Meta is leaning into Reels, its short-form video platform within Facebook and Instagram, as the future of its advertising business, according to company executives who presented at an advertising conference today (May 4).
“Video is the future of our platform,” Alvin Bowles, Meta’s vice president of global partnerships and engineering, said at the conference.
In 2022, 99.3 percent of Meta’s revenue, which totaled $114 billion, came from advertising, according to company financial documents. “It’s about giving people what they may not have realized they wanted,” Bowles said at the conference.
Meta presented at the Interactive Advertising Bureau’s NewFronts conference, in which companies introduce their new advertising options to media buyers. Other companies in attendance included TikTok, YouTube and NBCUniversal, which pitched advertisers, May 3.
Meta executives didn’t discuss any new advertising innovations in the social media apps’ feeds or within stories, suggesting that ad programming is already mature. The metaverse topic surfaced briefly, perhaps because executives don’t yet see it as a viable advertising mechanism. Instead, Meta executives spent most of the company’s time promoting Reels—even though making money through Reels can be difficult.
Advertising through Reels has some structural constraints, Susan Li, chief financial officer, said on a call with analysts on April 26 after reporting the company’s earnings. “People view a Reel for a longer time than a piece of Feed or Stories content, which results in fewer opportunities to serve ads in between posts,” she explained. Compared to the other in-app platforms that Instagram and Facebook offer, the time users spend on Reels isn’t generating as much revenue. If Reels is the future, as Bowles suggested, Meta will need to figure out how to make money off the platform and keep advertisers interested as competitors like TikTok and YouTube continue to innovate.
Are Reels effective?
The company’s platforms, which include Instagram, Facebook and WhatsApp, reach 3.8 billion people on a monthly basis, 3.02 billion of whom use one of Meta’s apps every day.
Reels are becoming more popular on Facebook and Instagram. Every day, users share more than 2 billion short-form videos, double the sharing statistics from six months ago, CEO Mark Zuckerberg said on the earnings call. The ability for Meta to make money off of Reels is also increasing, he said.
As Reels grow, so do the advertising capabilities for the platforms. For each dollar advertisers put into one of Meta’s products, they receive $3.31 in returns, Zuckerberg said, citing a study Meta conducted with the University of California at Berkeley. From October to December 2022, Meta saw a 20 percent increase in conversions—when users take an action like purchasing a product or signing up for a newsletter after viewing an ad—compared to the same period in 2021, according to Nicola Mendelsohn, Meta’s head of global business group.
Meta’s new advertising products
Mendelsohn unveiled a series of new advertising products at the conference, highlighting the rollout of those using augmented reality (AR) on Instagram and Facebook Reels. In a test of the product, Sephora created an AR experience where users apply an in-camera filter in the app, and the technology selects a perfume for the user based on their “aura vibe.” Users can then visit Sephora to purchase the perfume.
Meta added the ability for advertisers to link multiple products in a single Reel where, previously, a Reel only supported one link. The company is also allowing users to pause ads and preview the linked page without having to leave the Reel. The mechanism is already available on Facebook, and Meta plans for it to roll out on Instagram.
