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Meta announced during its Q1 2022 earnings call that Reels, its short-form video feature and TikTok rival, now makes up more than 20% of the time that people spend on Instagram. The company also noted that video, overall, makes up 50% of the time that users spend on Facebook. Although Meta didn't specify how much of that time is made up by Reels, it noted that Reels are performing well on Facebook as well.
Meta CEO Mark Zuckerberg said during the call that although its short-form video product doesn't monetize as well as Stories currently do, the company is optimistic about improving this in the future. Zuckerberg pointed toward the company's experience with Stories, which at first wasn't monetizing as well as the main Instagram feed but had improved over time. Meta expects to see a similar experience with monetizing Reels over time, but notes that it's going to be a multiyear journey and that the company is still in the early days of ads in Reels.
Zuckerberg outlined that since starting Facebook 18 years ago, the company has seen multiple shifts in the media types that people use and that short-form video is only the latest iteration and is growing quickly. He outlined that while Meta is seeing an increase in short-form video, it's also seeing a major shift in the advancement of AI recommendations driving more of its feeds, for both posts and Reels. He elaborated that feeds are going from being exclusively curated by users' social circles to being recommended by AI.
"Being able to accurately recommend content from the whole universe that you don't follow directly unlocks a large amount of interesting and useful videos and posts that you might have otherwise missed," Zuckerberg stated. "The AI that we're building is not just a recommendation system for short-form video, but a discovery engine that can show you all of the most interesting content that people have shared across our systems."
TikTok's powerful recommendation algorithm is one of the reasons behind its immense popularity, which is why it makes sense for Meta to focus on enhancing its own recommendation systems to get people to interact with Reels more, and in turn, be better aligned to compete with TikTok.
Meta's comments on Reels monetization come a day after Google revealed that it has started testing ads in YouTube Shorts. Google CEO Sundar Pichai also announced that YouTube Shorts, the platform’s TikTok clone, is generating 30 billion views per day, which is four times more than last year.
Meta and YouTube's short-form video efforts are a direct response to the success of TikTok, which has proven to be one of the world’s fastest-growing social media platforms, according to recent data. Meta has been looking to enhance Reels over the past few months and has largely adopted several of TikTok's features over time, including a Duet-like tool called Remix, to help it compete with the platform.
As for Meta's quarterly earnings overall, Facebook boasts 1.96 billion DAUs, up from 1.92 billion last quarter. In addition, Meta’s Reality Labs operated at a loss of $2.96 billion in Q1 alone, and last year, Reality Labs lost over $10 billion.