Meta Platforms seen as likely to pass TikTok in short form video in next 18 months: Truist
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Meta Platforms (NASDAQ:META) is likely to surpass ByteDance's (BDNCE) TikTok in short form video, thanks to Facebook and Instagram's Reels tool, investment firm Truist said.
Analyst Youssef Squali, who has a buy rating on Meta Platforms (META) shares, noted that the combination of Facebook and Instagram is likely to surpass TikTok in revenue by the end of 2023, which the analyst called an "impressive feat," given how new the offering is.
"While Meta continues to face meaningful headwinds from macro factors (economic slowdown, inflation, etc), changes to user privacy rules, and an expensive bet on a yet to be proven metaverse, we believe that the headwind of competition, especially from TikTok, is waning," Squali wrote in a research report, adding that TikTok's grip on short form video is "loosening." 
By contrast, Google's (NASDAQ:GOOG) (GOOGL) YouTube and Snap (NYSE:SNAP) were "caught flatfooted," though the analyst added that YouTube Shorts, which recently surpassed 1.5B users, is seen as "not far behind" in becoming the next contender.
Squali noted that after essentially starting 5 years ago, TikTok has more than 1B monthly active users and generated over $20B in revenue in 2021, according to third-party estimates. All of this shows the "rapid evolution" of consumer behavior and how they consume video content.
That said, competition is coming fast, both from Meta Platforms (META) and to some extent, Google (GOOG) (GOOGL), suggesting "that there can be multiple winners in this space." 
"While still early for Shorts, Reels, and Spotlight (Snapchat), we believe the [long-term] monetization opportunity is significant given TikTok's success so far, and short-form video's benefit for advertisers in the wake of [Identifier for Advertisers] loss and more personalized, richer experience for users," Squali added. 
Squali estimates that Reels could generate $8B in revenue for Meta (META) in 2022, including $5.6B in the U.S., compared to $1.2B in 2021, though some of that may be "cannibalistic" as it hurts other areas of Facebook and Instagram, such as newsfeed and stories.
Conversely, the analyst estimates that YouTube Shorts could generate $2.7B in revenue this year, including $2B from the U.S., as it only launched globally less than a year ago and has already surpassed 30B daily views and 1.5B monthly active users.
Conversely, Snap (SNAP) Spotlight is still testing ads, so Squali does not expect it to generate material revenue in 2022, noting that it "lacks the scale and cross promotion capabilities" of Reels and Shorts.