Meta: Annual revenue run rate for Instagram Reels reached $1B in Q2

With short form video content on the rise, Meta is capitalizing on Instagram Reels to keep it on par with engagement levels. CEO Mark Zuckerberg noted ads monetization for Reels is making faster progress than expected – reaching $1 billion annual revenue run rate in the second quarter.

While Reels doesn’t yet monetize at the same rate as Instagram’s Feed or Stories, Zuckerberg pointed out on Wednesday’s earnings call, the revenue run rate is higher than what Stories had at identical times post-launch.

Moreover, Meta saw a more than 30% increase in user engagement with Reels across Facebook and Instagram. Zuckerberg nodded to AI advancements as a factor for engagement levels.

“One example is that after launching a new large AI model for recommendations, we saw a 15% increase in watch time in the Reels video player on Facebook alone,” he said. “So I think that there are many improvements like this that we'll continue to make.”

Meta a few weeks ago began testing a feature which made all Instagram video posts shared as Reels, part of Meta’s efforts to “simplify and improve the video experience” on Instagram.

Last week, Instagram announced new video posts shorter than 15 minutes will automatically be shared as Reels. The change will be rolled out in the coming weeks, but videos posted prior to this implementation won’t become Reels.

Meta reported total Q2 revenue of $28.8 billion, down 1% year on year. Net income dropped to $6.7 billion from $10.4 billion in Q2 2021.

Approximately 2.9 billion used at least one of Meta’s Family of Apps daily in June, according to CFO Dave Wehner. In addition to increasing user engagement on Reels, Meta wants to tailor it for marketing needs.

“Our focus right now with Reels is ramping up ad load, improving performance and making sure the ads are easy for advertisers to create,” said COO Sheryl Sandberg. “We’re also using AI to better understand the content being published in Reels, so users can connect to the content that is most relevant to them and marketers can also show more relevant ads.”

Sandberg pointed to the example of Wild Alaskan Company, a sustainable seafood company that’s been testing Reels in its campaign. Through Reels, the company saw a 36% increase in return on ad spend, she said, as well as a 26% lower cost per new subscriber.

Though Meta has made strides in monetizing and improving engagement on Reels, short form video competition remains strong. TikTok, which touts about 1.39 billion global users, recently integrated its app into Vizio smart TVs.

TikTok has a major short-form video presence in the U.S., according to a June report from Moffett Nathanson, “dwarfing the reach of either Instagram Reels or Facebook Reels…”

Yet the app recently fell under scrutiny for potential data sharing concerns, with a BuzzFeed report alleging TikTok employees in China gained access to sensitive U.S. user data. TikTok’s CEO rebuffed those allegations, stating what’s referenced in BuzzFeed’s article is “not supported by facts.”

YouTube is also in the short-form video game with YouTube Shorts. Alphabet CEO Sundar Pichai has said Shorts have over 1.5 billion signed-in users each month, with more than 30 billion daily views.