When you actually need to compress
Most of the time you do not. Modern recording tools already produce reasonable file sizes, and any sharing platform that matters (Slack, YouTube, Loom-style hosting) compresses again on its end. The two cases where you genuinely need to compress yourself: email attachment limits (Gmail caps at 25 MB), and cheap CDN hosting where you are paying per GB. Outside those, compressing a video is almost always wasted effort.
What the three presets actually do
Smaller uses CRF 30 and downscales to 1280p — this is the right pick if your goal is "under 25 MB for email." Expect a visible softening on text-heavy screen recordings. Balanced uses CRF 26 and 1600p, giving you roughly half the original size with no obvious quality loss. Best quality uses CRF 22 and a 1920p cap — basically just re-encodes more efficiently than the source did, preserving everything your eye notices.
Why H.264 instead of H.265 / AV1
H.265 is 30% smaller for the same quality. AV1 is even better. Neither is universally supported. PowerPoint will not play H.265 on most Windows machines. Old phones choke on AV1. If we shipped a default H.265 compressor, half the people emailing the output would email us back asking why it does not play. So we stick with H.264 — the format every player has supported since 2008. If you specifically need H.265, use a desktop tool.
Skip compression by recording smarter
If your goal is "send a video to a coworker without it being huge," record with Clipy from the start. The recording is uploaded to a hosted link as you record — your coworker opens the link, no file changes hands, no compression needed. The whole reason this tool exists is to clean up after recording with something that did not give you a link.