Meta’s Reels Captures Growing Ad Share Amidst AI-Driven Engagement Push
The dominance of short-form video continues to reshape the social media advertising landscape, with Meta’s Instagram Reels emerging as a significant growth engine. Data from market intelligence firm Sensor Tower indicates that over half of all ads on Instagram were served within the Reels product in 2025, a substantial increase from 35% in the previous year. This trend underscores Reels’ escalating importance in Meta’s strategy to bolster user engagement and advertising revenue across its flagship platforms, Instagram and Facebook.
In the U.S., Reels commanded 46% of the time spent on the Instagram app in 2025, up from 37% in 2024. On Facebook, this figure reached 29% in 2025, reflecting a similar upward trajectory. This shift highlights a broader industry trend where vertical video, powered by sophisticated artificial intelligence, is becoming paramount. Companies like Meta, Google (via YouTube), and TikTok are heavily investing in AI-driven recommendation systems designed to surface personalized content and maximize user retention.
“The value for these platforms lies in their ability to serve users relevant content,” notes Dan Flax, senior research analyst at Neuberger Berman. “As their recommendation engines become more adept at understanding user preferences through viewing signals, the revenue generated from formats like Reels sees a corresponding boost.”
Advertisers are keenly following this evolution, increasingly allocating their budgets to short-form video to connect with consumers where they are most active. “Legacy content formats are experiencing a decline in ad volume as advertisers prioritize Reels to reach audiences effectively,” says Abraham Yousef, a senior insights analyst at Sensor Tower.
However, the rapid ascent of Reels has not been without its challenges for Meta, particularly concerning monetization. Short-form video historically generates less revenue per view compared to traditional feed-based content. Meta CEO Mark Zuckerberg acknowledged this dynamic in 2023, stating, “Currently, the monetization efficiency of Reels is much less than Feed. So the more that Reels grows, even though it adds engagement to the system overall, it takes some time away from Feed and we actually lose money.”
Despite these monetization complexities, the data suggests that the increased viewership on Reels is contributing to overall growth in app activity. Sensor Tower reports a 2% year-over-year increase in Instagram’s daily active users, largely driven by Reels usage.
Analysts, however, remain optimistic about Reels’ potential to drive substantial advertising revenue for Meta. “Even if Reels have a lower monetization rate than traditional feed content, the overall growth in advertising dollars spent with Meta remains positive due to the expanded reach and engagement,” Flax explains.
Zuckerberg revealed in an October earnings call that Reels across Instagram and Facebook had achieved an annualized revenue run rate exceeding $50 billion. Investors will be closely watching Meta’s upcoming fourth-quarter and full-year 2025 results, scheduled for release on January 28th, for updated figures on this critical growth area.
**A Strategic Response to Competitive Pressures**
Instagram’s Reels, launched in August 2020, was a direct strategic response to the burgeoning popularity of TikTok. Meta subsequently integrated the feature into Facebook the following year. This move has been instrumental in bolstering Instagram’s user base, which surpassed 3 billion monthly active users last September.
As Reels solidifies its position as a primary mode of user and advertiser interaction within Meta’s ecosystem, the key question becomes its ability to maintain dominance against formidable competitors like TikTok and YouTube’s Shorts. Meta has also been expanding the reach of Reels content, recently introducing an Instagram TV app for Amazon Fire TV streaming devices, enabling users to watch Reels on their televisions.
“Meta’s success with Reels is largely attributable to the continuous improvement of their recommendation engines,” Flax observes. “Credit is due to Mark Zuckerberg and the Meta leadership for effectively integrating Reels; I believe it has a very strong future.”
While Meta’s Reels engagement share continues to climb, Sensor Tower data indicates that YouTube’s watch time for Shorts remained relatively flat in the past year. Nevertheless, YouTube continues to lead in overall mobile engagement, with Sensor Tower estimating a 3% growth in U.S. daily active users for Shorts in 2025. TikTok, however, still leads in time spent, with users averaging 81 minutes per day on the app, compared to 80 minutes on YouTube and 55 minutes on Instagram.
This ongoing competition highlights vertical video and algorithm-driven content as a central battleground for social media companies vying for user attention, advertising revenue, and sustained growth.
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