Bloomberg reported that Instagram, owned by Meta Platforms (META, Financial), could account for half of the company's U.S. ad revenue by 2025, making it a powerhouse in the advertising landscape.
By 2025, the platform is forecasting its U.S. ad revenue to increase by 24% compared with the previous year, at $32 billion. The rising popularity of Reels, Instagram's short-form video feature that takes down ByteDance's TikTok and Alphabet Inc.'s (GOOG, Financial) YouTube Shorts, fuels this growth. As of early 2022, Instagram reached more than 148 million U.S. users and saw 30% of the company's global business, up from 27% in 2021.
User engagement on Instagram Reels is about to increase to over 50% of time spent on the app. Jasmine Enberg of Emarketer remarked on one reason that video has become the foundation of the Instagram platform: users spend 67% of their time on the platform viewing videos.
There's already momentum behind Instagram, and the ongoing uncertainty around TikTok's potential ban in the U.S. could add even more. Enberg said Instagram could take 20 percent of ad dollars that are reallocated from TikTok.
In 2024, the majority of Instagram's ad revenue came from Feed features (53.7%) and Stories (24.6%). Reels, Explore, and Threads will increase the combined revenue share by 9.6% by 2025.
Innovations in artificial intelligence, CRM integration, and monetization efforts have helped boost Meta's stock up to 79% year to date. One way investors can gain some exposure is through the Vanguard Communication Services ETF (VOX) or The Communication Services Select Sector SPDR Fund (XLC).
