Instagram’s Ad load will be increased as Meta fights revenue declines
Following another quarter in which marketers reduced their ad spending, Meta today announced the addition of two new ad slots to its Instagram ad load. In addition to a music catalog for advertisers and a new ad format for Facebook Reels, the company announced that advertisers will now be able to run ads on the Explore home page and in profile feeds.
Meanwhile, while Instagram Reels began rolling out 30-second ads globally last year, followed by Facebook Reels ads earlier in 2022, the new format now being tested will involve shorter ads on Facebook Reels in particular.
These 4- to 10-second skippable ads and standalone video ads, known as “post-loop” ads, will play after a Reel has ended. When the ad concludes, the Reel will resume and loop again. Many Reels, like TikTok, are intended to be watched multiple times — but including an ad at the end may cause users to scroll to a new video instead of watching the same one again. This is a risky move because people will most likely perceive it as a poor user experience.
Meta also announced that it will begin testing “image carousel” ads in Facebook Reels today. These are horizontally scrollable ads that appear at the bottom of Facebook Reels content and can include up to ten image ads.
Furthermore, as it struggles to monetize its TikTok competitor, Reels, the company is introducing new Instagram ad placements in order to increase the surface for ads.
This is accomplished by placing advertisements on the Explore home page and in the profile feed.
The Explore home is the page that appears when users first tap the Explore tab — the magnifying glass icon in the main navigation — on Instagram. Users can browse a page of suggested and trending content here, or tap on buttons at the top of the screen to dive into specific trends, such as “indoor garden” or “box braids.” Instagram had previously only placed ads on Explore within the Explore feed — that is, when a user taps on a post and scrolls. Instagram is now expanding to the Explore home page itself because it sees users spending meaningful time there. This is already being implemented globally.
Instagram says it will test placing ads in the profile feed, which is likely to be another unwelcome addition for users. When a user visits another person’s profile on the app and then taps on one of their feed posts, this is the feed that appears. This usually opens a vertically scrollable feed where you can browse through the user’s previous photos and videos. In a global test, this experience will now be interrupted by ad units as well.
According to Instagram, as part of this test, creators will be able to earn extra money from ads displayed in their profile feeds. This test will begin with a small group of creators in the United States.
That’s an interesting shift, considering Instagram has been heavily encouraging its creators to film reels for TikTok’s rival. Now, it’s essentially encouraging them to post more traditional content to their profile — possibly because this is a more profitable area for Instagram.
These additional ad units help the company’s ability to generate revenue at a time when Meta’s ad sales are declining. As a result, the company recently reported its first-ever quarterly revenue decline in Q2, shortly after experiencing its first decline in daily active users. While its revenue fell only 1% in the second quarter of 2022, from $29.07 billion in the second quarter of 2021 to $28.82 billion in the second quarter of 2022, Meta worried investors with a troubling Q3 forecast. The company predicted that third-quarter revenue would fall between 2% and 11% year on year, to somewhere between $26 billion and $28.5 billion.
Meta experiences its first quarterly revenue decline.
One of the factors contributing to the decline in Q2 was Meta’s inability to monetize Reels. Though the company bragged about Reels’ growth, claiming that it now accounts for up to 20% of the time people spend on Instagram, it wasn’t yet paying off in terms of revenue. “Reels doesn’t yet monetize at the same rate as Feed or Stories,” Mark Zuckerberg told investors. So, in the short term, the faster Reels grows, the more revenue it displaces from higher monetizing surfaces,” he explained.
In addition to the new formats, Meta introduced other changes aimed at creating more effective ads, such as the use of AI.
Meta has been grappling with the consequences of Apple’s privacy changes, ATT (App Tracking Transparency), which aided in the powering of ad personalization. It will now turn to AI technologies to help it serve more relevant ads to users.
When a person interacts with an ad, the company claims that machine learning will now deliver ads underneath it from other businesses that it believes may be of interest.
It also employs AI to direct users to “Click to Messenger” ads in order to connect with businesses via WhatsApp, Messenger, or Instagram Direct. It has also introduced a new ad format for lead generation via Messenger or a form.
Instagram is also launching an open beta for AR ads in Feeds and Stories, a previously announced format, as well as a song library with free music for advertisers to use in their Reels ads. The music is from the Meta Sound Collection, and the entire collection will be available in the coming months.
When contacted for comment, Instagram could not say how much these changes would increase the number of ads users would see, noting that the number would vary depending on how people used the app.
“Ads have always been an important part of Instagram,” a spokesperson said. “From ads in Feed, Stories, Explore and Reels, we’re continuously thinking about new ways to help advertisers and brands get discovered. These new ad formats and tools aim to help brands tell their story, reach new and existing customers, and grow their businesses,” they added.
“We closely monitor people’s sentiment — both for ads and overall commercialism,” the spokesperson added.