Reels remains an important growth driver for Meta Platforms’ (NASDAQ:) advertising business, according to a note from Citi analysts.
Their data shows that Reels ad load reached nearly 22% in the second quarter of 2024 year-to-date (YTD) and June 2024, indicating high user engagement.
“As our Q2 2024 IG Reels ad load tracking increased by 160 bps quarter over quarter to just under 22%, we believe engagement with Reels remains strong across the platform and Reels is a key driver of overall ad growth.” , Citi said in a statement.
While monetization is expected to come from a combination of factors beyond simply increasing ad load, Citi’s tracking suggests continued growth in this area. They point to increased popularity among advertisers, which now accounts for 75% of Meta advertisers, as well as the possibility of higher prices as contributing factors.
Looking at the bigger picture, Citi reiterates its Buy rating and $550 price target on Meta. Their analysis, including data from Reels and recent ad audits, suggests a strengthening digital advertising environment in which Meta is capturing a larger share of spend.
The report also highlights Meta’s current investments in artificial intelligence, including Llama 3, Meta AI and Business AI (agents). Recognizing the ongoing discussions surrounding the multi-year investment cycle, Citi views these initiatives as a sign of Meta’s strong position and potential for future growth.
Key takeaways from Citi’s Reels tracking include consistent user adoption, high ad density and national advertisers driving the majority of impressions.
Overall, Citi believes Meta’s focus on engaging Reels, coupled with investments in artificial intelligence and expansion of advertising solutions such as Advantage+ Shopping and Click-to-WhatsApp, positions the company well for continued growth and profitability through 2024.