Reels remains a significant growth engine for Meta Platforms' (NASDAQ:META) advertising business, according to a note from Citi analysts.
Their data shows Reels ad load has reached nearly 22% in Q2 2024 year-to-date (YTD) and June 2024, indicating strong user engagement.
"With our IG Reels ad load tracking in 2Q24 QTD expanding 160 bps Q/Q to just under 22%, we believe engagement remains strong across the platform with Reels a key driver of overall advertising growth," states the Citi note.
While monetization is expected to come from a combination of factors beyond just ad load increases, Citi's tracking suggests continued growth in this area. They point to rising advertiser adoption, now at 75% of Meta's advertisers, and the potential for higher pricing as contributing factors.
Looking at the bigger picture, Citi reiterates its Buy rating and $550 target price for Meta. Their analysis, including the Reels data and recent ad checks, suggests a strengthening digital advertising environment where Meta is capturing a larger share of spending.
The report also highlights Meta's ongoing investments in artificial intelligence, including Llama 3, Meta AI, and Business AI (Agents). While acknowledging ongoing discussions surrounding the multi-year investment cycle, Citi views these initiatives as a sign of Meta's strong position and potential for future growth.
Citi's key takeaways from their Reels tracking include continued user adoption, high ad density, and national advertisers driving the majority of impressions.
Overall, Citi believes Meta's focus on Reels engagement, combined with its AI investments and expanding advertising solutions like Advantage+ Shopping and Click-to-WhatsApp, positions the company well for continued growth and profitability throughout 2024.