What were the three biggest ad-related takeaways from Meta’s stellar Q2 2023 earnings report? Reels’ revenues, AI ad products, and a return to ad growth in Europe.
Reels has finally become a true TikTok competitor
More than three-quarters of Meta’s advertisers now use Reels ads, and the annual revenue run rate for Reels now exceeds $10 billion, up from $3 billion last fall, per Meta. That brings Reels into much closer contention with TikTok, which we forecast will have $13.16 billion in ad revenues worldwide this year, up from $9.89 billion in 2022.
The big red flag for future monetization growth is that Meta continues to expect time on Reels to monetize at a lower rate than its Stories and Feed since people tend to scroll more slowly through video content. Time spent is another factor: US adult Instagram users will spend 33.1 minutes per day on the app this year, well below the 53.8 minutes TikTok users spend, according to our forecast.
AI ad products are gaining traction
AI was a huge topic during the earnings call, particularly Advantage+, Meta’s suite of AI-powered ad automation tools.
Meta is seeing strong adoption for Advantage+ in the e-commerce and retail verticals, and consumer packaged goods advertisers are also showing interest. After Advantage+ Shopping, the company plans to roll out other products under the Advantage+ umbrella. The feedback and results that it’s seen from advertisers have been good, and Meta considers it a promising area worthy of continued investment.
Outside of Advantage+, Meta has also launched Lattice (which learns to predict an ad’s performance across data sets and optimization goals) and AI Sandbox (where marketers can test generative AI-powered tools like automatic text variation, background generation, and image outcropping).
Credit: https://www.insiderintelligence.com/content/3-big-ad-stories-meta-earnings-report-reels-tiktok