Why Meta Reported a Strong First Quarter for 2023

Why Meta Reported a Strong First Quarter for 2023

by Patrick Wool Meta

Meta’s ad business is back on the upswing, and AI is a big reason. On April 26, Meta reported its first increase in sales in nearly a year because of an improvement in its advertising business. This happened because Meta’s short-form video feature, Reels, is gaining more engagement thanks to Meta’s use of AI to target Reels more carefully to its user base. More engagement means more ad revenue. 

What Meta Announced 

Meta reported revenue of $28.6 billion, up 3 percent from a year prior and ahead of expectations of nearly $27.7 billion, according to analysts surveyed by FactSet. That snapped a streak of three quarters in which Meta’s revenue had declined from the year prior (The drop was the only time that has occurred since the company went public in 2012.) The 3 percent increase is an improvement from the 4.5% drop in revenue that the company posted in the final quarter of 2022. This is a notable turnaround for a company that spent the better part of 2022 regrouping after Apple’s consumer privacy controls ate into Meta’s ad revenues.

In his formal comments on the quarter, CEO Mark Zuckerberg attributed the growth largely to the popularity of Reels, which is Meta’s answer to TikTok’s influential short-form videos. He said that Reels are growing quickly on both Facebook and Instagram.

“Reels also continue to become more social with people resharing Reels more than 2 billion times every day, doubling over the last six months,” he said. “Reels are also increasing overall app engagement and we believe that we’re gaining share in short-form video too.”

He also said that more than 3 billion people use at least one of Meta’s apps each day.

Meta daily active users

Zuckerberg attributed the uptake of Reels to the way AI makes more personalized Reels recommendations for Meta users to watch, which, in turn, encourages advertisers to create targeted ads.  

He observed, 

Our investment in recommendations and ranking systems has driven a lot of the results that we’re seeing today across our discovery engine, Reels, and ads. Along with surfacing content from friends and family, now more than 20% of content in your Facebook and Instagram feeds are recommended by AI from people, groups, or accounts that you don’t follow. Across all of Instagram, that’s about 40% of the content that you see. Since we launched Reels, AI recommendations have driven a more than 24% increase in time spent on Instagram.

Our AI work is also improving monetization. Reels monetization efficiency is up over 30% on Instagram and over 40% on Facebook quarter over quarter. Daily revenue from Advantage+ Shopping Campaigns is up 7x in the last six months.

Meta Advantage+ Shopping Campaigns, introduced in 2022, are automated shopping campaigns that use machine learning by dynamically serving your ads to audiences most likely to convert while better utilizing your advertising budget. The product eliminates manual ad creation steps and according to Meta, “automates up to 150 creative combinations at once.”

Why the Meta News Matters

This news matters for two reasons:

Meta’s growth amid a challenging economic climate is also good news for the entire digital advertising industry. It’s a sign that advertisers are willing to continue investing in their brands during economic uncertainty.

What Advertisers Should Do

  • Experiment with products such as Meta Advantage+ Shopping Campaigns to understand how AI is influencing the advertising landscape.
  • Be open to trying other new Meta ad opportunities depending on how you engage with your customers and prospects. For example, Mark Zuckerberg told investors on the April 26 earnings call that Meta is building out business messaging “as the next pillar of our business.” He noted that last quarter its click-to-message ads reached a $10 billion revenue run-rate. Since then, the number of businesses using our other business messaging service — paid messaging on WhatsApp — has grown by 40 percent quarter-over-quarter.

At True Interactive, we advocate for our clients that invest in Meta and other platforms. We will continue to monitor developments and adapt our ad strategies as needed.

Contact True Interactive

To succeed in the ever-changing world of online advertising, contact True Interactive. Read about some of our client work here.

Image source: Alexander Shatov on Unsplash

How Meta Is Rebounding

How Meta Is Rebounding

by Taylor Hart Meta

Meta is back.

The company’s market capitalization lost considerable value in 2022 after failing to meet its financial targets. A costly investment into the emerging metaverse has been ridiculed. But Meta is showing signs of a much brighter 2023.

The Wall Street Journal recently reported that:

  • The company’s investments into artificial intelligence (AI) have helped Meta improve ad-targeting systems to make better predictions based on less data.
  • Meta’s short-form video product, Reels, is becoming more popular on Meta’s core Facebook and Instagram platforms.
  • The development of ad products based on user data from Meta’s own platforms is easing the blow of Apple’s privacy restrictions. Those restrictions, focusing on ad products that rely on third-party user data, had forced Meta to retool its ad strategy away from third-party user tracking to first-party data (the information that Meta gains from users from its own platforms such as Facebook and Instagram).

Reels Gains Traction

All of these developments are noteworthy. For instance, Reels is Meta’s answer to TikTok, whose dramatic rise, based on short-form videos, has threatened Meta. So, more user engagement with Reels should attract more advertisers.

The Wall Street Journal said that Tom Alison, head of Facebook, wrote in a memo to staff, “Facebook engagement is stronger than people expected. Our internal data indicates that Meta has grown to a meaningful share of short-form video.” And on Facebook alone, Meta can count on a large, engaged user base.

Facebook engagement

Reportedly, Meta has credited improvements to both Facebook’s algorithms and the computing systems on which they run, resulting in a 20 percent gain in time spent in Reels consumption. This is quite a turnaround from summer 2022, when Meta was still struggling to get users to embrace Reels videos.

More Effective Ad Products

Meta suffered a blow in 2021 when Apple introduced privacy controls that resulted in people opting out of having their online behavior tracked while using Apple products. This was a problem because Meta’s ad products rely mostly on tracking people across the web via third-party cookies. The privacy controls have forced Meta to do a better job building ad products based on user behavior on Meta’s own platforms (which Apple’s privacy controls do not affect).

Meta estimated last February that the Apple change would cost it more than $10 billion in lost sales for 2022, equivalent to about 8 percent of its total revenue for 2021. At the time, the news caused Meta’s stock price to plummet.

But Meta is gaining traction with new ad products. For instance, Meta’s broad targeting ad program consists of an automated targeting approach that reportedly produces better results for Facebook and Instagram ads than more refined, more niche audience approaches do. Meta is also developing ads in which users click straight into a messaging conversation with a business.

But ads based on first-party data are only 18 percent of Meta’s revenue, according to The Wall Street Journal. Meta has a lot of work to do.

Key Issues Going Forward

Meta recently reported better-than-expected results in its most recent quarterly earnings announcement. CEO Mark Zuckerberg said 2023 is a “Year of Efficiency,” which means managing spending carefully. Key questions going forward:

  • How well Meta will use AI to recommend Reels content to Facebook and Instagram users. The more targeted the recommendations, the higher the engagement rates. Meta needs people to stay engaged on Reels like they are glued to their TikTok videos. Engagement means advertising revenue from businesses that want to target those users with content.
  • The performance of ad products based on first-party data. Businesses should continue to ask their Meta ad representatives for developments in this area.
  • How well Meta manages its costly investment into the still young metaverse, which remains a sore spot for the company. The metaverse generates no advertising revenue streams to speak of for Meta.

At True Interactive, we advocate for our clients that invest in Meta and other platforms. We will continue to monitor developments and adapt our ad strategies as needed.

Contact True Interactive

To succeed in the ever-changing world of online advertising, contact True Interactive. Read about some of our client work here.

Lead photo credit: https://unsplash.com/@solomin_d

Why YouTube Is Turning to Shorts for Social Commerce

Why YouTube Is Turning to Shorts for Social Commerce

by Max Petrungaro YouTube

Short-form video is an important battleground for brands and consumers right now. TikTok really changed the game for video content creation by inspiring millions of people to create TikTok videos that typically last anywhere from 10 seconds to 60 seconds. Since then, a host of imitators have appeared, including Meta’s Reels on Facebook and Instagram; and YouTube Shorts.

Many businesses have quickly cracked the code for creating short-form video, and everyday users continue to up the ante, too, which has accelerated the rise of the creator economy, or everyday creators who monetize their content with the help of the host app.

Short-form video is also rapidly evolving as a format for creating ads, free content, and shoppable experiences. The latest example: YouTube Shorts is expanding shopping features.

What Is YouTube Shorts?

Shorts is a feature available to YouTube users. With Shorts, people can quickly and easily create short videos of up to 15 seconds, similar to how TikTok and Instagram Reels are used. The videos are created on mobile devices and viewed, in portrait orientation, on mobile devices. And once a person opens one Short, they get access to tons more of them (again, think TikTok or Reels playing one after another.) According to Google, YouTube Shorts now averages over 30 billion daily views (four times as many as a year ago).

It did not take long for businesses to get involved with Shorts. As we have blogged, brands everywhere are connecting with the vast YouTube audience with organic content and advertising.

For instance, Kitchen and home marketplace Food52 is posting Shorts that offer sneak peeks at its longer-form content on the traditional version of YouTube, as well as repurposing some recipe videos. Drupely’s olive-oil brand Graza says it is creating user engagement by posting how-to cooking and recipe content. According to Graza, videos focused solely on Graza products do better on TikTok than on Shorts.

Social Commerce on Shorts

If YouTube has its way, more brands will be using Shorts to sell things to people. New shopping features are being tested by YouTube in order to accelerate social commerce on YouTube. The new shopping features allow users to purchase products as they scroll through Shorts.

In the United States, eligible creators can tag products from their own stores. Viewers in the United States, India, Brazil, Canada and Australia can see the tags and shop through the Shorts. (The plan is to expand tagging for more creators and countries.)

YouTube is also experimenting with an affiliate program in the United States. This makes it possible for creators to earn commissions through purchases of recommended products in their Shorts and regular videos. YouTube says that this test is in early days. The program will be expanded in 2023.

This is just the latest in many efforts by YouTube to inject social shopping into the user experience. For instance, YouTube launched shoppable ads and the ability to shop directly from livestreams hosted by creators. YouTube has good reason to make it easier to buy and sell products on Shorts. Shorts has topped 1.5 billion monthly users. According to gen.video, YouTube ranks third overall in terms of where consumers do their product research before buying, only behind Amazon and Google directly.

YouTube Shorts is in a race with Instagram and TikTok to win attention from shoppers. Both apps have a head start on Shorts, and TikTok is testing TikTok Shop in the United States. TikTok Shop allows users to buy products directly through the app. All of them are trying to get a slice of the social shopping pie: social commerce is expected to be a $2 trillion market by 2025.

Brands are already figuring out how to sell products via Shorts. Glossier sold products through Shorts in June by creating a challenge for users to try. Glossier gave about a hundred influencers a new pencil eyeliner and encouraged them to create Shorts videos with the hashtag #WrittenInGlossier in the caption. People who tapped the hashtag were brought to the Glossier website. There, they could buy the eyeliner and were asked to recreate a look as part of the challenge. Any Shorts video that included the hashtag was shoppable.

2023 will likely be a year for more shopping features to proliferate on video platforms, with Shorts, TikTok, and Instagram duking it out for consumers’ attention amid a recessionary economy. Who will win? We’ll report progress here.

Contact True Interactive

We deliver results for clients across all ad formats, including video and mobile. To learn how we can help you, contact us.

“Why Google Is Bullish about Winning Its Fight with TikTok”

“How Brands Are Using YouTube Shorts”

“Why Google Brought Advertising to YouTube Shorts”

“Why YouTube Shorts Matters to Brands”

How Meta Is Defending Its Advertising Turf

How Meta Is Defending Its Advertising Turf

by Jessica Skopek Meta

Meta, the second-largest online advertising platform in the world, faces numerous challenges ranging from stricter privacy controls to the emergence of new competitors such as Amazon Ads and TikTok. Meta, like the market leader Google, is defending its position the best way it knows how: rolling out new ad products.

On October 3, Meta announced new ways for advertisers to reach the company’s user base, which encompass brands such as Instagram, Facebook, and Messenger. They include:

  • Post-loop ads on Facebook Reels. The skippable video ads, ranging from four to 10 seconds in length, play at the conclusion of a Reel, followed by the original Reel resuming and looping again. (Instagram Reels already have ads.)
  • Image carousel ads for Facebook Reels. These are horizontally scrollable and can include anywhere from two to 10 image ads. They appear at the bottom of Reels content.
  • Ads in creators’ profile feeds. These are aimed at giving creators another monetization option and will allow them to earn extra income from ads within the content they already have in their profile. This ad format is being tested with a small number of creators in the United States. A Meta spokesperson told Adweek that company will make it clear that creators are not affiliated with the ads that appear in their profile feeds.

Meta also announced new spaces available for advertisers on both the Explore page of Instagram, within Facebook Reels and on creators pages.

But wait – there’s more! Instagram also launched a series of ad formats. For instance, Instagram  is developing an open beta of augmented reality ads in feed and Stories. This makes it possible for brands to provide an immersive AR ad experience and encourage people to interact via their surroundings.

Instagram is also offering new multiadvertiser ads that use machine learning to serve ads from other businesses under an ad that may be of interest to the user. In theory these will help advertisers be discovered by Instagram users who are already in a shopping mindset. The new option is only enabled for direct-response objectives. Advertisers will have to opt in, with the opportunity to opt out whenever they choose.

The most interesting take-away from Meta’s new ad formats is the way Meta is trying to monetize the value of Reels for creators and Meta. For in-Reel Facebook ads, creators would get 55 percent of the revenue, while Meta would get 45 percent. The more consumers see Reels, the less time they spend in the legacy parts of the platform like the main feed.

In a July earnings call, CEO Mark Zuckerberg said, “We saw a more than 30% increase in the time that people spent engaging with Reels across Facebook and Instagram.” If creators of Reels can make money from their participation on these platforms, they could start to win back some of the audience Meta has been losing to TikTok.

Will Meta succeed? One concern advertisers shared with Adweek is that too many ad formats could create saturation. If users feel like their experience is cluttered with too many ads, their engagement with Meta platforms will decline.

But if monetizing Reels makes Meta a more attractive destination for creators, the format could provide a credible alternative to TikTok. For now, businesses should work with their agency partners to evaluate these ad products against where their audiences are most likely engaging with their brands. If you are already achieving strong results by advertising on TikTok, for instance, Meta’s new formats might not be necessary unless you aim to court Meta’s relatively older audience (compared to TikTok). But if you’re already looking for ways to reach Meta’s audience, and you’ve been using Meta as an ad platform, these formats may hold more appeal.

Contact True Interactive

To succeed with social media advertising, contact True Interactive. We have extensive experience helping businesses succeed on social media.

Facebook Reels: What Brands Need to Know

Facebook Reels: What Brands Need to Know

by Clare O'Shea Facebook

One year after Instagram announced the debut of short-form video feature Instagram Reels, parent company Facebook is joining the party. Reels first debuted on Instagram in 2020 in a clear bid to compete with TikTok. Facebook, having recently announced its plans to test Facebook Reels in the United States, is now figuring out ways to make Reels a more popular feature on Facebook itself (the U.S. initiative is an expansion of testing already launched in Mexico, Canada, and India). As part of the test, Instagram users can cross-post their reels to Facebook.

What do these developments mean for your brand? Read on to learn more.

What Is the Reels Feature?

When Reels rolled out on Instagram in 2020, the video time cap was 15 seconds, but the feature has since grown, and grown again: videos can now be up to one minute long. Using Facebook Reels, people can watch others’ videos, as well as create/share their own reels from the Facebook app. The feature’s reason for being? To allow people to “express themselves, discover entertaining content, and to help creators broaden their reach.” According to Facebook, almost half of time spent on the app is devoted to watching videos. Pair this data with the statement that Reels is growing “especially quickly,” and the test run of Facebook Reels makes a tremendous amount of sense. As CEO Mark Zuckerberg told investors, “We’re very focused on making it easy for anyone to create video, and then for those videos to be viewed across all of our different services, starting with Facebook and Instagram first.”

As Zuckerberg implies, emphasis is on creativity and its possibilities. Facebook Reels users have access to creation tools much like those already available on Instagram: video capture, for example, as well as camera roll import, timed text, and music selection. Editing tools allow people to speed up or slow down their video, and to incorporate augmented reality effects from Facebook or third-party developers. And after creating a reel, users can decide how to share it: with select friends, or the default share, which is the general public. As is the case throughout Facebook, Reels will be recommended to people based on their interests, who they engage with, and what’s trending as popular.

Why This News Matters

Facebook’s efforts speak to deeper trends and resonances. For one thing, the news demonstrates the tremendous sway TikTok holds in the social world. TikTok enjoys approximately one billion monthly active users. Sixty percent of TikTok users hail from Gen Z, soon to become the largest generation. Furthermore, TikTok users of all ages have proven themselves to be ardent fans, spending an average of 52 minutes per day in the platform and opening the app roughly 8 times per day. Eighty-three percent of TikTok users have posted a video. Facebook understands and respects these stats, and is responding accordingly.

The news also underlines the growing importance of video. As noted above, video accounts for  a major chunk of time spent on Facebook. And on Facebook’s latest earnings call, Zuckerberg pointed to Reels as “the largest contributor to engagement growth on Instagram.” In short, videos are hot.

Reels represent a possible advertising opportunity. While Facebook told TechCrunch that Reels on Facebook don’t currently include ads, the plan is “to roll out ads in the future.” Instagram, which has already begun to monetize Reels through ads, is showing what that might look like for Facebook down the road.

Finally, Facebook’s actions underscore the growing influence of individual creators. Consider the fact that in July, the social networking behemoth announced a plan to invest more than $1 billion in creators across both Facebook and Instagram through 2022. The platform’s willingness to shell out that kind of cash speaks to a fundamental belief in influencers’ power.

What Brands Should Do

What do these developments mean for brands? We recommend that you:

  • Embrace video, especially short-form video. Facebook is certainly demonstrating its commitment to the form. And as we blogged earlier this year, apps such as YouTube are launching short-form video options such as YouTube Shorts.
  • Look for advertising opportunities. Reels may not include ads on Facebook yet, but as noted above, the landscape is constantly evolving. What opportunities for advertising on video features exist today?
  • Understand that influencers hold a lot of sway. Consider how you might partner with individual creators to do influencer outreach for your brand.

Contact True Interactive

Pondering the role video might play in your brand’s strategic plan? Contact us. We can advise.