Amidst a flurry of big advertising, media and tech news last week, it was easy to almost gloss over a somewhat mind-blowing stat: Meta revealed that its Reels product is pacing at an extraordinary $50 billion run rate globally.

That figure comes just as YouTube announced another highly successful quarter, pulling in a very healthy $10.2 billion in ad revenue in the US, as it continues to siphon off a sizable chunk of the TV ad market. Last year YouTube pulled in $36 billion in advertising, and if this year proceeds as expected, the video platform should close in on roughly $40-ish billion in the US.

To be sure, that’s a fantastic number for YouTube. But consider that:

Reels only launched in September of 2021
Reels is hardly seen as the center of culture, or a major vehicle for the top creators on the planet
While YouTube has invested $100 billion in creators and media partners over the past four years. Meta has invested - what exactly into Reels?
YouTube commands a huge share of TV viewing - in fact, more than any other company
YouTube has been courting TV advertisers in a significant way for over a decade, including the launch of Google Preferred in 2014 (now YouTube Select) and its first upfront-like Brandcast in 2012.
While Meta does host a NewFront, Reels is only part of its overall story.

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Yet here we are, even after all that investment and effort, with YouTube seemingly scaling at a slower pace than the four-year-old Reels. What does this mean for YouTube, if anything?

While YouTube (and many others) have long squarely taken aim at getting its hands on that very attractive $60 to $70 billion TV ad market, that really hasn’t been Meta’s Reels focus. So did YouTube focus on the wrong prize? Well…
It may be simply much easier to roll up smaller, digital-first advertisers by helping them push into vertical video ads than it is to sway TV advertisers to see ‘user-generated content’ as being equivalent to, and as valuable as TV. This doesn’t feel like Reels is grabbing “TV money.”
So, should YouTube have gone harder after performance dollars? Is YouTube seen as an effective performance vehicle by enough of these long-tail advertisers, given that a lot (but certainly not all) of the viewing on YouTube is of the lean-back, entertain-me variety? That remains an open question - and a huge opportunity for YouTube.
Let’s remember, Meta’s Reels number is global - and there are parts of the world where TikTok is banned, which probably helps entice more advertisers in places like India.
The obvious question is - is Meta’s flywheel effect, and advertising-oriented AI, just better at funneling more brands to a newer platform than Google’s is? That would be somewhat surprising to me, given how broad Google’s advertising base is, and its apparent strength in AI ads (see: Performance Max). As one buyer put it, Meta can leverage data, infrastructure and AI investment to quickly scale new formats like few others. But so can Google.
Also in its favor, Meta is also going to be as good as any platform at recommending content, since it knows so much about its users. That doesn’t mean the content will be seen as premium among traditional brands.
Another big question - could Meta’s success with Reels be something of an accounting measure (as in, what they are counting as Reels’ money may be part of packages, and not ‘net new’ spending.) Or is Meta ‘making’ more and more of its advertisers buy Reels if they want access to other stuff? As one buyer explained it to me, “Reels benefits from Meta’s Advantage+ Placements, which creates that easy opt-in dynamic for a massive base of advertisers. Advertisers may have relatively low Reels spend, but the volume of them adds up quickly, fueling that growth.”

To be sure, there’s a fair argument that we shouldn’t be comparing Reels’ ad business to that of YouTube, but to TikTok’s -given that Reels was designed to be Meta’s answer to the Chinese-owned, short-form video juggernaut? Even in that case, Reels’ ad growth is remarkable, as TikTok is projected to exceed $11 billion in the US this year. A terrific number, but not $50 billion (which is again- global). If we blended all of Bytedance’s ad revenue, it would be a different story.

It’s worth wondering how brands view Reels, and the effectiveness of its ads. There is an ongoing, overarching debate about whether in-feed video can generate the same level of attention and brand impact as TV ads or even pre-roll videos can. I’d venture to argue that Reels ads are not as impactful as a YouTube ad following a top creator’s video on a large-screen TV. It’s likely that pricing and monetization per minute on YouTube may indeed exceed that of Reels’.

Still, $50 billion is $50 billion.

This week’s podcast features Robert Wheeler, founder of At the Moment Media, one of the more exciting and refreshing content vehicles to enter our space in a while. Check it out here:

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