Summary
- An analysis suggests that the Trump administration's tariffs weakened the price competitiveness of Temu and Shein.
- As a result, these online retailers reduced their advertising spending, leading to a decline in advertising revenue for US big tech companies.
- It was reported that the reduction in advertising spending on major US online platforms was pronounced.
Temu and Shein's Price Competitiveness Worsens, Advertising Spending Reduced
US Big Tech Companies' Advertising Revenue Declines
An analysis suggests that the tariffs imposed by the Trump administration on Chinese online retailers Temu and Shein are boomeranging back to US big tech companies. This is because Temu and Shein account for a significant portion of advertising revenue on major online platforms operated by US big tech, such as Facebook, Instagram, and YouTube.
According to the New York Times (NYT) and others on the 3rd (local time), market research firm Sensor Tower reported that Temu reduced its daily advertising spending on major US online platforms like Facebook, Instagram, and YouTube by 31% over two weeks starting March 31. During the same period, Shein reduced its social network (SNS) advertising spending in the US by 19%.
Since the announcement of the Trump administration's tariff policy in April, the reduction in advertising spending by Temu and Shein on US online platforms has become more pronounced. According to a survey by marketing firm Tinuiti, the share of Temu in Google Shopping ads in the US plummeted from 19% on April 5 to 0% a week later. Shein's advertising also shrank from about 20% in early April to 0% on April 16.
The analysis is gaining traction that this is due to the Trump administration's tariff imposition. The Trump administration abolished the 'de minimis exemption' for imports under $800 on May 2 and imposed a 120% tariff. As a result, Temu and Shein raised prices for US consumers.
As the competitiveness of low prices, which was the background for Temu and Shein's popularity in the US, weakened, these companies halted aggressive advertising activities. This led to a decline in advertising revenue for US big tech companies.
Meta, the parent company of Facebook and Instagram, also reported a decline in advertising revenue. Susan Li, Meta's Chief Financial Officer (CFO), said in a conference call with investors on the 30th of last month that some Asian retailers, without naming them, reduced their advertising spending in the US due to tariffs.
Reporter Han Kyung-woo, Hankyung.com case@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
