Meta Platforms introduced Reels in 2020 as a response to the increasingly popular TikTok, prompting skepticism regarding its originality and innovation. Many viewed Reels as another instance of Meta imitating a successful competitor.
However, on Wednesday, the company reported significant growth in Reels usage among both consumers and advertisers, indicating that the feature is rapidly approaching the popularity levels of TikTok, a platform favored by younger audiences that has transformed the social media landscape.
According to Meta, the swift rise of Reels, which can be accessed on both Facebook and Instagram, is partly due to enhancements in the company’s recommendation algorithms. This area has long been a stronghold for its Chinese competitor.
Justin Osofsky, Meta’s head of online sales, operations, and partnerships, emphasized in an interview on Thursday that the platform’s discovery engines can effectively serve users with Reels they are likely to enjoy.
Currently, Reels videos are generating more than 200 billion views daily across Facebook and Instagram, a notable increase from 140 billion views last autumn. TikTok has not responded to requests for its own daily viewership statistics.
Osofsky noted that this increase in Reels engagement establishes a foundation for generating further revenue opportunities.
While Meta has been investing in artificial intelligence for several years, the company is now prioritizing such technology to enhance content recommendations and advertising across its various platforms.
Meta CEO Mark Zuckerberg shared during a recent conference call that Reels’ annual revenue run rate has surged to $10 billion (approximately ₹82,287 crore), up from about $3 billion (around ₹24,688 crore) last fall and $1 billion (approximately ₹8,229 crore) last summer.
This financial growth positions Reels comparable to TikTok’s advertising business, which reportedly generated $9.9 billion (around ₹81,472 crore) in global ad revenue last year. Research firm Insider Intelligence has projected TikTok’s global ad revenue to reach $13.2 billion (about ₹1,08,630 crore) this year.
Experts attribute Reels’ expanding popularity to Meta’s advertising platform, which allows advertisers to effortlessly integrate promotions into the feature. Debra Aho Williamson, a principal analyst at Insider Intelligence, stated, “It’s as easy as checking a box.”
Meta’s Chief Financial Officer, Susan Li, reported that over 75% of the company’s advertisers have started using Reels for their ad placements.
In 2022, Meta executives often faced queries from investors regarding whether the increasing consumption of Reels was adversely affecting ad sales by diverting user engagement from more lucrative sections of its applications, such as the News Feed. At that time, the volume of ads in Reels was relatively low, but Zuckerberg expressed optimism about its potential as advertisers became more accustomed to new formats, similar to past transitions within the platform.
During the earnings call on Wednesday, Li mentioned that while Reels would likely continue to generate less revenue than ads through Meta’s Stories and Feed formats—due to users scrolling more slowly through video content—the platform’s potential cannot be ignored.
Despite Reels’ growth, TikTok maintains its lead with respect to time spent on social media. According to estimates by Insider Intelligence, the average user in the U.S. dedicates 53.8 minutes each day to TikTok, compared to 48.7 minutes on YouTube, 33.1 minutes on Instagram, and 30.9 minutes on Facebook.
© Thomson Reuters 2023
