Reels, Meta Platforms’ response to viral short-form video app TikTok, initially faced skepticism when it was launched in 2020, with many perceiving it as another instance of Meta imitating a popular competitor.
However, Meta has recently revealed impressive statistics indicating that Reels videos are gaining significant momentum among users and advertisers, rapidly closing the gap with TikTok, the beloved social media app owned by ByteDance that has revolutionized the digital landscape.
According to Meta, the remarkable growth of Reels, which can be viewed on both Facebook and Instagram, is in part due to the company’s enhanced recommendation software, an area where the Chinese-owned TikTok has excelled in the past.
“We can display Reels that we believe you would be interested in based on our discovery engines,” stated Justin Osofsky, Meta’s head of online sales, operations, and partnerships.
The number of Reels video plays on Facebook and Instagram now surpasses 200 billion per day, a significant increase from 140 billion last autumn. TikTok did not immediately respond to requests for its daily figures.
Osofsky acknowledged that the growth of Reels “establishes a foundation that allows for further monetization.”
While Meta has been investing in artificial intelligence for years, it is now prioritizing its utilization to enhance content recommendations and advertisements across the company’s platforms, Osofsky added.
The annual revenue run rate for Reels has surged to $10 billion, a notable increase from around $3 billion last autumn and $1 billion last summer, as shared by Meta CEO Mark Zuckerberg during a conference call with analysts following the second quarter results.
This means that Reels now rivals the scale of TikTok’s business last year, generating $9.9 billion in worldwide ad revenue, according to estimates from research firm Insider Intelligence. Insider Intelligence projects that TikTok’s global ad revenue will hit $13.2 billion this year.
One reason behind Reels’ growth is the seamless integration of Meta’s ad platform, allowing advertisers to easily promote their products or services on the feature, explained Debra Aho Williamson, a principal analyst at Insider Intelligence.
“It’s as simple as checking a box,” she said.
Susan Li, Meta’s chief financial officer, revealed that over three-quarters of Meta’s advertisers are running ads on Reels.
During 2022, Meta executives faced inquiries from investors regarding whether the substantial increase in Reels consumption was negatively impacting ad sales, as users were spending less time on higher-profit areas of Meta’s apps, such as the News Feed.
At that point, there were relatively few ads in Reels. Nonetheless, Zuckerberg expressed his expectation that advertisers would gradually embrace the format, as they had done with previous transitions from desktop to mobile and from Feed to Stories, Meta’s Snapchat-like feature.
During the earnings call, Li stated that the company predicts Reels will continue to generate less revenue compared to the ads generated from the Stories and Feed features, attributing this to the slower scroll-through rate of video content.
Despite the growth of Reels, TikTok and its renowned content recommendation algorithm still dominate in terms of time spent on social media apps. According to estimates from Insider Intelligence, the average US TikTok user spends 53.8 minutes per day on the app, compared to 48.7 minutes on YouTube, 33.1 minutes on Instagram, and 30.9 minutes on Facebook.
© Thomson Reuters 2023
