Facebook Stock Rise Treated With Caution, Despite Launch Of Instagram Reels

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Facebook Stock Rise Treated With Caution, Despite Launch Of Instagram Reels

Last week’s announcement that Facebook was to launch a new Instagram feature, called Reels, could not have come at a better time for the social media company. Instagram Reels allows users to create short videos with audio and special effects similar to TikTok.

Facebook’s announcement coincided with further sanctions by the Trump administration on China, including an executive order on Thursday which bans US companies from dealing with ByteDance, the Chinese owner of TikTok.

International Scrutiny

TikTok has been under intense scrutiny over the last few months, as they have become part of the geopolitical struggle between the White House and the Chinese Communist Party.

The video-sharing app has been treated as a privacy and security threat because of its Chinese ties, with federal employees being banned from using the app on government-issued devices.

Facebook may have seen an opportunity appear in the midst of the controversy surrounding TikTok.

After the release of Reels in the US, Facebook’s stock rose by 6.5% as Trump’s executive order stated that in 45 days any transaction by any person with ByteDance Ltd would be prohibited.

Despite it being impossible for the White House to actively delete TikTok from the phones of millions of Americans, the executive order may prevent people from downloading the app.

Political Risk

It is difficult to see how the politics surrounding TikTok may play out. Microsoft is reportedly in talks to purchase the app in a multi-billion pound deal, and the popularity of TikTok could be difficult for Facebook to challenge should that deal materialise.

Moreover, TikTok content creators with tens of millions of followers are remaining loyal to the video-sharing app for now, despite the government’s concerns over security.

Facebook also has a habit of creating features that resemble that of their rivals, with some being unsuccessful. Lasso and Hobbi are two examples, with both being shut down this year.

Facebook’s short term rise on the back of this announcement should be treated with caution. What will decide the success of Reels will ultimately be whether TikTok’s content creators jump ship – if they even go anywhere at all.