Instagram’s Engagement Grew By 24% But Monetization Remains An Issue!

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A call held on 27th April 2023 featured -Meta CEO Mark Zuckerberg and CFO Susan Li discussing the company's quarterly results and fielding questions from analysts. Meta, the parent company of Instagram and Facebook, revealed some exciting updates about its platforms during its Q1 2023 quarterly earnings call.

Zuckerberg shared an impressive statistic about how the introduction of Reels on Instagram increased time spent on the platform by over 24%. This growth can be attributed to the power of AI-driven content recommendations, which provide users with non-connection-based videos similar to the popular format pioneered by TikTok.

Li expressed her satisfaction with the impact of Reels on engagement, stating, "We're very pleased with what we've seen Reels drive in terms of incremental engagement on the platform so far." She emphasized the value people placed on short-term videos and highlighted the significant increase in sharing around Reels in recent months. According to Li, re-shares of Reels have doubled over the last six months, indicating a growing sharing flywheel. #WhenMetaMetReels
 
Although Reels and AI recommendations have successfully boosted engagement on Instagram, the increased activity has not yet translated directly into more revenue. Li admitted that Reels are dismantling some revenue from Stories and feed-based posts since users are spending their time engaging with Reels instead. However, this is part of a larger trend of overall user time increasing, which Li believes will eventually lead to positive revenue growth.

Li projected that Reels will achieve revenue neutrality by the end of the year or early 2024, with further positive contributions expected in the future. She acknowledged the need for product development to establish proper monetization for Reels, as they differ structurally from existing Instagram content types. While achieving monetization parity with Feed or Stories may not be immediately attainable, the incremental growth driven by Reels gives Meta confidence that it will eventually become a significant revenue contributor.
 
Nevertheless, while revenue generation is lagging, Meta remains optimistic about the future, anticipating AI-recommended Reels will become a key monetization driver. As the company continues to invest in product development and capitalize on the growing trend of short videos, the future looks promising for Meta and its platforms.

Have you spent more time on Instagram since Reels were introduced? Do you think AI-driven content recommendations will help Meta’s revenue? Let us know in the comments below!