It may be assumed that the growth of short-form video advertising would be great for TikTok but it could prove the contrary.
While more ad dollars are being spent on the short-form format, it’s now being allocated across more platforms than ever before. And this could become troublesome for TikTok in the long run even if it initially got marketers addicted to short-form video content.
“TikTok led the global short video field over the last few years — 2023 is the first time that run may be challenged,” Jamie MacEwan, senior research analyst at Enders Analysis has said. “TikTok’s user base crossed a billion while ad revenue reached around $9 billion in 2022, up tenfold in 2020. We expect its ad growth to slow a bit to around 40% this year.”
It’s lead competitor? Meta. Momentum for advertising on Reels is building and Meta will do what it can to sustain it. Marketers have told Digiday over the last few months that Reels is already in a strong second place to TikTok, and the gap between the two is narrowing. Reels has already made inroads into those budgets over the last year or so. Its annual ad revenue run rate tripled from $1 billion in Q2 2022 to $3 billion at the end of the year, a rate likely to continue now that Reels accounts for 30-40% of Instagram usage, per Meta’s most recent investor call. Furthermore, the amount of Instagram impressions from Reels in 2022 was 2.5%, which shot up to 10.8% in the first quarter of this year. Having said that, Instagram Reels is growing from a lower base than TikTok.
In regards to ad spend, brands are not necessarily pulling money from TikTok but are expanding their investments in other platforms as well. According to social tech agency GoSpooky, TikTok spend among clients increased from 10% of all campaign spend last year to 40% this year. That’s approximately 35% of influencer’s clients’ overall spend going on Reels campaigns on Instagram, up from some 15% the year before.
At Incubeta, no clients were advertising on TikTok in 2021, which increased to 10% of clients in 2022, then to 25% of clients this year, said Craig Brown, svp strategy at Incubeta. Meanwhile, Reels spend has remained “very low” — and about 1% of Meta impressions are served on Reels, Brown said.