With the end to a key U.S. trade exemption near, market analysts say China-founded e-commerce players Temu and Shein have pulled back sharply on advertising. Shares of Temu parent company PDD Holdings have slumped in recent weeks but the ad pullback could also have implications for Meta Platforms and other social media stocks.
Starting May 2, packages shipped directly from China to the U.S. will no longer qualify for a duty exemption on goods under $800. The trade exemption has helped Temu and Shein offer low-cost items shipped directly from Chinese manufacturers to doorsteps in the U.S. Temu's rapid growth in 2023 and 2024 even prompted Amazon to launch a competing part of its website with a direct-from-China sales model, called Amazon Haul.
Now, ad-market watchers say Temu and Shein are pulling back on the online ad spending. Buying up ads on Facebook, Google and elsewhere helped fuel both platform's rapid growth over the past two years. Wall Street analysts are debating what that pullback could mean for Meta, Google parent Alphabet, Snapchat parent Snap and other digital advertising players.
Morgan Stanley analysts lowered estimates "across the board" for e-commerce and digital ad companies they cover on Thursday.
"E-commerce drives online advertising and online advertising drives e-commerce," Morgan Stanley analyst Brian Nowak wrote in a client note. "So when large numbers of first-party/third-party sellers and SMBs could be adversely impacted by China tariffs (we estimate roughly 60% of Amazon's third-party sellers have some China exposure as an example) there are ripple effects in the digital ad markets."
Temu's Ad Pullback
Temu's daily average U.S. ad spend on Facebook, Instagram, TikTok, Snap, X and YouTube declined a collective average of 31% between March 31 and April 13, compared against the previous thirty day period, according to estimates from market research firm Sensor Tower in a report published Wednesday.
Meanwhile, Shein's daily average U.S. ad spend on Facebook, Instagram, TikTok, YouTube and Pinterest fell a collective average of 19% over the same period, according to Sensor Tower.
Further, Temu went from buying 19% of U.S. Google Shopping ad impression as of March 31 to zero on April 12, according to performance marketing firm Tinuiti. The data is a signal Temu is no longer aggressively bidding for visibility on Google, Tinuiti director of digital marketing research Mark Ballard told Adweek.
What Does Temu Pullback Mean For Meta Stock?
China-based ad-buyers accounted for roughly 11% of Meta's overall revenue, according to estimates in the Thursday Morgan Stanley note.
Temu's $1.4 billion in ad spending on Facebook and Instagram accounted for about 1% of Meta's 2024 ad revenue, according to Morgan Stanley's Nowak. Temu also likely represented a similar percent share of Google's 2024 search advertising revenue, the note said.
Still, Nowak wrote Thursday that he view Meta as likely the most resilient to a pullback from China-based e-commerce advertisers. Nowak said other advertisers would still be interested in Meta's audience-focused ad auctions.
"As an example, consider the number and breadth of advertisers bidding to show ads to 'Men in Chicago interested in electronics, gaming and Marvel movies, 'as opposed to the breadth of the keyword bidding on 'cheap iPhone charger,'" Nowak wrote. "This is another reason we believe Meta (despite ~10% of revenue directly from China) is better positioned than Google search and Amazon through this tariff uncertainty."
Meta Stock Price Cut By Morgan Stanley
Despite that optimism, Nowak cut his price target for Meta stock to 615 from 660. He maintained a positive overweight rating.
That was among a long list of other cuts to tech stocks in the report. Snap's price target was cut to 8 from 10. Google was cut to 185 to 210 by Morgan Stanley, while Reddit was dropped to 140 from 210. Pinterest was lowered to 28 from 42.
Meta stock is up a fraction at 503.34 on the stock market today. U.S.-listed shares of Temu parent PDD Holdings were a fraction higher at 92.39 in recent action. PDD stock is down 4% year-to-date but have fallen 20% since the start of the month.
The social media giant will report first-quarter earnings on April 30. Meta stock is down more than 12% year to date. That's after a 194% surge in 2023 and 65% gain last year.
