Meta remains focused on improving monetization of Reels, its version of short form video content for Instagram and Facebook. Despite boasting continued user engagement, the company noted Reels’ path to profit is still a work in progress.
Previously, Meta reported Facebook and Instagram users were playing more than 140 billion Reels per day. The company didn’t provide an updated count for the fourth quarter, but founder and CEO Mark Zuckerberg noted on Wednesday that Reels plays “have more than doubled over the last year” across Facebook and Instagram. Resharing of Reels also doubled on both apps in the past six months.
Still, Zuckerberg stressed Reels aren’t generating as much revenue as other services across Meta's sites, such as the News Feed.
“Even though [Reels] adds engagement to the system overall, it takes some time away from Feed and we actually lose money,” he said on the earnings call, adding Meta is on track to bring Reels revenue headwinds to a “roughly neutral” level by the end of 2023 or early 2024. After that, Zuckerberg anticipates the company can “profitably grow Reels while keeping up with the demand that we see."
The fourth quarter also saw Facebook reach 2 billion daily active users. Among Meta’s Family of Apps (including Facebook, Instagram, Messenger and WhatsApp), the company reported 2.96 daily active people (DAP) as of December 31.
On the advertising front, Meta noted ad impressions across the Family of Apps increased by 23% year-over-year, whereas the average price per ad went down 22% in that same period. CFO Susan Li attributed the impressions growth to Reels engagement along with “ad load optimizations” across different formats, including Reels, Stories and the News Feed.
Li noted the company is “not quantifying the gap in monetization efficiency between Reels and other services.” But she delved a bit into why Reels’ monetization might be lagging. The difference in ad load is one factor, but also the actual format for Reels is “more video-intensive, so there’s scroll-speed differences for Reels relative to services like Stories and Feed.”
“That’s what kind of is holding Reels back from a monetization efficiency standpoint per time relative to the other services,” said Li. She added Meta has done “a lot of work” to “unlock advertiser demand on Reels.”
Meta launched Reels back in 2020, with critics at the time calling it a clone of TikTok. The company has continued its focus on short form content, announcing last summer that Instagram video posts shorter than 15 minutes will automatically be shared as Reels.
Despite Meta boasting high Reels engagement, a report from The Wall Street Journal last fall suggested Reels usage still pales in comparison to TikTok. Research firm Omdia predicts TikTok will continue to outpace both Meta and YouTube in ad revenue over the next few years.
YouTube may soon see an uptick in short form monetization, however, as the platform this month kicked off creator monetization for YouTube Shorts. The platform has also optimized Shorts viewing for TV screens.