By Sam Bradley and Krystal Scanlon  •  April 17, 2025  •

Ivy Liu

The president’s renewed push for steep tariffs on Chinese imports has started to rattle the retailer – and much of the social ad business.

According to market research firm Sensor Tower, Temu’s U.S. ad spending on Meta fell 10% year on year in first quarter 2025. The platform represented 68% of its American media budget, down from 76% in 2024 and 2023, when the platform was estimated to have spent some $3 billion globally. Temu declined to respond to requests for comment.

At the same time, the proportion of American monthly active users on its app fell from 30% in 2024, to 15% in Q1, while U.S. app downloads fell 40% in that period, pulling down its ranking on the iPhone app store rankings from first to 11th among shopping apps.

The changes haven’t been limited to Meta. Temu’s share of Google Shopping ad impressions – a proxy for its use of product ads within Google Search – dropped from 40% to zero between April 1-12, according to research conducted by Mike Ryan, head of e-commerce insights at Smarter Ecommerce. According to data shared by media agency Tinuiti, it’s remained at 0% since then.

Meanwhile, Tubular Labs has reported that Temu’s U.S. operation halted sponsored TikTok videos at the beginning of April, per Adweek reporting. Taken together, the findings suggest a wholesale retreat from digital advertising in the U.S. market from the company.

But beyond the headline stats lies a less discussed consequence, the knock on effect Temu’s pullback is having on the broader paid advertising social media space. 

“In digital advertising, a lot of the growth we saw, particularly in 2023, but continuing into 2024, was driven by Temu’s massive ad spending. And so most of everyone else was reacting to that, including Shein,” said Sky Canaves, principal analyst, retail and ecommerce at eMarketer, referring to the Chinese fast fashion e-commerce brand. “Shein increased its ad spending in response to Temu’s onslaught because Shein was losing sales as customers who were looking for fast fashion started turning to Temu.”

How does that help rival advertisers?

In the short term, Temu’s retreat benefits rival advertisers in two ways. Firstly, a noisy competitor for audience eyeballs and dollars has disappeared, leaving one less threat to worry about.

Secondly, Temu’s exit from the market could slow the rise of cost-per-thousand rates (CPMs) or even cause them to drop, in a “mirror” of its former impact, according to Dimi Albers, CEO of Dept.

Or to put it another way: when the biggest spender in the room walks out, CPMs can soften, and the cost of doing business on paid social media starts to look a lot less brutal. 

“There is a definite possibility that ad pricing could be improved with large advertisers like that pulling [out of] the market,” added Darren D’Altorio, head of social at Wpromote. eMarketer has projected U.S. social media ad spend could fall as much as 10% due to tariffs, cutting annual growth from 12.8% to 1.5% – crediting part of that fall to the impact of the policies on firms like Temu.

There are signs that CPMs on Meta have softened in Q1 of 2025. The average Meta CPM fell 6%, from $15, per Wpromote data. But disentangling cause and effect – Temu’s retreat and the broader market instability from shifts in price – isn’t easy. Much of the decrease fell in January, D’Altorio said, likely owing more to “volatility following the inauguration” rather than the absence of Chinese brands in particular.

Either way, the window won’t last long. Albers suggested the exit would provide “a window of maybe a few weeks” for brands looking to jump in, which would close once demand from other quarters takes up the slack.

Furthermore, while Temu is among the advertisers most affected by the tariff changes, it’s far from the only one. Domestic brands aren’t untouched, given that any company with a supply chain that involves importing parts or goods from China is on the hook for a cost hike. That’s having an impact on marketing decisions, and could potentially cloud the ability of marketers to respond to swings in the paid social ad market.

“Given current conditions… it’s questionable whether anyone is feeling particularly confident enough to take advantage,” said eMarketer’s Canaves.

At Basis Technologies, for example, evp of integrated client solutions Amy Rumpler told Digiday retail clients were concentrating their investment on unscathed SKUs. “We’re seeing some advertisers shift consumer engagement or interest to other products that were not impacted by tariffs,” she said.

Temu’s exit from the market “offers some relief for advertisers,” concluded Smarter Ecommerce’s Ryan, “but it doesn’t equal the pain that they’re probably feeling from tariffs.”

https://digiday.com/?p=575756