With the rise of TikTok and Instagram Reels, the short-form video’s popularity is rapidly growing and more businesses around the world are joining these platforms to connect with their customers, especially younger generation: According to Business Insider, approximately 40% of younger consumers use these platforms for their searches.
One of the fastest-growing platforms for video-sharing in the Western world is Tik Tok, owned by Chinese company ByteDance: Omdia research showed that TikTok in October surpassed Netflix to become the second most popular app in the US, behind YouTube. The main driver of success for TikTok is its hyper-personalized algorithm leveraged by computer vision, natural language processing (NLP), and metadata. First, computer vision analyzes facial features, products, and other traits in people and objective to quickly understand video’s content and classify them. NLP is used to translate and describe the audio of a video, then Machine Learning labels and classifies data to determine who that content is most useful for. The final step in categorizing videos is analyzing metadata provided by users when posting - like captions, hashtag or mentions. Since its launch, TikTok gained over 1 billion active users worldwide, providing a great opportunity for business that are trying to attract a wider audience of costumers: Brands such as Starbucks, McDonald’s and Pizza Hut have capitalized on this already.
Instagram Reels is one of the most recent video-sharing social media features, but the Meta-owned platform is growing very fast, reaching $3bn annual revenue run rate in Q3 2022, as reported by the company. Instagram Reels allows users to share short-form video content that can be up to 90 seconds long, which they can personalize with filters and music. Instagram Reels leverages Artificial Intelligence to enhance customers’ satisfaction analyzing users’ activities including what they post, when and how often, in order to rank videos on Feed based on their preferences. AI is also used as a filter to remove spam, misinformation, and policy-violating content. Moreover, Instagram uses Machine Learning to identify which accounts users would like more to see by studying the order in which words appear in their posts to measure how related they are. Instagram Reels is growing 30% QoQ, and it accounts for 20% of time that users spent on the platform. Monetization is still lower compared to Feed or Stories yet, but Meta recently announced that it is going to introduce new Ad features to boost the revenue streams for Reels, which is projected to push Meta’s online video ad revenue from $30bn to $39bn by 2027.
The attractiveness of TikTok and Instagram is massive because these platforms allow businesses to reach a targeted audience globally and increase their chance of succeeding while giving users access to an infinite range of content which doesn’t require any subscription. As of today, over 80% of people make purchasing decisions based on a brand’s video, pushing social media platforms to add new features to maximize reach and engagement, as well as increase monetization.
The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.
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