Meta Platforms & Instagram – Economic & IDFA Impacts, Short-form Video & E-commerce

Many are wondering about the impact of the current uncertain or recessionary global economy on Meta and Instagram, perhaps thinking about advertising businesses, budget cuts, pricing declines and a potential shift from brand to performance advertising in this environment. What are your expectations and estimates here?

Consensus expectations are for Meta’s 2022 revenues to be flat compared to 2021’s, and we’ve mentioned some contributing factors. I’m thinking about steady state, and we clearly haven’t seen normal times in 2-3 years. What do you think would be the mix of brand vs performance advertising revenue for the company, and where has that shifted to? I think many are wondering how far that pendulum will swing.

Where might the steady state be once we get through the challenging economic backdrop? Would the split be 50/50? Where do you think Meta would like to be in 2-3 years?

If we assume a normal set of circumstances, maybe pre- or early pandemic, is it reasonable to say the brand vs performance mix was more like 80/20? Could that swing, given the recessionary backdrop and some of the business’s priorities? Could it perhaps get close to 50/50 and then swing back to where you were saying, around 70/30 or 60/40? Is that the right way to think about it?

You mentioned IDFA [Identifier for Advertisers] is over one year in, and by all accounts is still having a fairly significant and generally negative impact on big and small companies across digital and social media advertising. People are now wondering about Google and when it will get rid of cookies. I think the company has communicated it will do so by the end of 2024, so there’s some time between now and then. How has this impacted the industry at large and how has it disrupted the way Meta and Instagram are thinking about, investing in and prioritising things?

What has Meta been doing and what will it do to address the challenges? You mentioned prioritising first-party data. I think many would have been surprised that IDFA has had such a dramatic and significant impact on Meta, Facebook and Instagram even one year in. This was announced years before, so the company had time to prepare, but it still had this severe negative impact on how the businesses do things. What are people not understanding about how this unfolded and how it affects Meta and Instagram specifically?

You alluded to a possible company- or business-wide campaign to get users to opt-in. Would you expect to see something along those lines from Meta before the end of 2022? Will this be something more constant that launches and then has a steady drumbeat, or did you mean something different?

A specialist in a previous Forum Interview on IDFA mentioned that while you can try to get people to opt in, Meta and Instagram also seem to be working on different ways to access first-party data beyond the users opting in. That might be buying it, building something that people are automatically signing up for or partnering directly with big brands and gaining access to their first-party data. To what extent do you think the company is trying to do these things and has it been successful?

Looking at short-form video and Reels, I think many perhaps wonder to what extent Meta has been motivated by the successes of other companies and businesses in this category to launch, invest in and push Reels. The company obviously sees TikTok and all the gains it has made, but this does seem to have become a huge theme across social media over the last couple of years. Is it simply the tremendous success of TikTok? Is it the engagement and potential for monetisation? How do you think about short-form video as a broader theme and how has Meta been approaching it with Instagram?

The short-form video analogy is really interesting – you had Snapchat and Stories launching, then Instagram launched a response, and then suddenly everyone was using Stories across multiple platforms. It was a head-to-head competition that most people would say Meta and Instagram eventually won. To what extent do you think history could repeat itself here? Many perceive Meta and Instagram as long shots and dark horses in terms of how they’re competing with TikTok in short-form video. Do you think they have the right approach? Have they been investing in the right way? What do you think they’ve done right and where could they improve?

What could or should Meta and Instagram do to narrow the gap? You discussed the algorithm, creator tools and the nature of the distribution. The company seems to have opportunities to invest and make progress on all those fronts, but I think many have been surprised how long it’s taken to close the gap.

Are Meta and Instagram having trouble working out which tools resonate? Do they perhaps not want to overwhelm the user base? It seems as if there are some great tools, but I get the impression there isn’t necessarily a strategy – it’s almost like throwing things at the wall and seeing what sticks. To what extent do you think that’s true?

I think Meta has shared a metric indicating that 20% of the time spent on Instagram is on Reels. Do you think that’s a helpful or important metric? Where might that trend, assuming continuing focus on investment in this area?

Meta indicated in Q1 2022 that 20% of time spent on Instagram was with Reels, and said it’s seen continuing growth, but hasn’t updated that number. If the company is doing things right, are we looking at 50% in 1-2 years? How should we be thinking about the importance of that metric and where it should be going?

Do you think Meta would be happy with 50% of time spent on Reels, one year from now?

How do you assess the transition from the dominant format in Stories to short-form video? What are the business model implications of that? I think a challenge Meta and Instagram have had is that there’s a monetisation question, and although they do this well – perhaps better than anyone else – it’s still relatively less developed, mature and successful than Newsfeed from a monetisation perspective. Can you expand on Reels and the impact it has on Meta and Instagram in terms of monetisation?

Are you saying that Stories currently monetise at roughly the same rate as Newsfeed?

If I’m doing the maths right, it took Stories 3-4 years to reach parity in terms of monetisation with Newsfeed. If you think back to when Reels launched, might it take longer? Are you talking about 2025 or around there for parity? I think people should be considering using that analogue and then considering even more time for the ramp-up. Are you suggesting that Meta does perhaps have a better chance to get that percentage of time spent up than monetisation parity over the near term?

It sounds as if you’re saying CPMs for Newsfeed and Stories are comparable. How much lower do you think CPMs are for Reels than those other major formats?

My recollection is that Meta and Instagram were thought of as somewhat ahead of the curve on e-commerce, and then the pandemic came and they seemed to put all their chips in the middle of the table and had a bunch of partnerships. My sense is that e-commerce didn’t perform as well as they would have expected. How do you think about that, or what do you think they did well or missed? Based on what I’ve read, they seem to be pulling back from e-commerce to a large extent.

I think I read that Facebook and even TikTok have been stepping away from social commerce, and I believe Instagram reportedly discontinued its affiliate shopping programme last month, so maybe it’s just a broad reset. That being said, a specialist in a previous Interview about Pinterest [see Pinterest – Shopping and E-commerce Opportunities & Related Corporate Governance Considerations – 07 September 2022] said shopping accounts for less than 10% of the company’s revenues, and that it could be half of revenue within the next 3-5 years. I’m not suggesting that there’s that level of opportunity specific to Meta and Instagram, but you seem to be saying they haven’t walked away, but are perhaps just resetting a bit. Do you expect them to refocus on e-commerce? Given a data point such as that, I would imagine that people recognise the opportunity.

Does it make sense for Meta and Facebook to partner with a handful of large merchants, so that they could handle discovery while the other companies could handle people actually shopping? It seems that’s the disconnect you touched upon, so wouldn’t partnering with people who have that figured out work better than building it yourself?

Could you see Instagram and Meta partnering with Amazon or Walmart? Those companies often compete with Meta and increasingly with Instagram from the advertising side of things.

Looking at Instagram’s management, it’s interesting that the company’s head, Adam Mosseri, and Co-heads of Product, Ashley Yuki and Max Eulenstein, are all long-time Meta employees. To what extent do you believe much of the thinking and the people leading the business are perhaps overly entrenched? Could the company need some new blood and leadership to shake things up? It seems as if a big challenge is that the company has been so big and successful that it can’t go ahead and do what it wants in the way it wants to do it because it has all these other considerations and constraints. How important do you think it would be for someone to come in at a high level from outside of Meta?