Meta Platforms Chief Executive Mark Zuckerberg is betting the social-media large’s near-term future on Instagram Reels, the short-video function he’s touting as the corporate’s reply to TikTook.

The firm’s inside analysis reveals that Meta has lots of catching as much as do.

Instagram customers cumulatively are spending 17.6 million hours a day watching Reels, lower than one-tenth of the 197.8 million hours TikTook customers spend every day on that platform, in keeping with a doc reviewed by The Wall Street Journal that summarizes inside Meta analysis.

The doc, titled “Creators x Reels State of the Union 2022,” was printed internally in August. It mentioned that Reels engagement had been falling—down 13.6% over the earlier 4 weeks—and that “most Reels users have no engagement whatsoever.”

One purpose is that Instagram has struggled to recruit folks to make content material. Roughly 11 million creators are on the platform within the U.S., however solely about 2.3 million of them, or 20.7%, publish on that platform every month, the doc mentioned.

Meta spokeswoman Devi Narasimhan characterised the info about viewing hours as outdated and never international in scope, however declined to reveal different numbers. She mentioned Reels engagement at present is up, on a month-to-month foundation.

“We still have work to do,” she mentioned. “But creators and businesses are seeing promising results, and our monetization growth is faster than we expected as more people are watching, creating and connecting through Reels than ever before.”

The shift to Reels has taken on urgency following a tricky 12 months for the social-media firm. In July, Meta reported its first ever decline in income, partly as a result of adjustments made by Apple Inc. to the iPhone’s working system put a significant dent in Meta’s capability to ship personalised adverts. The firm additionally has had bother retaining teenage customers drawn to opponents resembling TikTook. As of Friday, Meta’s market worth had declined by greater than $620 billion since peaking greater than a 12 months in the past.

Meta has mentioned that Reels, which was launched within the U.S. in August 2020, accounts for a fifth of the time folks spend on Instagram, and that the time customers spent participating with Reels on Instagram and Facebook had risen greater than 30% through the second quarter.

“We’re seeing good promise in the rollout of Reels, good adoption,” Instagram Chief Operating Officer Justin Osofsky mentioned in an interview. “But with that said, we know we also have work to do.”

He mentioned Reels make up greater than half of the content material that Instagram customers share with one another in non-public messages. The ease with which customers can share Reels with mates differentiates the service from others, he mentioned.

The inside doc confirmed that almost one-third of Reels movies are created on one other platform, normally TikTook, and embrace a watermark or border figuring out them as such. Meta mentioned it “downranks” these movies, which means it reveals them to smaller audiences to scale back the incentives for those who publish them, however they proceed to proliferate. For Reels customers, the result’s that usually they’re proven movies recycled from one other, extra widespread platform.

“People have told us they want original high-quality content,” Mr. Osofsky mentioned.

Landen Purifoy, a 22-year-old creator in Plano, Texas, makes movies for TikTook and different platforms, largely of him utilizing a tool referred to as a chat field to make humorous sounds and music. Many of his posts get greater than 1,000,000 views on TikTook.

This spring, Mr. Purifoy posted the identical video throughout TikTook, YouTube Shorts, Snapchat’s Spotlight and Instagram Reels. The video obtained hundreds of thousands of views on each platform besides Instagram. There, it bought lower than 100,000.

“Nobody’s going to make original content for Instagram,” Mr. Purifoy mentioned. “It just doesn’t make any sense.”

To encourage customers like Mr. Purifoy to publish extra, Meta introduced final 12 months that it was launching a fund to pay creators a complete of $1 billion by the tip of this 12 months. The inside doc mentioned that Instagram Reels to date has paid out $120 million.

“Meta’s suite of monetization product offerings is largely in-line with competitive offerings, though limited product scale results in fewer paid creators / low % of payouts,” the doc mentioned.

The Meta spokeswoman mentioned this payout quantity is outdated and doesn’t embrace separate funds to Facebook creators that the fund additionally covers.

TikTook introduced its personal creators fund in August 2020 that it mentioned would pay out $1 billion over the subsequent three years.

Meta’s advert enterprise continues to be a behemoth, producing way more income per person than TikTook. In 2021, Facebook and Instagram generated income within the U.S. market of $32 billion and greater than $21 billion, respectively, in contrast with $3 billion for TikTook, in keeping with estimates in an August report by Bernstein Research.

But Meta’s promoting operation faces headwinds, notably from the privacy-related adjustments from Apple rolled out final 12 months. The firm beforehand mentioned it anticipated a $10 billion hit to income this 12 months because of the adjustments.

Meta additionally continues to battle unfavorable perceptions amongst customers, paperwork present. Meta has lengthy surveyed customers about their perceptions of its enterprise, changing their solutions into proportion scores. The portion of Instagram customers who suppose the corporate “cares about” them fell from almost 70% in 2019 to roughly 20% earlier this summer time. On the query of whether or not the product was “good for the world,” the rating fell from greater than 60% in 2019 to barely over 45%.

The Meta spokeswoman mentioned that didn’t replicate the corporate’s inside knowledge, however declined to elaborate.

The firm has additionally been polling customers on a separate query that in some ways will get to the guts of the tech large’s present predicament: “Would you say that Meta’s best days are ahead of it or behind it?” The firm declined to reveal how customers responded to that query.

At least a number of the points affecting Meta replicate shifting views about social media extra broadly. TikTook and different platforms even have sparked considerations about their unhealthy features and results on younger customers.

Other social-media corporations have had their enterprise fashions upended, too. Snap Inc., maker of the favored Snapchat app, mentioned late final month it was shedding 20% of its workers, halting work on a number of initiatives and reorganizing its operations.

Meta, which basically pioneered social media when Mr. Zuckerberg launched Facebook out of his Harvard dorm in 2004, has lengthy been the trade’s 800-pound gorilla.

Over the years, the corporate has been resilient, executing a number of technique shifts to handle adjustments within the aggressive panorama. In 2012, Mr. Zuckerberg made mobile-first merchandise a precedence for Facebook, which was based for desktop customers. Several years later, the corporate launched disappearing-posts options, beginning with Instagram Stories, resulting in criticism that it basically copied one in every of Snapchat’s options.

While it took a while for Stories to catch on, each strikes finally proved prescient, serving to the corporate keep a dominant place in social media for nearly twenty years and briefly attain a market worth of greater than $1 trillion.

TikTook’s explosion in recognition presents an enormous problem. The app, owned by Beijing-based ByteDance Ltd., launched within the U.S. lower than 5 years in the past. It has drawn scrutiny and criticism associated to its Chinese possession, however that has carried out little to stem its recognition.

Tiktok posted a median annual achieve of 67% in each day hours spent per person within the U.S. from 2018 to 2021, far exceeding that of its rivals, in keeping with Bernstein’s August report. Facebook and Instagram posted common annual positive aspects of 9% and 11%, respectively, throughout that interval.

As TikTook has grown, so too has the recognition of short-form video as a format, main Bernstein Research analysts to put in writing: “The 2020s are the SFV decade.”

After TikTook soared in recognition amid Covid-19 lockdowns in early 2020, each Meta and YouTube, which is owned by Google, launched short-form video merchandise of their very own. Mr. Zuckerberg has touted Reels as the corporate’s fastest-growing content material format, however TikTook has maintained its lead.

“Creators still think of TikTok as being synonymous with SFV and prioritize it for the broad discoverability it brings them,” mentioned the inner Meta doc.

Meta’s challenges with Reels are vital as a result of the service is central to an effort to reinvent the way in which the corporate operates.

Meta’s merchandise—first the principle Facebook app, then Instagram—succeeded by exhibiting customers content material from their mates, household and others they know and select to comply with. TikTook succeeded by doing the other, exhibiting customers content material from accounts really helpful by an algorithm that figures out what sort of movies customers need based mostly on what they spend time watching. It pushes a feed of content material personalised to folks’s pursuits, serving to them uncover new issues they by no means knew they wished or would get pleasure from.

This summer time, Instagram accelerated a push to be extra like TikTook by launching a service it internally referred to as Panavision. Like TikTook, it served content material, together with a hearty dose of Reels, to customers from accounts they don’t comply with.

There was a swift backlash from customers, together with from celebrities Kim Kardashian and Kylie Jenner.

Ms. Jenner reposted a card to her Instagram story that mentioned “Make Instagram Instagram again (stop trying to be tiktok i just want to see cute photos of my friends.) Sincerely, everyone.”

Within days, Instagram mentioned it could scale back the quantity of content material proven to customers from accounts that they don’t already comply with, no less than for now. But Mr. Zuckerberg and Instagram head Adam Mosseri have made clear that’s the course the corporate is transferring.

“We’ve leaned too far into video over the last couple months,” Mr. Mosseri mentioned in a video posted to Instagram in late August. “But we still believe video is a long-term important trend.”

A giant query is whether or not Instagram customers, particularly creators, will come alongside for the journey.

Danny Freeman, a 36-year-old creator in New York, goes by the deal with @DannyLovesPasta and makes cooking content material for his a million TikTook followers. He mentioned TikTook is his most important platform, however he additionally posts to Instagram Reels, and he thinks the 2 may be complementary.

He mentioned he has observed that extra visually interesting content material does higher on Instagram Reels, whereas movies the place he’s speaking to the digicam a few sure subject would possibly do properly on TikTook.

“I do feel like different content does well on Instagram,” he mentioned, explaining that he reposts about 30% of his TikToks to Instagram Reels, however generally re-edits and tweaks them barely earlier than he does.

In July, he posted a recipe video on TikTook that bought about 440,000 views. He posted the identical video on Instagram Reels, and it bought a million views.

“I think it’s because that was more of a recipe video, more visual, so maybe that’s better for Instagram or for the audience,” he mentioned.

More than 70% of Instagram’s viewers is 25 or older, in contrast with 56% for TikTook, in keeping with analysis agency Insider Intelligence. That suggests Instagram customers typically have extra disposable earnings, making them extra engaging to advertisers.

Bernstein analyst Mark Shmulik mentioned Meta costs larger charges partly as a result of its adverts spur many customers to take motion, resembling clicking on a hyperlink and shopping for one thing. TikTook’s adverts are extra akin to YouTube’s, which generally merely promote the model. Those advertisers are paying merely to succeed in as many individuals as potential, like a TV advert.

Alexis Bittar, a Brooklyn-based jewellery firm, has been promoting its necklaces, bracelets and earrings on Instagram for years. The firm’s chief income officer, Naowna Simon, mentioned she is aware of the adverts herald new prospects and construct an enduring relationship with them.

“Beyond just the actual sales revenue return, what we also see with paid revenue advertising is they sign up for our email list, or even if they don’t actually hit follow, they’re more likely to continue interacting with us informally,” she mentioned.

She mentioned the effectiveness of the corporate’s posts with nonetheless photographs has declined as Instagram emphasizes Reels.

The jewellery firm doesn’t promote on TikTook, however does have an account on the app.

“We’re still baby stepping into TikTok because we’re not really sure it’s where our resources are best focused,” she mentioned. “It’s just a fun platform to be on.”