Why Facebook is losing the Paid Media battle against TikTok and YouTube

Paid Media
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The rise of social media phenomenon TikTok has been meteoric. First released in September 2016, the short-form video app now has more than a billion active monthly users.

However, although the rise of TikTok is good for consumers and advertisers alike, there’s one notable loser: Facebook (Meta). Last month, for the first time in the company’s 18-year history, Facebook’s daily user numbers declined. On top of this, the company’s growth has plateaued. So, what can it do to counter the threat of TikTok from a paid media perspective?

How is Facebook combatting the threat of TikTok?

Of course, Facebook has faced major threats to its hegemony in recent years, chiefly from Snapchat and Twitter. As a result, the company is used to tackling threats and emerging from the other side (largely) unscathed.

In order to combat TikTok, Facebook launched Reels in August 2020. This short-form video format appears on both Facebook and Instagram, but has found limited success. Experts believe that this is because the Reels project has been largely under-funded.

If Facebook is serious about challenging TikTok’s dominance in the short-form video sphere, then it will need to invest in creators in a similar way to YouTube, which remains the most lucrative income source for social media celebrities and content creators.

In YouTube’s model, creators produce content that draws in engaged users. Then, adverts are sold to appear within the content. More creators and more content means more engaged users. This means more potential ad revenue for all involved.

YouTube is successful in drawing in creators because it offers the best avenue for making money. It shares 55% of all ad revenue earned on a video with its creator. In 2021 alone, YouTube distributed nearly $16 billion to creators.

What is Facebook doing to bridge the gap?

Facebook already offers some form of payment for views on Reels. However, it does not come close to matching YouTube’s spend. As a result, the platform is low on the priority list for creators.

Content creator Hank Green recently told Forbes that he earns around $2 per thousand views on YouTube. By comparison, he earns around 60 cents per thousand views on Reels.

However, if Mark Zuckerberg is interested in attracting more creators to Reels and diverting them away from YouTube and TikTok, he could use Meta’s 36% profit margin and $48 billion cash pile to pay them more. This would place Reels higher up a creator’s priority list and would incentivise them to prioritise Reels over TikTok.

What’s the future for Reels?

Over the course of this year, Meta has allocated up to $1 billion for creator payments. However, although this looks like a huge sum, it falls way short of the $16 billion YouTube paid creators last year.

Added to this, Meta has set a timeframe for spending this money. In July 2021, it said that it would continue funding through December 2022. Setting a timetable indicates that Meta will likely turn off the financing at the end of this year.

This is interesting because it shows us that Mark Zuckerberg does not fully believe in the Reels concept. After all, last year alone, he spent upwards of $10 billion on the metaverse, which has no semblance of a timescale.

While payment for Reels is limited in terms of both scope and time, Meta’s view on the metaverse is that the company will spend as much money as needed for as long as possible in order to make it happen.

Paid media and Reels – The Spike view

Although Mark Zuckerberg knows that he can’t let TikTok take over the short-form video space unopposed, his commitment to Reels seems to be lukewarm at best.

But, it’s clear that Meta needs to hang onto the advertising revenue generated by Instagram and Facebook until it can make the metaverse materialise. After all, Instagram and Facebook accounted for 98% of Meta’s $118 billion revenue last year.

In the past couple of years, advertising dollars have increasingly moved to short-form video. At the moment, Facebook is doing very little to combat its decline in the sphere. With ad spend now shifting, it must develop the metaverse quickly before it loses out to innovators like YouTube and TikTok entirely.