Invasion of the Shorts: the Revenue Impact of Short-form Video

Video content was king long before TikTok burst onto the scene in 2016. But since surpassing 1 billion monthly active users and becoming the most visited site on the internet in 2021, the influence of TikTok on the digital media landscape cannot be denied.

TikTok’s surge in popularity has positioned short-form video as the fastest growing media format in the current mediaverse. Hubspot defines “short-form” as “any video under 60 seconds…with the optimal length between 31 and 60 seconds.” Designed to quickly capture attention and not attempt to hold it for too long, these bite-sized content morsels have become the hottest trend in social media. According to SproutSocial, “66% of consumers report short-form video to be the most engaging type of social media content in 2022, up from 50% in 2020.”

Predictably, publishers are eager to capitalize on the popularity of video shorts. But monetizing an inherently brief format has proven a hard nut to crack. In this article, we look what's behind the rise of video shorts — and the challenges of balancing user demand with profitability.

Why are short-form videos so popular?

With the near-constant proliferation of apps, communication channels, and other digital distractions, it should come as no surprise to learn attention spans are shrinking. In 2016, Meta reported, “on Facebook, we’re seeing people spend, on average, 1.7 seconds with a piece of content on mobile compared to 2.5 seconds on desktop.” Given these declining attention spans, it makes perfect sense that short-form video has become the content format of choice.

Speaking to Forbes, Victor Potrel, Vice President of Platform Partnerships at TheSoul Publishing, identifies some additional factors that have contributed to the recent popularity of video shorts:

• Ease of participation — More often than not, short-form videos turn into viral trends because they are easy to replicate (dances or lip-syncs), or they invite a response (remixes, duets, or questions). As Potrel explains, the ease and speed with which video shorts can be created “helps convey a sense of authenticity and belonging, boost engagement, create a participation culture across platforms, and reinforce a positive feedback loop between creator and viewers.”
• Short-form video content is (typically) free and easily accessible— In a world rife with content subscriptions, free short-form video platforms like TikTok will maintain a natural appeal. This is great for users but complicated for publishers, advertisers, and even creators.
• Content is tailored to the user — Recognizing that viewers are often looking for a quick burst of entertainment, “short-form platforms have rapidly experimented and honed their ability to deliver content that matches different audiences’ needs, demographics and expectations.”

The publisher and marketing response

Following the TikTok boom, it didn’t take long for competitors to begin producing their own short-form video features. Meta released Instagram Reels in 2020, and it quickly became the platform’s most searched feature. YouTube also began rolling out its short-form video feature, aptly named Shorts, in 2020 — which Variety reported “generated 6.5 billion daily views in March 2021 alone, according to Google.”

Marketers and advertisers have been equally keen to leverage the popularity of video shorts. HubSpot’s 2023 Marketing Strategy and Trends Report found “90% of marketers using short-form video will increase or maintain their investment next year, and 21% of marketers plan to leverage short-form video for the first time in 2023, also the highest of any trend.”

The interest — and monetary investment — makes sense since short-form video has surged in popularity, but the ROI is proving to be more complicated.

Popular - but hard to monetize

Publishers, advertisers, and creators alike have rushed to leverage the attention-grabbing power of short-form video. But giving users what they want has proven to be only half the battle. The real challenge is monetizing inherently short content.

Take Instagram Reels, for example. As Reels grew in popularity, they began taking engagement away from the Instagram Feed — which already had an effective monetization structure in place. TechCrunch reports that in an investor call for Meta’s Q4 2022 results, Mark Zuckerberg explained, “‘Currently, the monetization efficiency of Reels is much less than Feed. 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.’”

The problem is monetizing video content — especially short-form video — is vastly more complex than monetizing a static feed. As The Economist puts it, “Watch a five-minute YouTube clip and you might see three ads; scroll Instagram for five minutes and you could see dozens. Watching video also seems to put consumers in a more passive mood than scrolling a feed of friends’ updates, making them less likely to click through to buy.”

The video ads themselves have also proven problematic. For starters, “Auctions for video ads are less competitive than those for static ones, because many advertisers have yet to create ads in video format.” Another significant hurdle is that attention spans are even shorter for ads. According to Insider Intelligence, “Gen Z loses active attention for ads after just 1.3 seconds.” In a bid to solve this problem, TechCrunch reports Meta has “expanded its overlay ads experiment to creators in more than 50 countries in addition to displaying in-stream ads.” But so far, The Economist says “Just over 40% of Meta’s 10m or so advertisers use Reels ads.”

Keeping creators on side

The incentive structure for content creators, without whom there would be no short-form video content, is also an ongoing challenge. The competition for high-quality content is fierce, and platforms are willing to pay — especially if it means they can draw creators away from TikTok.

As Digiday reports, YouTube’s initial bid to bring creators to Shorts was the “YouTube Shorts Fund — a $100 million cash pile the video service had set aside for creators to monetize their content.” But this nebulous allocation of money didn’t sit well with creators. “Creators didn’t always feel like creator funds properly compensated them for their work, while the platforms thought they did,” Digiday explains.

In early 2023, YouTube switched to a profit-sharing model where “eligible creators earn a 45% share of the revenue from the ads viewed around their Shorts videos, while YouTube retains the remaining 55%.” But with creators now claiming they’re making even less money than before, the revenue-sharing model has also come under criticism.

Meta is also struggling with how to compensate creators. According to TechCrunch, Instagram launched “its program to pay bonuses to creators for making Reels and hitting specific benchmarks” in 2021 — resulting in some creators receiving “more than $10,000 in bonuses, with some claiming to get even $35,000 in a month.” But in March 2023, Meta paused the payment program, cryptically claiming it “might reintroduce the program in ‘targeted’ ways if Reels enter a new market.” It's difficult not to see the revenue dilemma mentioned by Zuckerberg behind this decision.

Demand vs. revenue

Ironically, one possible solution to the profitability problem of video shorts is to lengthen the form. In mid-2022, Meta expanded the maximum video length for Reels from 60 seconds to 90 seconds. Even TikTok has lengthed its time constraints to secure more ad spend. As reported by Wired, “While TikTok has ridden the wave of popularity that propelled it to the top of app stores worldwide, to sustainably grow its revenue, it needs longer videos, which gain more attention, and allow them to sell more ads.”

However, capturing and holding attention with longer-form video means users are no longer quickly cycling through large quantities of content — and TikTok’s advantage has always been its algorithm, which relies on users consuming lots of content.

With the added complication of countries banning TikTok over security concerns, the race is on for competitors to devise an effective monetization strategy for video shorts. But, given the growing popularity of short-form video — and the monetary difficulties posed by incorporating ads and compensating creators — it seems that the only certainty at the moment is more change to come for platforms and publishers.