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Reels Dominates Instagram Ads, Hitting 50% Share
Instagram Reels ads surge to over 50% in 2025 from 35%, reshaping Meta's ad strategy
PUBLISHED: Tue, Jan 20, 2026, 4:51 PM UTC | UPDATED: Sat, Jan 24, 2026, 8:44 PM UTC
4 mins read
Instagram Reels ads jumped from 35% to over 50% of all ad inventory in 2025, according to Sensor Tower data reported by CNBC
Reels now account for 46% of time spent on Instagram in the U.S., up from 37% in 2024, pulling ad volume away from legacy feed ads
Meta's Reels hit a $50 billion annual run rate, though the format still generates less revenue per impression than traditional feed ads
Watch Meta's earnings on Jan. 28 to see how much this growth has translated into total advertising revenue
Meta's short-form video bet is paying off in a big way. More than half of all Instagram ads now run on Reels, up from just 35% last year, according to new data from Sensor Tower. The shift marks a seismic change in how advertisers are reaching Instagram's massive user base and underscores how completely vertical video has reshaped social media's ad landscape. With Reels on track to hit over $50 billion in annual revenue, Meta's once-risky pivot is becoming its most valuable real estate.
The numbers are stunning in their simplicity: Meta's Instagram Reels have become the platform's advertising engine in a single year. That shift from 35% to over 50% of all ads isn't just a metric update – it's a complete reversal of how the social network monetizes billions of users worldwide.
The real story here is what it reveals about where users are spending their attention. In the U.S., Reels consume 46% of time spent on Instagram, up from 37% just twelve months earlier. That's not a gradual drift. That's a wholesale migration. And advertisers are following the eyeballs, exactly as they should.
"Legacy services are seeing ad volume shift away, with advertisers prioritizing more Reels to meet users where they are," Abraham Yousef, a senior insights analyst at Sensor Tower, told CNBC. The sentiment captures the raw urgency driving this shift. Brands don't have much choice. If your customers are watching Reels, your ads go to Reels.
But here's the tension that's been quietly gnawing at Meta for years: Reels make money differently than the feed. When Mark Zuckerberg spoke about this problem back in 2023, he was blunt about the monetization math. "Currently, the monetization efficiency of Reels is much less than Feed," he said during an earnings call. "So the more that Reels grows, even though it adds engagement to the system overall, it takes some time away from Feed and we actually lose money."
That admission sent a chill through the analyst community. Meta's growth strategy was cannibalizing its most profitable product. Yet instead of pumping the brakes, Meta doubled down. The company had no choice. TikTok and YouTube weren't waiting around – they were building their own vertical video products and actually gaining ground with younger users. Instagram's existence depended on winning the short-form video race.
Fast forward to today, and the bet appears to be working. Instagram's daily active users are up 2% year-over-year, driven entirely by Reels usage, according to Sensor Tower. More importantly, the revenue picture has shifted. While individual Reels ads still generate less revenue than feed ads, the sheer volume of time people spend watching them is starting to overcome that efficiency gap.
"Even as you substitute some feed at a higher monetization rate than Reels, you still are growing, in totality, the amount of advertising dollars that advertisers are spending with Meta," said Dan Flax, a senior research analyst at Neuberger Berman. Translation: Total revenue goes up even if individual Reels ads pay less.
The AI angle matters here too. Vertical video has become Meta's most sophisticated AI play. The recommendation systems that power Reels are getting smarter with every video watched, every pause, every skip. That data feeds back into better algorithms, which surface more relevant content, which keeps users watching longer, which gives advertisers more inventory to buy. "They're surfacing content to the user, and as they get more signals based on what the user watches, that's helped their recommendation engines get better and you've seen it in the Reels revenue number," Flax explained.
The $50 billion annual run rate that Zuckerberg announced last October feels like a milestone, but it's also a moment of truth. Investors will be watching the Jan. 28 earnings call to see if Meta can actually grow those Reels revenues into something meaningfully larger. If Reels hit 55% or 60% of ad inventory in the next year, and revenue keeps scaling, then the cannibal problem goes away – Meta won't be losing money anymore.
But Meta's facing stiff competition. YouTube's Shorts haven't gained much traction lately – watch time was actually flat last year, according to Sensor Tower. Meanwhile, TikTok still owns time-spent metrics, with users averaging 81 minutes per day compared to Instagram's 55. YouTube still reaches more U.S. daily active users, though that advantage is narrowing. The three-way battle for vertical video dominance is intensifying, and it's becoming clear that the platform with the best AI recommendation engine will win.
The Reels dominance story reveals how quickly social media's entire economic model can shift when user behavior changes. Meta's decision to prioritize short-form video at the expense of feed revenue was a calculated risk that's starting to pay off. The real test comes in the next year – can Instagram keep growing users while maintaining monetization efficiency? If it can, then Reels becomes the blueprint for platform growth. If it can't, investors will start asking whether Meta's chase for TikTok parity has created a long-term problem. Either way, the vertical video wars are far from over.

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