There's no doubt that Meta Platforms (META -1.23%) CEO Mark Zuckerberg is threatened by TikTok. The short-form video app saw its usage explode over the last two years, and the average user in the United States spent nearly 40 minutes per day on the app last year, according to eMarketer. By comparison, Instagram -- Meta's closest competitor to TikTok -- sees its American users spend an average of around 30 minutes per day on its app.
Instagram is working to close the gap, heavily focused on its copycat feature Reels. But can it catch up to the leading short-form video platform?
Don't let averages fool you
The headline numbers show a wide gap between TikTok and Instagram users, but it's important to remember one thing: Instagram has a lot more users. Instagram surpassed two billion global users at the end of 2021, while TikTok reached one billion users (including China) just a few months prior. Instagram doesn't operate in China.
TikTok's user base in the United States is estimated to be around 90 million. Instagram likely has close to 180 million users in the U.S. based on the percentage of Facebook monthly active users in the U.S. and Canada.
As eMarketer analysts point out, TikTok's average usage will likely decline as more casual users join the platform. Instagram has already captured those more casual users that might log in every so often.
Put another way: TikTok's total engagement is still only two-thirds that of Instagram's despite a 33% higher average engagement rate. And as its user base grows, growth in total engagement won't keep up the same pace. So while TikTok is a significant threat to engagement on Instagram, it's still not grabbing more attention overall than the older app.
Instagram can still grow
During Meta's fourth-quarter earnings call, Zuckerberg noted that Reels is the biggest source of engagement growth on Instagram. The company is investing heavily to grow the format. It has also taken tips from TikTok's algorithmic content recommendations, which is the secret sauce of TikTok's high engagement rates: an endless stream of quality content tailored for you can just suck you down a rabbit hole. Instagram started putting more content from accounts users don't follow in the main feed.
Indeed, Instagram is amid a shift from a photo-sharing app to a source of entertainment. Snap made a similar shift a few years ago, investing heavily in original content and premium content partners for Snapchat's Discover section. The move worked as it has seen an increase in both active users and engagement. That said, Snap is still much smaller than Instagram with more potential to grow.
Instagram may still need to balance its push to grow Reels and other video formats on the app with the thing that drew users to the platform in the first place: sharing photos. As long as everyone can easily access the features they like most and the other formats don't get in the way too much, it should be able to grow. That's something Snap did particularly well with Snapchat as the original photo-messaging service remains well intact despite the investment in content.
The push toward new formats like Reels will, however, have a negative financial impact on Instagram. Reels monetizes at a lower rate per minute of engagement than the core Instagram feed or Stories. CFO Dave Wehner also expects pressure on engagement from the continued growth of TikTok and other social media companies, which won't be entirely offset by growth in Reels.
In the long run, the shift ought to allow Instagram's average engagement to match TikTok's, if not best it. And with Meta's best-in-class digital advertising capabilities, it ought to monetize that engagement at a very good rate compared to other apps.