An Undeserved Penalty for Meta
Meta shares (Facebook platform owner) has lost 50% since the beginning of 2022. Facebook and Instagram have dominated the social media industry for a long time with a minor contribution from the Snapchat that was populated mostly by teenagers. A dramatic change came when TikTok emerged - a rapidly expanding short video social media platform. The launch of Instagram Reels and efforts by the U.S. Administration to crack down on TikTok within the U.S. territory were not quite successful in discouraging new Chinese social media expansion. Nevertheless, it is too early for Facebook to be dismissed.
The adult audience spends 38 minutes a day on TikTok, while Facebook and Instagram have these reading at 31 and 30 minutes respectively. The Meta platform is still popular for communication purposes and for posting photos, but not so popular for video content as people prefer to consume videos on other social media platforms. Meanwhile, video content is very important in terms of audience retention. Meta Platform’s CEO Mark Zuckerberg said that people spend over 50% of their time on Facebook using Reels while only 20% of their time is spent on Instagram. New Meta efforts to introduce artificial intelligence algorithms to increase audience involvement in video content may increase Meta revenues even if the platform’s numbers do lack behind that of TikTok. TikTok had one billion active users a month in 2021 with a revenue of $20 billion. Reels have 1.3 billion active users while revenue from reels was recorded at $1.2 billion. Increasing monetization and audience engagement may boost revenues up to $5.6 billion in 2022.
Meta is also likely to decrease financing of it Metaverse as the Reality labs division posted $3 billion losses during the first three months of 2022. The decrease of spending and rising Reels revenues will upgrade price targets for META stocks for the mid-term.