It looks 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.
Local marketers blame Temu for the spike in advertising costs across Meta's ad platform.There were many Chat about Xdiscussions on LinkedIn, and even heated conversations on WhatsApp over the past week have these marketers concerned about what they see as predatory growth.
They suspect that Temu, one of Meta's biggest advertisers, if not the biggest, is jacking up ad prices.
And there may be truth to their suspicions.
Temu's ad spend soared by a whopping 1,000% year-over-year from January to November 2023. Approximately 76% of ad spend was allocated to social media, with a significant portion likely spent on meta.
It looks like this onslaught of advertising will continue into 2024.
MediaRadar data from January to March 2024 shows Temu invested more than $46 million in advertising across various social platforms, with Facebook capturing 98% of ads in Q1 2024. It has been.
Such huge expenditures are bound to have ripple effects on the market, and that is basic supply and demand. But how much of an impact does it have?
That's the million dollar question.
It's difficult to pinpoint a single cause because of the complex interplay of factors that influence ad prices, from market saturation to nuances in audience targeting.
This is made even more difficult by the fact that not all brands are affected by these factors to the same extent. While some of his DTC advertisers are continuing business as usual with minimal changes to their CPM or meta strategies, others are grappling with profitability issues. They are exploring new creative strategies, messaging, advertising accounts, and more to adapt to the evolving landscape.
However, one thing is clear. Temu's ad splurge and subsequent response provide insight into the current state of DTC advertising. This is a fiercely competitive arena, and significant investments by new entrants can disrupt market dynamics. As costs rise, small or new advertisers face greater hurdles, highlighting the need for DTC companies to hone their strategies and explore more innovative and cost-effective advertising approaches. I am.
“Yes, we are seeing a sharp increase in CPMs for some accounts, especially clients that have adopted broader targeting tactics,” said Adam Therian, head of media at GYK. “In one account, in the last week he has seen an almost 100% increase in CPM, resulting in a significant drop in results.”
Telian said he's not ready to pin everything on Temu, but believes this is a wake-up call for DTC advertisers to diversify their advertising channels.
This involves thinking beyond the meta and working with retention teams across different channels such as email, SMS, and loyalty programs, and focusing on creative strategies such as user-generated content and collaboration with creators and development teams. It means that.
Such diversification can create a buffer against the effects of volatile market changes, especially for accounts seeking broader visibility across various platforms. The key is to foster a brand-centric approach, rather than just focusing on products that move on the meta. Sue Azari, e-commerce industry consultant at AppsFlyer, who has worked with Temu in the past, explains: There are two channels. ”
So when the topic of Tem becoming DTC's new bad guy comes up, much of it revolves around Therian finding a balance between pragmatism and caution.
This was evident in a recent conversation backed by data from Edgewater Research that revealed the proliferation of Temu's meta ads. While some marketers interpreted the addition of more than 8,000 meta ads in less than a week as evidence that Temu had grown at its own expense, others admittedly Although it may raise some eyebrows, he acknowledged that it does not conclusively indicate an increase in spending.
“I think most of the advertised pricing concerns associated with Temu are overblown,” said independent analyst and investor Eric Seufert. “Temu spends unprecedented amounts of money on app install ads on Meta and other social platforms, which may be competing on the long tail of impressions (i.e., attracting the most valuable users). not targeted).
More simply, Meta's advertising ecosystem is so vast that it's inconceivable that a single advertiser's rapid spending could significantly increase ad prices. That may be true, but let's be honest. There will always be people who bear the brunt of these changes.
Hanna Parvaz proves this. She is a marketing consultant for growth agency Aperture and is the central figure in Tem's promotional activities.
“With Temu launching 8,000 ads in a week, we're seeing campaign CPMs skyrocket, and we're seeing agencies increase minimum spend to help clients cut through the noise.” she said. “Of course, this is a very well-established theory, but Tem is not the only factor.”
All of this shows that Temu hasn't completely wiped out its DTC star. Yes, some businesses are being affected, but they are not completely disappearing. There is nothing. Instead, a bleak combination of factors is casting a shadow over these companies, from Facebook's soaring ad prices and ad measurement disruptions to rising shipping costs, weak public markets, and a weaker-than-expected customer base.
Frankly, the DTC bubble has burst and collided head-on with reality.
