Temu, a Chinese-founded discount e-commerce platform, became Meta Platforms' (NASDAQ:META) top advertiser in 2023, according to a report by Wall Street Journal.
PDD Holdings (PDD), Temu's parent company, reportedly allocated close to $2 billion for Meta advertising, taking industry leaders by surprise. Temu also ranked among Google's top five advertisers by spending last year.
A Temu spokesperson contested the $2 billion expenditure claim without revealing the actual figures, the report said.
This surge in e-commerce advertising is seen as a positive development for both Meta and Google, contributing to a recovery in their advertising sectors after a difficult 2022. The advertising sector has faced numerous setbacks, including a general ad slowdown and new Apple (NASDAQ:AAPL) policies that impacted ad targeting capabilities.
The improvements were especially evident at Meta, with its stock price jumping in early February following the announcement of its most substantial quarterly sales growth in over two years.
The company's revenue from China nearly doubled, reaching $13.69 billion last year, marking a significant turnaround from a slight decline the previous year.
According to Goldman Sachs, Temu's extensive marketing efforts resulted in an average loss of $7 per order in 2023.
“Temu is likely losing money on every sale, as it attempts to invest their way into a position in the marketplace,” said analysts.
“If it doesn’t work, or if it decides that they’ve spent enough money on advertising,” that would become an issue for tech giants, including Meta.
However, analysts highlighted that a reduction in advertising expenditure by Temu is unlikely to significantly impact Meta's overall growth trajectory due to notably strong spending in China.