Morgan Stanley: Strong Reels, Shorts adoption negatively impacting TikTok

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TikTok usage appears to be plateauing, with 31% of respondents using the app daily and 53% monthly, Morgan Stanley analysts said in a Tuesday note.

Analysts said that the improving Instagram Reels feature on Instagram seems to be negatively affecting TikTok, with 26% of Reels users not using TikTok at all, an increase from 20%. Moreover, the percentage of Reels users who use TikTok daily has decreased, now at 46% compared to 50% previously.

“YouTube Shorts also appears to be impacting TikTok as 40% of Shorts users are not using TikTok (up ~470bp from 36%) and similar to Reels, the percent of Shorts users who use TikTok daily is also declining (down ~239bp to 35%),” analysts at Morgan Stanley noted.

The growing Reels adoption on Instagram and Facebook (NASDAQ:META) signals positive monetization opportunities for Meta (META), Morgan Stanley’s team highlighted.

Currently, 37% of Instagram users and 33% of Facebook users engage with Reels daily, with 78% and 70% engaging monthly, respectively. Overall, daily usage of Instagram and Facebook stands at 37% and 60%, respectively, with monthly usage at 63% and 84%.

Meanwhile, YouTube’s daily usage has increased by approximately 750 basis points since September, reaching 59%. Similarly, engagement with YouTube Shorts also continues to grow, with 35% of YouTube users now using the feature on a daily basis.

“Like META’s Reels, we are encouraged by this strong Shorts adoption and believe it is driving incremental YouTube engagement and that the Shorts monetization rate is lower than other YouTube surfaces (but that it will rise over time),” analysts wrote.

“Notably, at 1Q:24 GOOGL said that in the US, the monetization rate of Shorts relative to in-stream viewing has more than doubled in the past 12 months, including a 10-point sequential improvement in 1Q,” they added.