Temu’s ad blitz exposes DTC turmoil: decoding the turbulent terrain

Seems like DTC (direct-to-consumer) has a new villain: Temu.

For better or worse, this Chinese-owned online marketplace has been getting a lot of heat from the DTC crowd lately.

Marketers there are pointing fingers at Temu, attributing the sharp surge in advertising costs across Meta’s ad platforms to its ad dollars. There’s been a lot of chatter on X, LinkedIn discussions and even some heated conversations on WhatsApp over the past week as these marketers worry about what they see as predatory growth.

They suspect that Temu, one of the largest advertisers on Meta, if not the largest, is driving up ad prices.

And there might be some truth to their suspicions.

Temu’s advertising expenditure surged by a whopping 1,000% year over year from January to November 2023. Around 76% of those ad dollars were allocated to social media, with a significant portion likely spent on Meta.

This ad blitz seems set to continue in 2024.

MediaRadar data from January to March 2024 shows that Temu invested over $46 million in advertising across various social platforms, with Facebook capturing 98% of the ads during the first quarter of 2024.

Such massive spending is bound to have ripple effects on the market — it’s basic supply and demand. But just how much impact is it having?

That’s the million-dollar question.

In the intricate web of factors influencing ad prices, from market saturation to the nuances of audience targeting, pinpointing a single cause for something like this is tricky.

This is made even harder by the fact that not all brands are affected by those factors to the same degree. While some DTC advertisers continue business as usual with minimal changes to their CPMs or Meta strategies, others are grappling with profitability issues. They’re exploring new creative strategies, messaging, ad accounts and more in an effort to adapt to the evolving landscape.

However, one thing is clear: Temu’s ad splurge and the ensuing reaction offer insights into the current state of DTC advertising. It’s a fiercely competitive arena where hefty investments by newcomers can disrupt market dynamics. As costs soar, smaller or newer advertisers face greater hurdles, underscoring the need for DTC companies to refine their strategies and explore more innovative, cost-effective advertising approaches.

“Yes, we’re seeing a sharp incline in CPMs for several accounts, especially the clients that employ more broad targeting tactics,” said Adam Telian, head of media at GYK. “One account has seen nearly a 100% increase in CPMs over the last week resulting in a drastic decrease in results.”

While Telian isn’t ready to pin it all on Temu, he said he does believe it’s a wake-up call for DTC advertisers to diversify their advertising channels.

This means thinking beyond Meta, collaborating with retention teams across various channels like email, SMS and loyalty programs, and focusing on creative strategies such as user-generated content and collaborations with creators and development teams.

Such diversification can create a buffer against the impacts of volatile market shifts, especially for accounts seeking broader visibility across various platforms. The key lies in fostering a brand-centric approach, rather than solely focusing on products that move on Meta. As Sue Azari, an e-commerce industry consultant at AppsFlyer who has worked with Temu in the past, explained: “This is why it’s really important for brands to ensure that they’re really diversifying their strategy and not being overly reliant on one or two channels.”

So, when it comes to the chatter about Temu becoming DTC’s new big bad, much of it revolves around finding Telian’s balance between pragmatism and caution.

This was evident in recent conversations, fueled by data from Edgewater Research revealing Temu’s rapid surge in Meta ads. Some marketers interpreted the addition of over 8,000 Meta ads in less than a week as evidence of Temu’s growth at their expense, whereas others acknowledged that it doesn’t definitively indicate increased spending, even if it certainly raises eyebrows.

“I think most advertising pricing concerns related to Temu are overblown,” said independent analyst and investor Eric Seufert. “Temu is spending an unprecedented amount of money on app install advertising on Meta and other social platforms, but its ads are likely competing at the long tail of impressions (i.e. not targeting the highest-value users).”

In simpler terms, Meta’s advertising ecosystem is so vast that it’s improbable for a single advertiser’s rapid spending spree to significantly drive up ad prices. That might be true, however, let’s face it — there’s always someone who feels the brunt of changes like these.

Hannah Parvaz can attest to this. She’s the marketing consultant behind growth agency Aperture, and she has been at the center of Temu’s advertising spree.

“With Temu launching 8,000 ads in a week, we have seen the CPMs of our campaigns skyrocket and there’s a movement for agencies to increase minimum spends so that their clients can attempt to cut through the noise,” she said. “Temu won’t be the only factor though, of course, although this is a very established theory now.”

All of this is to say that Temu isn’t snuffing out the DTC star entirely. Sure, it’s putting a damper on some of those businesses, but it’s not extinguishing them completely. Nothing is. Instead, a bleak combination of factors — from escalating Facebook ad prices and disrupted ad measurement to soaring shipping costs, sobering public markets and smaller-than-expected customer bases — is casting a shadow over these enterprises.

Put bluntly, the DTC bubble has burst, colliding head-on with reality.

https://digiday.com/?p=542087

>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : DigiDay – https://digiday.com/marketing/temus-ad-blitz-exposes-dtc-turmoil-decoding-the-turbulent-terrain/?utm_campaign=digidaydis&utm_medium=rss&utm_source=general-rss