Meta Platforms, Inc.’s increasingly painful advertising spend retreat from the likes of major Chinese e-commerce competitors such as Temu and Shein. Combined, these companies make up the majority of Meta’s anticipated sales to China—projected at $18.35 billion for 2024. This shift comes in light of recent trade policy changes initiated by President Donald Trump, specifically targeting the de minimis trade exemptions that have traditionally benefited these online retailers.
When Susan Li, Meta’s finance chief, described the highest-level trend, she highlighted a surge of Asian-based exporters cutting costs, propelled by the need to avoid the de minimis trade loophole’s May 2 end. This new requirement has given companies such as Temu and Shein a new obstacle to overcome to stay competitive within the changing trade landscape.
Li stated, “There’s just a lot of uncertainty around this, given the ongoing trade discussions.” She described how some of the impotence advertising budgets have moved to other markets. Overall spending from these advertisers is still under what we were experiencing prior to April.
Challenges for Meta and Other Digital Advertising Players
Their impact is finally coming to light. Indeed, as an example, Temu has reduced its U.S.-based advertising spend due to the tariffs. Consequently, its ranking in the app store in-app has really suffered. These unprecedented tariffs currently total 145%. They are crushing the most high-profile part of Meta’s Reality Labs unit—which focuses on developing virtual and augmented reality headsets.
Meta’s revenue guidance for the second quarter of the year is between $42.5 billion and $45.5 billion. Li warned about the risk of trade talks leading to a souring of the general business environment for Meta. “It’s very early, hard to know how things will play out over the quarter, and certainly harder to know that for the rest of the year,” she remarked.
If anything, Google’s motivation is being squeezed by declining ad revenues due to Chinese retailers. They’ve painted a grim picture for foreseen headwinds in their commercial advertising business, particularly in the Asia-Pacific region. All of this points to a larger trend impacting digital advertising spend in the face of increased trade protections.
Li also pointed out that suppliers who source hardware from multiple countries are struggling with increased overhead. This is all due to the trade dynamics that have recently changed. As Meta modifies its supply chain in reaction to ongoing trade discussions, the company is focusing on enhancing its artificial intelligence capabilities.
“This updated outlook reflects additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware,” Meta stated.
What The Author Things
The impact of trade policy changes on Meta’s advertising revenues and overall growth highlights the difficulty the company faces in maintaining momentum amid shifting geopolitical and economic factors. While investing in AI and infrastructure may help future-proof the company, the immediate impact of declining ad spend in key markets is undeniable.
