People want to see more Reels, Meta CEO Mark Zuckerberg told Wall Street on Wednesday. But can Zuckerberg afford to give the people what they want?
When it comes to Reels, Meta's answer to TikTok's popular short form videos, the answer may hinge on one particularly important group of people: creators.
Meta currently rewards some of its top Reels creators with thousands of dollars in monthly "bonuses." It's been a welcome, if murky and unpredictable, windfall, say several creators with whom Fortune spoke.
“I tried to find a rhyme or reason—and I’m not really sure,” said Schannon Yodice, who made as much as $24,000 in April last year from Reels Play bonus payments for her Reels.
Enrique Barrera, a Tallahassee, Florida-based emcee who has attracted 4.1 million users in the last 90 days to his quinceañera and family party content, says he typically gets more modest payments of $110 a month from Reels bonuses. "I don’t really know how it works,” Barrera says. “It’s fun for everything to go viral, and at least get something out of it. That’s enough money to buy me a tripod to set up for more videos.”
As competition heats up with other short form video platforms like YouTube Shorts and TikTok, Meta's payments to Reels creators could become increasingly central to its strategy and its success. But Meta's calculus when it comes to creator compensation is only likely to get trickier.
Meta executives acknowledged an inconvenient reality about Reels during the company's quarterly earnings call on Wednesday. The amount of Reels video "plays" doubled over the past year, but this growth in engagement actually hurts Meta's bottom line.
Reels steals viewership from Instagram and Facebook Feeds, the company’s most lucrative avenues for advertising revenue. And for at least the next year, Meta executives acknowledged, that will continue to be the case.
"The key to unlocking [Reels revenue] is improving our monetization efficiencies, that way we can show more Reels without losing increasing amounts of money,” Zuckerberg said on Wednesday's earnings call.
Meta reported that its total revenue declined by 4% in the last three months of 2022, while net income of $4.6 billion was down 55% from 2021. The company has laid off 13% of workers as it tries to weather a slumping market and adapt to privacy changes implemented by Apple that have limited its ability to target ads to users.
Gratitude and confusion
The growth in Reels user engagement was a bright spot in Facebook's results. And creators have been central to the success of Reels, providing a regular supply of the short video clips users love to binge.
To incentivize quality content, Meta launched the Reels Play bonus program in the fall of 2021. The invite-only program gives qualifying creators monthly payments, but it's been plagued by confusion since its inception.
At first, creators said they were unsure how to qualify and what kind of payments to expect, per TechCrunch. Now, over a year later, the confusion remains, but Meta seems to have doubled down on the program by increasing maximum payments from $10,000 to $35,000 per month (a Meta spokesperson said that maximum payments and plays vary on a creator basis). And, as Meta appeared to test algorithms promoting short-form video, enterprising creators figured out they could post simple face filter videos, go viral, and hit the program’s maximum of $35,000 per month (to the chagrin of their actual friends), reports the New Yorker.
In Fortune’s interviews with six Reels creators who attract a minimum of 100,000 video views per month, they expressed confusion—and gratitude—for the payments from Meta, with checks ranging from $0 to $6,000 per month.
Yodice, who began posting videos of her home renovations to Facebook and Instagram as That Tile Chick, said she made $107,000 last year from Reels Play bonuses alone. Recently, however, her monthly payments from the program have dropped to around $6,000. She says she's not sure why.
A spokesperson for Meta declined to comment on creator satisfaction or confusion with Reels Play bonuses. “The Reels Play Bonus incentive program is one of several monetization opportunities across both apps. We introduced the program to help creators kickstart their monetization journey on Instagram and Facebook and earn extra money,” said the Meta spokesperson.
It's unclear to what extent the Reel bonus payments are tied directly to the advertising revenue generated by a particular creator's videos. And given that Meta is still struggling to monetize its Reels videos, the payments to creators represent one more cost that works against the product's path to profitability. Inside Meta, there’s debate over how, and if to share the ad wealth, reports the Information.
This is happening to the backdrop of an incredibly competitive short-form video ecosystem, where payments to creators responsible for driving user engagement, and, in turn, advertiser dollars, could determine which tech giant ends up on top. On February 1, YouTube began paying top creators 45% of advertising revenue on Shorts, the Google-owned platform’s TikTok competitor. Meanwhile, TikTok has largely failed to meaningfully compensate creators through its $1 billion Creator Fund. The Bytedance-owned short-form video giant also rolled out the Pulse program to split advertising revenue 50/50 with the creators responsible for the top 4% of videos in key categories. This program has also gotten off to a slow start, with some participating creators telling Fortune they’re making less than $5 from Pulse.
While Meta is having some early success cultivating goodwill with creators, the bar to woo this viral sect remains relatively low — leaving an opening for any of the platforms to swoop in. The history of low or nonexistent payments from social platforms has left many creators with low expectations and accustomed to working for free. Rather than rely on platforms to monetize their massive followings, creators have come to support themselves via brand partnerships, consultancies, affiliate marketing and old fashioned corporate jobs. “If I can get $2 a day for just posting a video, I’ll be happy with that, even though I should want more,” says Barrera.
