During its Q1 2023 earnings call, Meta shared that time spent on Instagram has increased by over 24% since the launch of Reels, which uses AI-powered content recommendations. This has resulted in more sharing around Reels and a doubling of re-shares over the last six months, but Reels is cannibalizing revenue from Stories and feed-based posts. Meta hopes that Reels will become revenue-neutral by the end of the year or early 2024. But, it requires proper monetization due to structural differences from existing Instagram content types.
Meta CFO Susan Li noted that AI-driven recommendations on Facebook, which do not come from direct connections, are increasing engagement among users, but she did not confirm whether Reels was having a similar impact on Facebook proper. Although Reels is not yet directly translating into more revenue, the overall trend of incremental user time is positive and Meta is confident that Reels will eventually become a key contributor to monetization.
