Facebook Has A Growth Crisis. And Zuckerberg Already Told Us That Reels Aren’t The Solution.

Meta and Mark Zuckerberg have a 6-letter problem. It’s easy to spell: Ti-k-To-k.

TikTok has become the Hot Thing in Tech and has amassed a million-plus users. It is now threatening Zuckerberg’s social media networks. He admitted as much several times in a call with Wall Street analysts earlier this week about quarterly earnings, a briefing in which he sought to explain his apps’ plateauing growth—and an actual decline in Facebook’s daily users, the first such drop in the company’s 18-year history.

Zuckerberg has insisted a major part of his TikTok defense strategy is Reels, the TikTon clone—ahem, short-form video format—introduced on Instagram and Facebook and launched in August 2020.

If Zuckerberg believed in Reels’ long-term viability, he would take a real run at TikTok by pouring money into Reels and its creators. There is a lot of money. YouTube is the biggest source of income for celebrities on social media. These creators create content that attracts engaged users. The platforms sell ads to appear with the content—more creators, more content, more users, more potential ad revenue. It’s a virtual cycle.)

Now, here’s as good a time as any for a crash course in creator economics. For this, there’s no better guide than Hank Green, whose YouTube video on the subject recently went viral. He is best known for his YouTube channel, which he runs from Montana. His most popular channel is Crash Course (13.1 million subscribers—an enviable YouTube base), to which he posts education videos for kids about subjects like Black Americans in World War II and the Israeli-Palestinian conflict.

Green, like the most savvy social media marketers, fully grasps the value of YouTube as a way to make money. YouTube shares 55% all the ad revenues earned from a video it creates with its creator. “YouTube is good at selling advertisements: It’s been around a long time, and it’s getting better every year,” Green says. Green earns approximately $2 per 1000 views on YouTube. YouTube gave almost $16 billion in total to creators last fiscal year.

Green is a man of great mentality. He has also created accounts on TikTok Instagram, Facebook and TikTok. TikTok doesn’t come close to paying as well as YouTube: On TikTok, Green earns pennies per every thousand views.

Meta already offers Reels some payouts. Over the last month, Reels has finally amassed enough of an audience for Green’s videos to accumulate 16 million views and earn around 60 cents per thousand views. Many times over TikTok’s but still not enough to get Green to divert any substantial his focus to Reels, which has never managed to replicate TikTok’s zeitgeisty place in pop culture. (Tiktok “has deeper content, something fascinating and weird,” explains Green. Reels, however, is “very surface level. None of it is deeper,” he says.) Another factor weighing on Reels: Meta’s bad reputation. “Facebook has traditionally been the company that has been kind of worst at being a good partner to creators,” he says, citing in particular Facebook’s earlier pivot to a long-form video that led to the demise of several promising media startups, like Mic and Mashable.

This is where Zuckerberg could use Meta’s thick profit margin (36%, better even than Alphabet’s) and fat cash pile ($48 billion) to shell out YouTube-style cash to users posting Reels, creating an obvious enticement to prioritize Reels over TikTok. Perhaps even Reels could be more popular than YouTube’s TikTok rival, Shorts.

Now, imagine how someone like Green might get more motivated to think about Meta if Reels’ number crept up to 80 cents or a dollar per thousand views. Or, $1.50. A YouTube-worthy amount of $2. YouTube earnings can rise up to $5 and even double, for popular creators.

Meta has assigned up to $1 billion to these creator checks, which seems huge until you consider the capital Meta currently has. Think about how much YouTube has disbursed. Meta also stated that it will continue to disburse those funds through December 2022, last July. Meta has set a timeframe to allow them to (most likely?) disburse the funds. The financing will be turned off at Christmas next year.

Over many years, Zuckerberg demonstrated his willingness to spend Everest-sized amounts of money on projects that he believes in. Does You fully trust in. Most notably, there is the Metaverse. It’s the latest Zuckerberg pivot. Meta spent $10.1 million last year on this bill to help develop new augmented or virtual reality software. It also bought headsets and hired engineers. In 2022, costs are predicted to rise. Reels aside, Metaverse spending is not on a schedule. Wall Street has been assured that this splurge will go on for theforeseeable future. Overall, Meta’s view on the metaverse seems to be, We’ll spend as much as possible—for as long as it takes—for this to happen.

The same freewheeled mindset doesn’t seem to appply to Reels. But Zuckerberg knows he can’t let TikTok take over the short-form video space unopposed. Meta should hold on to the revenue from Instagram and Facebook so that it can create the metaverse. (stagram and Facebook, for perspective, generated 98% of Meta’s $118 revenue last year; sales of Meta’s VR headset, the Quest 2, accounted for the remaining 2%.) And advertising dollars will move to short-form video, following users’ increased demand for this type of content over the last several years.

Reality is, Zuckerberg has already admitted he doesn’t see Reels as a long-term solution to his TikTok problem. If he did, he’d spend more on it and creators like Green than what the metaverse costs him over six weeks.

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