Facebook (FB) has turned to Instagram Reels in the hope of strengthening its ads revenue base. The social networking giant is launching ads globally on the TikTok-clone, according to Reuters.
The move to run ads on the video platform follows trials in select markets, including India, Brazil, and Germany. During the trial phase, the company ran ads from brands such as Netflix (NFLX), Uber (UBER), and Louis Vuitton.
In support of the ads on Instagram Reels, CFO Justin Osofsky says the ads will provide a way to discover new content. (See Facebook stock chart on TipRanks).
Osofsky said, “Brands of all sizes can take advantage of this new creative format in an environment where people are already being entertained.”
Reuters reports that ads on Reels will loop and will be up to 30 seconds long. The ads will also appear in between individual Reels. The ads should allow Facebook to make money by taking advantage of the growing consumption of short videos that present a unique advertising opportunity.
The unveiling of ads on Reels comes at a time when Facebook has consistently delivered strong results. According to HSBC analyst Nicolas Cote-Colisson, FB should continue to benefit from strong demand for online advertising. However, Cote-Colisson states that his “regulatory barometer is showing no signs of significant cooling down.”
The analyst recently reiterated a Sell rating on the stock but increased his price target to $275 from 220, implying 18.3% downside potential to current levels.
Consensus among analysts is a Strong Buy based on 29 Buys, 4 Holds, and 1 Sell. The Facebook average analyst price target of $387.03 implies a 15.01% upside potential to current levels.
FB scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.