Hook, line and sinker: Instagram crosses 2 billion users, Reels hits $3 billion annual revenue rate

The video format was introduced by Instagram in late 2019 to counter rival TikTok’s popularity.

TikTok, the Bytedance owned short-format video sharing platform, pioneered the short-video format and made it popular.

Increasing engagement

Reels has become Meta’s major engagement tool, with more than 140 billion plays across Instagram and Facebook, up 50% from six months ago, according to Zuckerberg.

Meta had announced in July that the annual revenue run rate for Reels stood at $1 billion.

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“Reels are incremental to time spent on our apps. The trends look good here, and we believe that we’re gaining time-spent share on competitors like TikTok,” added Zuckerberg.

Meta has been constantly working on changing and transforming Reels since its introduction to make it more engaging. In the latest update, Instagram allows users to watch Reels together and interact with each other.

Monetisation challenge

This rapid growth for Reels as a format means it’s on course to become a major revenue generator for Meta. Reels is not as easy to monetise, however. As Zuckerberg put it, “The growth of short-form video creates near-term challenges since Reels doesn’t monetize at the rate of Feed or Stories yet. That means as Reels grows, we’re displacing revenue from higher-monetizing surfaces… Even with the progress we’ve made, we’re still choosing to take a more than $500 million quarterly revenue headwind with this shift. But we expect to get to a more neutral place over the next 12-18 months.”

The statement followed an otherwise gloomy earnings report for Meta, which saw its revenue drop 4% to $27.7 billion, from $29 billion a year earlier. Net income was $4.4 billion, down 52% from a year earlier. Meanwhile, the company’s spending soared by 19%.

2 billion users

During the quarter, Instagram crossed two billion users, catching up with Meta’s first and flagship platform Facebook, the company said in a statement. Facebook, Mea’s first and flagship platform currently has 2.96 billion users.

Instagram, which was founded in 2010 by Kevin Systrom and Mike Krieger, was acquired by Meta, then known as Facebook, in 2012, for $1 billion. The social media platform recorded its billionth user in 2018.