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Instagram Reels faces user and engagement challenges from TikTok

Yahoo Finance Tech Editor Dan Howley discusses reports that Instagram Reels is falling behind TikTok.

Video Transcript

- Internal documents shedding new light on how much work Instagram has to do to catch up with TikTok. According to an internal Meta document obtained by the "Wall Street Journal," Instagram users spend 17.6 million hours a day watching Reels. That sounds like a lot, right? But it's only a fraction of 197.8 million hours TikTok users spend each day on that platform. Yahoo Finance technology editor Dan Howley here has the details. Dan, what are we learning here?

DAN HOWLEY: Yeah. This is not a very good look for Meta, or Instagram for that matter. Basically, Reels is the product that the company is leaning on to try to steal back some of its users from TikTok. They're putting heavy investments into this kind of short form video, exactly what TikTok is, and really trying to mull their way into that market and get that away from TikTok. But according to these numbers, as you said, 197.8 million hours a day is being watched on TikTok, while only 17.6 million hours a day is being watched via Reels.

Now, they also say in this report that Reels engagement was down 13.6% in the prior four weeks of August when this report was created and that just 20.7% of Instagram's 11 million content creators are posting on the platform each month. Now, there's a few caveats here. Meta, obviously, says that the data that was provided to the-- or the "Wall Street Journal" got a hold of was outdated and not global. And it says that Reels engagement overall is up month over month.

But there's also the issue of content that is copied from platforms like TikTok and then passed off as being original on Instagram. The report says 1/3 of Reels are coming from other sources, whether that's TikTok or Snap or something along those lines, and not actually from Instagram itself. So for a company like Meta, which has shares down 50% year to date, this is not great news.

- Yeah. Dan, I guess from your assessment, you cited the lack of engagement there. But why do you think Instagram is struggling so much just in terms of attracting some of their content creators and enticing them to make Reels? Because simply when you just look at the numbers, clearly, the number of Reels on Instagram is a fraction of what we're seeing on TikTok.

DAN HOWLEY: Yeah, I mean, this is a pivot. This isn't what Instagram was originally made for. Instagram was originally made for photo sharing. And then they started adding video content over time. Now, the short form video aspect of it was there. But they're really pushing that more now to compete fully with TikTok. And I think it just comes down to the same idea that we're going to see advertisers kind of point to is that younger users are going towards TikTok and not Instagram.

There's also the idea that people want Instagram to be for photos and not just a video platform. You'll recall that they tried to run a test where it was kind of a TikTok clone more or less and it received swift backlash from big Instagram users like Kendall Jenner and Kim Kardashian, basically saying they wanted Instagram to be Instagram and not a TikTok clone. But Meta for what it's worth says, look, that's where the money is right now and that's where we're going to go. We're not going to just lean on the idea that these major celebrities only want to look at photos.

- Meta certainly feeling the pressure, reporting its first ever decline in revenue in July. So we'll see what the next couple of months hold. But, again, Meta here under pressure. Dan Howley, thanks so much.