had an advertisement network that was based around gifs. Facebook shut down that advertisement network when they bought Giphy and rolled their own ads instead.


Mate, the whole article is 11 sentences, including the bit that explains what a gif is, and 2 of those 11 sentences answer your question


Giphy is already integrated in lots of juicy places that Facebook could never get an integration with their current reputation and competitors. A gif embed service, from a business perspective, is a tracking pixel generator.

So Facebook is buying the ability to see who you talk to in android keyboards, slack, discord, etc


That isn't how it works. Giphy/Facebook cannot see what is going on in your Slack channel just because you posted one of their GIFs.


They can't see the content of the Slack channel. But they can absolutely correlate the web request that loads the GIF with the other (illicitly-collected) data they have on you and have an even better signal on who you are, which companies/people you talk to, etc.


All they can see is that a user on slack.com is requesting the GIF. If you are using the Slack desktop app there's no other session to correlate it to.


The IP address and user-agent is enough of a session over time (remember that it loads every time you open your client as long as the GIF is in your recent history, so you get multiple data points to refine your search). Cookies or browser-specific state is on its way out anyway as more and more browsers impose restrictions.


Couldn't Giphy uniquely identify a gif when you post it to a channel, and when the reader(s) fetch said gif, fb could reconstruct the graph of channel/chat participants?


Heck, it's worse than that.

We're talking about GIFs. You know, short messages, memes, practically short text messages. They can literally extract context from those conversations, if a decent enough amount of them are used in the same place.

That would actually be quite a cool machine learning exercise.


for a very particular definition of "cool" that IMHO should be retired asap.


Absolutely. Slack channel URL crossed with IPs that pulled the GIF then profile via user agents and other fingerprinting that tied it to known Facebook accounts.

They’ll know exactly who is in every single slack channel together, discord server, subreddit, etc etc.


> Also what's so special about Giphy? Seems it could be duplicated fairly easily by any serious competitor.

Just cause its easily duplicated doesn't mean others can compete. You can easily duplicate Instagram, Twitter, Pinterest, etc. But unless you are as big as Facebook, you will not be about to compete. Its called network effect.


But it's just gifs. Not social network like other examples.


> But it's just gifs. Not social network like other examples.

When you send gifs to someone, that gif can be tracked. Which means, it can be monetized like other social networks. In fact, their business model is exactly like other social networks.


If Telegram shows anything, you can.


Telegram was launched 8 years ago. By a Russian billionaire.

Facebook/WhatsApp/Instagram have ~3 billion users and Telegram only has 500 million, after FB has been under constant attack for about 3 years and Telegram has received a ton of free advertising as a result.

If you call that easy (after all, that what the comment you were replying to was asking), then everything in this life is easy. Heck, getting resurrected is probably "easy".


I don't call it easy, I call it possible.


hehe, yea!

tg value proposition is based around a superior user experience, that's what competition is all about.


The acquisition was announced 18 months ago and the regulators have only just announced that there's a problem. That's about how long it takes to make a decision like this.

If FB wanted to use Giphy to squash an upstart competitor, 18 months is plenty of time to accomplish it. So regulators preemptively forbid some kinds of abusable power, especially when the company has abused its monopoly power in the past.

It would be better if regulators could act fast only when needed, but I'm not holding my breath for that to happen.


> The acquisition was announced 18 months ago and the regulators have only just announced that there's a problem. That's about how long it takes to make a decision like this.

It's about as long as it takes to figure out that Facebook didn't grease enough palms in order to let this pass muster, and won't be shelling out any more, so they're going to make it public, in the hopes it will spur Facebook to reconsider.

This is as predictable as the dance a company does when they have to fire an executive for shameful behavior, and the resulting PR to-do list dealing with the press and investors.


>Also what's so special about Giphy? Seems it could be duplicated fairly easily by any serious competitor.

They're not buying it for the tech, they're buying it for the user base so they can sell their data to advertisers.


Doesn't Giphy also have rights-agreements with major movie studios - thus allowing their users to exchange clips of copyrighted content without fear of litigation (something about Giphy persuading litigious studios that allowing clips is basically free marketing)?


Don't know what Giphy has, but creating and sharing a gif from a movie would be fair use and not subject to copyright.

You're not going to watch a movie in gif format, and it would be a derivative anyway.


Sure as an individual, but a movie studio would absolutely go after a company that is in the business of indexing, hosting and serving clips from their movies.

I suspect this is why Giphy got that license. And I bet it comes with some terms like allowing studios to remove GIFs they don't like, etc..


> And I bet it comes with some terms like allowing studios to remove GIFs they don't like, etc..

Y'ever noticed how the "send a GIF" panels in apps (often using Giphy behind-the-scenes as whitelabel) often have the top few rows of "trending" (quotes intentional) GIFs are mostly taken from recent major Hollywood releases? Most of the time it's whatever the most recent Marvel MCU film was - or some other mass-market action film - so if not the MCU then it'll be from whatever Disney's latest Star Wars movie or TV show just-so-happens to be.

...so yeah, that's very likely paid product placement right there. Not only is it free advertising for Marvel, but it's advertising that people actually want to share with each other!

Of course, what gives Giphy its credibility with net-savvy users is that they let people upload and cut their own GIFs. If you instead imagine Giphy as just being a free, maybe even banner ad-free, repository of GIFs but was strictly read-only (maybe have a likes system?) and comprised of only rightsholder-approved GIFs (but imagine the selection was still substantial so 75%+ of the time you'd still be able to find the right reaction GIF for your situation: it's just it'd all be the same well-known actors playing the same roles in all the same kinds of films and TV shows; no user-generated-content or really any material that isn't owned by a Fortune 500 media company) - but would people still use it? I think they would - especially if the E2E user-experience quality is there... as opposed to most other kinds of sites that do tolerate their users committing acts of copyright violation, but plaster the site in the worst online ads of all (because most of their users are smart enough to be offended by homogenized and consolidated entertainment media then they're going to be smart enough to run adblock too).

Disney Co is now at the point where they can choose to give Giphy a sweet deal (e.g. a covenant not to sue or even an explicit copyright license, provided Giphy promotes pro-Disney GIFs) and use Giphy not necessarily for their own direct benefit (i.e. GIFs as advertising new films), but to choose to actively support, fund and promote Giphy to ensure Giphy stays the default place for GIF editing and exchange, but because Disney then effectively "owns" Giphy, they can shut-off and shut-out promotion for all other non-Disney franchises just to ensure Disney laps up people's mindshare and imaginations: soon, in a few decades, Disney will own the rights to all new original thoughts.


Yes agreed there is also paid placement for sure.


Fair use is not a global concept.


Fair use isn't that cut and dry, it depends on how much of the work you're using, what you're using it for, how much you transformed it, etc.

It's really not "well it's only a gif, you can't touch me".


Fair use really depends on, well, the use. If you were to take a 5s clip from a movie and use it as a commercial for your product, you would almost certainly not be within fair use rights.


So, even more guaranteed users ?


And also to prevent it from growing in such a way that it could threaten existing Meta properties. This is the typical behavior in monopolies these days, get big enough to simply buy out any potential competition. Seems like the UK has had enough.


Which is fine, they're an advertising company. At the moment that regulators say that it's okay for Facebook to exist and operate the way they do -- collecting and organizing data to use for ad targeting, you can't really be on a high-horse about them doing that.


> I guess I don't get it. This is based on speculative misuse - that FB may in the future deny access to Giphy to competitors. So if you own a tool that your competitors may use then that's anti-competitive? Seems like that could apply to a lot of companies. Why not wait for actual misuse and base a case on that?

On the face of it this sounds reasonable but doesn't work in practice.

Precisely what service do they have to offer? What quality standards. How much can they charge? Do they have to innovate or can they let it stagnate. How do you police it? If FB want to limit the service they will (and they have a history in this area).

See also Nvidia / Arm.


Many services and products can be duplicated. I think the major concern is the network effect - it's the users that they are interested in.


> Also what's so special about Giphy?

At a guess: a large existing library of GIFs.


This might be the real motivation. Facebook(Meta) is data hungry and data driven company. It cares about existing data and the potential for getting more data. Known platform has a high chance to provide more data.



> Also what's so special about Giphy? Seems it could be duplicated fairly easily by any serious competitor.

Imgur already exists, and I believe (?) Giphy was created as an answer to it?


Giphy started as the place to upload mp4 "gifs" to post on reddit. There was the giphy bot that would convert any .gif to a giphy. But naturally they had to pay the bills, so the grew.


>And that bad law will bite others not just FB.

this is anti-trust regulation, not precedent that will be applied to any company. the context is important. they're looking at the scale and business practices of facebook specifically and making a decision that facebook shouldn't own giphy, not that any company can't own a tool that competitors may use.


The current UK government is very corrupt. The issue here is that someone at FB missed their request for a "donation". I'm sure this can all be sorted for a low 6 figure sum...


Facebook literally employ the former deputy Prime Minister.


Yeah, but he was never really "in" with the current lot (not corrupt, different political party, not an old boy) and he hasn't been part of a government for 7 years.

It's time for a new hire/donation/whatever


This is a regulator, not a political appointee or contracted agency.


Im not quite sure what you mean. In the UK system everyone is a political appointee. Just how blatent a PM is about interfering in "independent" agencies depends on the PM. And Boris literally just sacked the head of the standards commission and dissolved it to save a political nobody who isn't even needed to shore up a majority.

There is no separation of powers here, as long as the PM is the PM, he is basically god.


Arguably yes, at least by British standards. And according to the Times’ tapes a few years ago of the former Conservative treasurer and now Baron Cruddas you're right about the 6 figures.


Okay, I'm dumb. But can anyone please explain how the UK has any right to stop an American Company(Meta) from acquiring another American Company(Giphy)? If the UK can, can Germany, India, or even China and Russia do something similar?


Meta is free to entirely pull out of the UK market if it wants to ignore the ruling. Any country is free to say "if you want to operate here, you must do X" but how onerous X can be before the company concerned pulls out, will depend on the market importance of that country. I doubt that Meta would obey an equivalent order by Liechtenstein.


Certainly any country can claim for itself all manner of powers, which sometimes will run up against limits of enforcement capability. The OPs question only makes sense if understood in a normative sense: even if they can, what gives them the right? or, is it a good idea?

We can assume for certain, I think, that UK regulators operate within a set of rules, and in many cases they will not have the power to interfere with an acquisition between two foreign businesses - for good reason. Regulators in other countries may not have the power to stop this particular deal in the first place.

Maybe the powers of UK regulators need to be further restricted.


I think you aren't understanding this at all. UK regulators aren't stopping anything, the merger already happened. UK regulators are simply saying that if Facebook wants to continue its operations within the borders of UK they need to sell Giphy. They were given this right by the democratically elected government of UK. Regulators in every other country have the same power, dictate conditions on which one participates in their markets.


I am merely saying that the UK electorate has the responsibility to limit the power of its regulators (unless you are of the believe that their power should be unlimited).

The interesting discussion to be had here is about what good policy is, not to say "A country can make whatever laws it likes". Well duh.

We all have an interest in a functional global system. To that end, it is beneficial of countries at times defer to the laws of other nations (https://en.wikipedia.org/wiki/Comity). Maybe this is such a case. Possibly we would prefer not to have other countries try to interfere with mergers happening without our own jurisdiction too often.


When the US government finds its responsibility to limit the power of its companies (unless you are of the belief that their power should be unlimited), come back to me on that.

Companies are a tool that should serve the public, if they cease to serve the public, they should be bought in line, destroyed, or (as is threatened in this case) exiled. A democracy is meant to be for the people, not for profit. Profit is just a motive to try and incentivise things that are valuable for society, when that isn't achieved, regulators should step in to fix it.

Companies that are too large have too much money, and too much power. They are inherently anti-consumer and cause harm to the very fabric of democracy. In any sane world, we would be breaking up a huge number of these large corporations into much smaller pieces.

The electorate has a responsibility to protect democracy and not let companies break the law of the land, they have no responsibility at all to companies.


The assertion that other countries should simply abandon their sovereign regulators' powers is baseless hubris. The fact that the US seems happy to allow corporate titans to reach ever new sizes does not mean anyone else is on board.

If the US wants their regulators' decisions to carry weight in another country, they can pay for the privilege via trade agreements, same as it ever was.


It seems like a perfectly reasonable power to me, i certainly would not vote against regulators being able to do so if I were a UK citizen.

As an American citizen, would you want to restrict regulators from being able to block the business of a company that merged with a CCP controlled company in China?


> As an American citizen, would you want to restrict regulators from being able to block the business of a company that merged with a CCP controlled company in China?

On what grounds would that business be blocked?

On grounds having being state controlled? I'm not sure US regulators do have that power. On some pretend grounds, to be able to wield it as a geopolitical weapon? Probably not.

On some narrow national security reasons? Maybe.


> On grounds having being state controlled? I'm not sure US regulators do have that power. On some pretend grounds, to be able to wield it as a geopolitical weapon? Probably not.

overall, the Commerce Clause in article I of the US constitution grants the federal government power to regulate commerce with foreign nations, which includes import / export restrictions. For example you can't really buy things from Iran or Cuba without major restrictions if at all.

if a trade embargo doesn't fall under the realm of "geopolitical weapon" I don't know what does.


The "probably not" was intended to be an answer to the question "would you support" - apologies, that wasn't clear.

My overall point is that details matter for good policy. A regulator having the power to ban a foreign merger for supposed anti-competitive reasons, but really political ones, is not the same thing as, say, a legislative body passing sanctions legislation.

In other words, just because the UK wants to ability to sanction a Chinese business does not mean the Competition and Markets Authority needs to granted the ability to interfere with Chinese mergers.


Are you for real? Do you know that Cuba's being embargoed because Cuban Americans in Florida are an important political group?

How much more geopolitical do you have to get? You've been trying to starve an entire country for more than half a century because a bunch of your citizens are pissed off they got kicked out of there 30+ years ago and your politicians need them to win vital nation-wide elections.

Yes, I know about all the Cuban abuses and all that other garbage, but that doesn't make it right because the US is allied to <<soooo>> many other human rights violating countries and it doesn't even bat an eye.


> On what grounds would that business be blocked?

Any grounds pertinent to American interests, frankly.


Have US regulators not blocked multiple such businesses already?


Although I agree with you, about 5 years ago the British electorate decided they wanted their own government to set all regulations within the country without having to listen to what foreign courts — specifically the courts of a friendly region with a much larger GDP than itself — had to say, so I doubt the UK electorate would act in a way you consider responsible.


Two countries having different laws says nothing inherent about the need to "limit" the power of one to enforce a specific set of laws within their borders, unless We assume the U.S. is inherently Exceptional compared to other countries, and so if another country has some weird hang-up that threatens Our Economy, it is quite concerning and really the citizens need to rise up against their leaders' tyranny and ensure U.S. Law is truly global before one of Our Corporations loses some Money.


>what gives them the right?

The sovereignty of the United Kingdom over its own territory and incorporated businesses, through laws created by the British parliament which derives its power from the British people, very straightforward.

And if you think the British people are more sympathetic to Facebook than the British regulators you have another surprise coming

Whether a business is foreign or not is irrelevant as far as its operations in the UK is concerned. Do you think Chinese owned businesses in the US don't have to comply with American law on American soil?


> The sovereignty of the United Kingdom over its own territory and incorporated businesses, through laws created by the British parliament which derives its power from the British people, very straightforward.

And yet, the British parliament has a history of creating bad, unjust and undesirable laws (though I make no claim that they do so more frequently than other legislative bodies). This fact leaves you with three options:

- You can engage with OPs argument, which is suggesting that the laws enabling the regulator to do this are bad.

- You can choose not to engage with it, and read on.

- You can post trite observations that the UK can make laws.


You can basically ask that same question of everything that government does.


Which part of a sovereign country’s government governing their sovereign territory is the problem here?

I imagine since jaywalking is legal in the UK (but not in the US) you have similar comments? How could there be a different law about the same topic in different countries!

How is this any different to “in country X there are Y laws”. Giphy could be from Mars and it would make no difference.


Both Meta and Giphy operate in the UK market, and the UK can set conditions for operating in that market. The EU, India, China and Russia can do the same.


What would happen if they just disabled Giphy in the UK?


It still removes Giphy as a "competitor". Let's say that Facebook bought all competing messenger programs, but then disabled them in the UK because it was anti-competitive. Well, then the only option left is to use Facebook Messenger.

Giphy isn't necessarily a direct competitor (and we might disagree with the UK regulators on their assessment of the merger), but just shutting off Giphy in the UK probably wouldn't do what they want. They might want Giphy willing to sell their data to other parties that are competitors to Facebook. If that's the business value of Giphy, merely disabling it in the UK still gives Facebook the worldwide power of Giphy and it would be hard for a NewGiphy to compete with the only advantage being "we have UK data."

It's also up to the UK to determine if such a remedy would satisfy them. Facebook can't disable Giphy and then say "you don't have jurisdiction anymore." That's not how it works. Facebook could pull out of the UK by closing its offices there, but pulling out might involve also not selling ads to UK-based businesses (before Brexit, there's the possibility that Facebook could lean on the common market to continue selling ads).

Basically, disabling Giphy in the UK (or even worldwide) doesn't really solve the issue.


They'd probably start being fined by the UK regulators.


Any company has to follow the law where they operate. Being an American-headquartered company doesn't really mean anything in this context.


They could probably get the American government to flex if needed. 'Drop these demands or no Aston Martin will be sold in the US'. The problem with both companies being American is that the American government can retaliate with popular support, the ads write themselves


It depends on how far either side is willing to go. The UK is one of the few countries with which the US has an annual trade surplus ($21.8bn),[1] which is worth a lot more each year than Giphy's purchase price or even Facebook's UK revenue, so there is a lot of room for retaliation.

Traditional British media will drum up support for anti-Facebook actions, and the current UK government was elected on a mandate of defending perceived British sovereignty, with economic considerations being less important.[2] The UK government has already engaged in actions that harm its economic interests to safeguard its sovereignty.[3]

1. https://ustr.gov/countries-regions/europe-middle-east/europe...

2. https://ukandeu.ac.uk/new-polling-reveals-shift-from-immigra...

3. https://www.cer.eu/insights/ten-reflections-sovereignty-firs...


They can remove their access to the country. The EU has been doing the same for quite a while.

Also, Facebook UK is a thing.


The UK could arbitrarily block Facebooks IPs, I guess. I imagine this would end up like the carriage fee battles between networks and cable operators, with Facebook and the UK running ad campaigns about who is in the right here. I think UK citizens would bed more annoyed at the government than at FB.


More likely is that they would ban British companies (or companies operating in Britain) from publishing ads on Facebook and doing business with them (including local data center operators and ISPs, Google and Apple as app store operators).

It's all about economic power. The UK has to think about potential retaliation by the US.

In the end,Trade wars are often bad for everyone. Usually it's beneficial to find a compromise if possible.


You don't have economic power when you're breaking the law. (Generally)


I don’t follow this. All kinds of economic power exists outside of legal boundaries, on large and small scales. Everything from street prices for drugs to bribery demands at government levels.

Even laws designed curb market abuse through fines can be considered a cost of doing business rather than a disincentive, making it an economic tool for the perpetrators.


I refer to this specific situation.


Maybe they could just ban Giphy while it's still Meta-owned?


Reminds me of the history of Pirate Radio in the UK


> UK could arbitrarily block Facebooks IPs, I guess

If Facebook defied a British order like that, the U.K. could enforce quite a lot through American courts.


They have a legal presence in the UK (a subsidiary of the Facebook HQ) and probably want to merge those two UK companies as well.


Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: