Growing Ecommerce – The Retail Growth Podcast
Behind Temu's Digital Advertising Landslide
Temu's advertising has been at the center of countless headlines in recent months. However, journalists don't know advertising well enough and don't have the data necessary to tell the full story. Mike has monitoring Temu for months – and mega-advertisers like Amazon, Wish, and eBay for years. He ties together all of his research on Temu so far into a single story exploring their dramatic rise, and their performance impact on other advertisers. This episode isn't Wall Street analysts or regular consumers, it's for ecommerce advertisers and operators, and it's a story that no one else can tell.Please note there is a lot of data in this episode and you might want to watch the video feed for the best experience.
Temu's advertising has been at the center of countless headlines in recent months. However, journalists don't know advertising well enough and don't have the data necessary to tell the full story. Mike has monitoring Temu for months – and mega-advertisers like Amazon, Wish, and eBay for years. He ties together all of his research on Temu so far into a single story exploring their dramatic rise, and their performance impact on other advertisers. This episode isn't Wall Street analysts or regular consumers, it's for ecommerce advertisers and operators, and it's a story that no one else can tell.Please note there is a lot of data in this episode and you might want to watch the video feed for the best experience.
Welcome to Growing Ecommerce. I'm your host, mike Ryan of Smarter Ecommerce, and today is a very special episode because it's our first ever video podcast. We are adding video to the podcast. We're adding also some higher microphone quality. We'll be switching over our software. We're making some investments in this podcast. We want to increase the quality and increase some of the things that we can do here and some of the people that we can reach. But, having said that, for audio listeners this could get tricky to follow at times.
Speaker 0:We're going to upload the video feed into the audio podcast feeds as well, like Spotify and Apple Podcasts. You know you can also find it over on YouTube, of course, and otherwise forgive us. We just wanted to do something special here. I'm going to talk about that now. I want to share with you a bunch of data, and it's the type of thing that it's hard to do just in audio format alone. So we thought, now that we're introducing video feeds, which will mostly just be nice to have it'll show the guests that we're interviewing and so on but for a bonus round, why not show something that only works with video, where you really need to enjoy all the visual aids that are in there, and that topic. It's one that I've sworn off and walked away from and I keep crawling back. That topic is say it how you will Timu Temu Temu. I'm going to share with you some data that I've shared some of this before online on Twitter here and there, or on LinkedIn a little bit, or in conversations with news reporters, but I've never told this whole story all at once, and that's something that I want to change today and I'm really focusing here. You know I spoke with Stefan Wenzel a few episodes back about Teemu's business model. So if you want to catch that side of things, go back and catch that episode. But today I really want to show you what they are doing in terms of advertising, the impact that they are having on platforms, focusing on Google, because that's where I have access to a lot of data, but we'll also discuss meta as well, and that's going to be quite interesting that part too. All right, let's get into it.
Speaker 0:I've got four parts to this conversation. The first one is the weather event, and then I've got twists, kind of plot twist number one, two and three that we'll see later on. But first I want to talk about this idea of a weather event in an advertising platform or on an advertising channel, because so much of our performance and what's going on in there. We tend to want to assign successes to ourselves and maybe we don't want to assign blame to ourselves always, but the fact is that we're not always as in control of these things as we might imagine. There just is weather or background noise in any given advertising channel. There's going to be fluctuations in demand, there's going to be changes in economic sentiment and what's going on with competitors and every number of things, how the technology of the platform is changing and what new campaign types are rolling out. We're just in this very multivariate, non-deterministic, complex, confounding weather system that's hard to forecast, hard to predict. But once in a while there's something bigger than just the normal weather, bigger than the forecast today is a little rainy or the forecast today is sunny. Sometimes storms blow through, weather events happen, and I'm going to show you an example of that. This is a throwback to some stuff that we saw during the pandemic, but I think it's just a good opportunity to show you what a weather event can look like in Google ads, for example.
Speaker 0:So this chart is showing three things. It's showing you COVID, stringency on a gray line, which is COVID stringency, is basically how intense were lockdown measures at a given time and we're looking at the German market right now, by the way and then it's showing retail mobility, which was tracked by Google back then. They had some very interesting mobility indexes, because they're tracking everyone's location all the time on Google Maps and aggregating that data, so they knew if people are visiting stores more or less, for example. And then that's the black line, the last line in gold this chart is so old, it's our old brand colors the last line is Google Shopping, cpc, and these things are all interrelated to one another and actually they all follow from this intervention that was occurring, this weather event, which was the pandemic, and the government measures that were taking lockdowns, covid stringency. That data, by the way, comes from Oxford University.
Speaker 0:So what we see is that there's this very clear inverse relationship between lockdowns and retail mobility, which is completely clear and expected. When the lockdown intensity goes up, retail mobility goes down. People are not moving around as much, they're not in retail environments as much, and then, when lockdown intensity lessens, people start going back into retail environments more. This is totally clear, but what's interesting is we can then see that reflected in the channel in the Google Shopping CPC. We see that while there are kind of this hip and waistline format with the negative or the inverse relationship between mobility and stringency, we see that CPC kind of echoes the movement of retail mobility. So as retail mobility was going up, cpc was climbing up too, and I've done other versions of this chart for specific clients. This was at a market level for the country of Germany. I've also looked at retailers like grocers, for example, and looked at their conversion rates and seen very similar effects happening, and so they'd see their conversion rate going up and down like a roller coaster and of course, it was due to this huge, massive effect and effects.
Speaker 0:Because this is a noisy weather system, like we talked about, confounding multivariate blah, blah, blah Effects do need to be big to stand out like that and to define these clear correlations. It can be hard to find them because it's so noisy. That's a signal that you're dealing not just with a sunny day or a rainy day, but with a weather event. So a little bit more context and I'll get into Tmoo. This is showing something else that happened a few years back, before the pandemic. This is showing back in 2017 to 2019, the entry of these huge advertisers, amazon and eBay, into Google Shopping here in Europe, and it's a quarterly view and you can see how rapidly really they came to be quite prevalent.
Speaker 0:The way that this is measured is basically I look at the count of advertisers or accounts in a given quarter and then I look at the percentage of those accounts where these competitors were detected at the account level, which suggests that they are a significant competitor. Any given account will have thousands of competitors behind the scenes. You can view this in Auction Insights reports in Google. If you drill down really deep, you can find thousands of competitors, but at the account level, an account might have from 10 to, at most, maybe 60, six zero account level competitors and a pretty typical number would be, let's say, 30 to 40. So just being present out of thousands in that account level report shows that it's a significant competitor, and we saw that Amazon had a period of testing in 2017. And then across 2018, they ramped up to be an account level competitor for about 75% of advertisers, to be an account level competitor for about 75% of advertisers, and eBay followed on a bit later. They started up midway through 2018. And they also ramped up to be a competitor to about 40% of competitors back then in 2019. And so this is what an aggressive market entry looked like a few years back. Keep this in mind. Okay, you know we're talking about Amazon here. They have budget. They spent about a year testing the channel and then they ramped up pretty steep after that point.
Speaker 0:But here's where Teemu enters the picture. This is a screenshot of a Slack message from my colleague, stefan, and he wrote Teemu P is German for like phew. It's like the sounds you make when you're wiping sweat off your forehead. And I wrote damn, because in that screenshot there are eight horizontally arranged product listing ads in Google Shopping and five out of eight are for Tmoo. And that was in July last year. So I knew right away when I saw that that we were dealing with a new kind of weather event, that something big was happening, that there was a major new competitive entry into the market, and since then I've talked about this topic with a lot of newspapers, from the Financial Times and AdExchanger, modern Retail, adweek, business Insider, the Wall Street Journal. People are obsessed with this topic because it's important, because this is changing the destiny of these advertising channels and changing also what life is like for an advertiser. But we're going to get into more of that later.
Speaker 0:Let's first look at what happened next. What happened next is here. I'm showing you Pimu, amazon and eBay. We just looked at Amazon and eBay right, and this is starting as of May 2023. So some time has passed since what we last looked at, where Amazon and eBay were ramping up their advertising efforts. Ebay now holds steady at around 50%, amazon at around 80%, and they're very stable. Now those fluctuations are gone. They found their spot and they're spending there, and in May, teemu started popping on the scene and by the end of June, three months later, they were on par with eBay. They actually dragged down eBay a bit.
Speaker 0:From what it looks like Hard to prove causation there, but I think it's a fair assessment. There's even a slight dip in Amazon. Teemu came on the scene hard and we're going to put it on a timescale in a chart where it'll make it more visually comparable to what those others did. But within three months, effectively overnight one quarter there was a new eBay-sized advertiser in Google Shopping. This chart fast forwards until November of 2023. It's the same metric. It's the percentage of advertisers facing account level competition from these competitors Amazon, you see, they're just perfectly stable and steady over this period, and eBay also quite steady. But now Timu, within six months, is nearly an Amazon-size competitor. They're popping up as a serious competitor for three out of four advertisers at that point, and Amazon's about eight out of 10. So, 75% against 80% and something like that is unprecedented, because I showed you before what those big market entries look like Amazon spending a year testing. So I'm going to zoom out even more and give you an even bigger picture to help you understand what this was like. And here I've added I've taken eBay off the map, because what eBay did and has done is not even comparable. Actually, the only time we've seen something like this before was a little e-commerce player.
Speaker 0:You've probably heard of many comparisons made with Timu, a website called Wish, and you can see that they were testing across 2019. And then, in 2020, they just poured gasoline all over their ads and lit a match. Within a year, they skyrocketed to the level of Amazon. They were reaching parity with Amazon. They skyrocketed to the level of Amazon. They were reaching parity with Amazon Of interest. Back then, you'll see Amazon having a dip in Q1 of 2020 or Q2. And that was, of course, the acute lockdown period. Amazon paused their ads for a little while and that caused their prevalence to dip. So you can also, by the way, see how this is kind of correlated to spend and activity. Of course, you can't be competing against 75 or 80% of advertisers out there unless you're spending tons and tons of cash.
Speaker 0:Now Wish imploded and you can see that in this chart. They went down and they collapsed just as fast as they had risen. It's really just this parabolic kind of shape. And now we look at Tmoo on this chart and we can see that there was no testing period. It took what? About a year for Wish to get to parity with Amazon. It took Timu six months. It is just a perfect vertical ascent. But there in Q4 of 2023, they started to the ceiling or things started to slow down. You know, I question if it's possible for any single competitor to get more visible than that. There must be a ceiling on here somewhere, a practical ceiling. I don't think it's possible to hit 100% on this chart, but they started slowing down. We'll get into that a bit more later.
Speaker 0:So I think this is the last thing I want to show you in this chapter this kind of preface, which is the rocket ship launch of Timu in Google advertising. What I've done here is just made all of those charts kind of comparable, because we were looking at eBay back in 2018, amazon in 2017, then Wish in 2020, timu in 2023. It's very confusing to hold that all in your head and make a comparison, so here I've just taken quarters alive and I'm showing you what these advertisers look like next to each other, putting them all on one timeline. So they all start in the low 1% range or so in their first quarter, but then they rapidly start scaling up. No one, though, is even close to comparable to what Timu did, even close. The furthest that anyone reached in their first year live was eBay. That's nearly 40%, and Timu is up there at nearly 80% penetration or prevalence. So they've been twice as aggressive in their first year as any other advertiser that I'm aware of, and I don't think you can really miss an advertiser of this size. So I would say they're the most aggressive advertiser that there ever was on Google Shopping.
Speaker 0:Now let's get into. I promised you there are three plot twists here. I hope I haven't oversold that. No one's coming back to life for anything like that. There's not any secret twins or something whatever. There would be like a telenovela or soap opera. But the first twist is that Timu is very prevalent but they're not that strong.
Speaker 0:So what I've done here this is a box plot comparing competitive power of Timu versus Amazon and Google Shopping. So, as a box plot, you know the box portion. They're showing you the middle 50% of advertisers and then the bars are showing you the range and you can just see that Timu is down there at around like 30% competitor power, whereas Amazon is, like you know, for an average or median advertiser, they're going to be much stronger, at like 50%. And the way that this works. This metric, just for the nerds out there, this might not be interesting to like a CMO listening or something. Metric, just for the nerds out there, this might not be interesting to like a CMO listening or something. But hey, let's get into it.
Speaker 0:Google Auction Insights provides three metrics. It provides overlap rate, impression share and outranking share, and what I do is basically take the average of these things to show you, because it's hard to again hold these three metrics in your mind and get a clear picture of them all at once, so I combine them into one metric that shows you the general strength, and this, by the way, is an older snapshot. I haven't run this analysis much lately. Timu has gotten stronger and we'll see that later on, so you will get an update on this, but the fact remains that Timu is not that strong compared to Amazon. They're not even that strong compared to a median advertiser, and so what I want to show you next, this is a really interesting data set that anyone can get. You know if all this stuff about competitor prevalence or competitor power, if that's too abstract, this is something that is a little bit more direct. If you go into Google Merchant Center anyone can see this, anyone who has a Merchant Center you can view the stack-ranked top advertisers, biggest visibility, advertisers in any country and category combination where your feed is active.
Speaker 0:Basically and this is just an example on this chart but what I was seeing in late 2023, in December, and even in the first weeks or days of January 2024, this year I was seeing that Timu was topping out these charts the way that you see Amazon doing in this. This is a more recent screen capture. Timu was in the first place, the second place. There was things I couldn't believe I was seeing, like in apparel in Germany, fashion in Germany, timu was stronger than Amazon. Timu was stronger than Zalando, which is, I mean, it's their home territory and it's their specialist. That's all they do is fashion. They were stronger than Sheehan by far. Just if you look at the stack rank, timu was the top dog in Q4 of 2023 in fashion in Germany.
Speaker 0:Just as one example. As unlikely as it would seem, but in January I noticed that the stack rank started to change. Timu started appearing down. Like you know, in this particular example in the UK, timu is in like the number four position, over in home and garden. Okay, in apparel they're still in number two, great, but otherwise they're missing from the table. They started slipping.
Speaker 0:Something happened. So you could see just in absolute terms, in terms of like paid visibility, timu was slipping. So this got me interested. And here's the twist the last time we saw that quarterly chart, you know, timu was kind of on par with Amazon and what we see in Q1 of 2024 is that they started dropping. Now it's not a huge dip, but when you're Timu and you're on this stratospheric rocket ship, kind of ascent, this is something. This is a blip. Something happened in Q1 of 2024. And specifically, they spent less money. They spent a lot less money I can't put a number on it but they fell back to their rank of like Q2 2023. They lost quarters worth of progress and that's interesting.
Speaker 0:Now we're going to get into some more detail here. You can see at a daily level what happened to that same metric the percentage of advertisers that they're competing against over the entire course of Q1. So I have a dotted line that's tracing their high watermark of 80%. That's about as strong as they ever got. That's how strong they were in late December and early January and you can see how that eroded over the course of January.
Speaker 0:It reached a bottom right around the time of the Super Bowl and at that point they went from like competing against in a serious account level way against eight out of 10 competitors to competing against like six out of 10 competitors. That's a big drop and at the time I thought maybe this is related to the Super Bowl. They're running these big ads, maybe they want to kind of reduce the noise a bit so that they can see the lift of the Super Bowl ads. I don't know, it seems sophisticated. For T-Move, I'm being honest. It seems sophisticated, but we couldn't know how this would evolve over time. Now they rallied a bit over the course of February and by early March they were back at about 7 out of 10 advertisers, seeing account level competition. And then the damnedest thing happened they dropped again and they dropped back down to about 6 out of 10 advertisers, so they were showing softness and a reduction in spend across the course of the quarter.
Speaker 0:This, I think, is something that should be known to Google shareholders. I mean, actually, at the time of recording, we're before the earnings report, the Q1 earnings report, so let's see what's what's going to come out of that. Now, I'm not saying that this is going to hurt in like year over year terms, because of course, tim was spending still a lot more money than they were a year ago. So in year over year terms, things should look okay, but in quarter over quarter terms, you would expect yeah, you'd anyway expect some seasonality. Of course Q4 is a big quarter. You'd expect Q1 to dip, but I think we're going to see a stronger dip in Google's revenue for Q1 than would be explained by normal seasonality, and I think it's because Teu's spending so much money there.
Speaker 0:And let me just go on a bit of a rant here, because this is exactly the problem with an advertiser like Timu throwing that amount of cash at an ad platform. I don't think I've said this before I don't know if on this podcast, but I don't think that this is healthy for anyone. Like for Google. When the new cash is flowing in on a quarterly basis, that feels great when the numbers are going up, but it's also building a dependency on that revenue in the future a future dependency, because now we see that if the revenue starts to fall away, this could be problematic for Google, and I'm not saying that's necessarily what's going to happen. This is not financial advice, but it's a risk factor that opens up.
Speaker 0:Google starts to have a dependency on a big advertiser like Teemu, and the thing is that Teemu is not even friends with Google. Teemu is trying to poach users from Google search and bring them into their app. This is like not just any normal advertiser saying oh hey, I have some products I want to sell. I want to send some people to my web shop, you know, get them in my email list, do some retention, do some expansion on them. This is Timu trying to just like steal customers from Google, and Google, on a short-term basis, has every incentive to let it happen because it drives revenue up on a short-term basis, has every incentive to let it happen because it drives revenue up and on a short-term basis I don't think they can even do anything about it. I don't think they can say, timu, you're not allowed to spend on our channel. On what basis? But on a long-term it's super problematic for Google. Now it also sucks for Timu and I'll show you that soon. I for Timu, and I'll show you that soon. I also think it's bad for consumers because these advertising channels get flooded with Timu products and not with a variety of products, like you might want to see. Let's remember back to that early screenshot where five out of eight options were Timu. I'm not sure that was a good customer experience for the shopper and again, that's another risk to Google, by the way, that Timu is trashing the customer experience. These are all things that I find really problematic about the situation.
Speaker 0:Okay, let me back up for one sec. The next slide is cool, okay. So what I like about a situation like this? On the other hand, about this reduction in spend and like these dips and valleys, and then suddenly it's rising again. This all introduces variation that wasn't there before, timu's spend was more consistent than that and it was just tending to go up. I didn't have examples of their spend going down. But when they introduce variation like this, it lets me figure things out, because that's what you need. You need to look, you can compare that variation with the variation in other things and you can learn stuff. I'm going to show you some things that I learned from Timu's variation in their soft Q1.
Speaker 0:I promise you we talk about meta a little bit, so this is so interesting for so many reasons in my opinion. Tell me if I'm wrong. This is comparing that metric I've been showing you with meta's number of active ads as collected from the meta ads library. Number of active ads as collected from the meta ads library. And, by the way, a huge shout out to Edgewater Research for sharing this data with me. They've been collecting this and sharing it. We've been talking over the course of the quarter about what's going on and this is, by the way, I have no affiliation with Edgewater. Smarter eCommerce has no affiliation with Edgewater. You know we're just nerds sharing data trying to figure out what's happening. But if we look at this like, remember, my data is from Europe, right, and this data is from the US. It's from a different platform in a different region and the patterns are very similar.
Speaker 0:And I also want to invite you to do something, especially people watching. It will be hard for someone listening, but if you take the meta chart and in your mind's eye you shift it to the right a little bit, you'll find out that it lines up a lot better with the Google activity. Even there's actually a lag effect here. There's a few days difference between what happens on meta. A few days later that will happen on Google and this suggests that Google is just downstream of meta. That's often the case that someone will, let's say, pause their meta ads and then they find that their Google search volume for their brand or whatever starts to suffer because they were generating demand and awareness upstream or up funnel on meta and then they were capturing that downstream on Google. And I believe that's the kind of effect that we're seeing here, because there's a clear lag effect between these two data sets. If you de-lag these or kind of match them, the correlation between them jumps up.
Speaker 0:And this is what I said, that this situation is also bad for Teemu. So here I have plotted that Google proxy that we've been looking at this whole time the percentage of advertisers who see competition from Teemu, and I've plotted that against their app rank movement, which I got from Sensor Tower, and I think it's pretty clear to see that these are very closely related. Actually, they have a correlation off the check my notes but if I'm not mistaken they have a correlation of 0.8, which is pretty high, especially for things that at face value, like they, they don't have necessarily a super obvious connection necessarily. But we see that Google Shopping is driving users into Timu's app, which is exactly what I said earlier that Timu is trying to steal these users from Google and why this is bad for Timu.
Speaker 0:Earlier I said that Google has a dependence on Timu. Well, guess what? Timu has a dependence on Teemu? Well, guess what Teemu has a dependence on Google too. Digital ads are the tail that is wagging the dog. Teemu is not organic. There's nothing organic about this company. Oh man, I had a slide for that. I can get that data from Google too, from the Merchant Center, and I can see that Teemu's paid to organic ratio is greater than 100 to 1. Google can't report a ratio higher than 100 to 1. It maxes out the chart. Someone like Amazon, for example, might be at, let's say, 18 to 1. So there's nothing organic going on about Timu. It's not like Shein, where there's all kinds of word of mouth and social media and whatnot driving app installs as well as paid influencers and ads, but Timu has this pure dependency. If they stop spending at all, their app rank suffers.
Speaker 0:And, by the way, just to describe what we're looking at with app rank here because there's a little bit of detail there and I think it's important If you would go to Sensor Tower and look at shopping apps, you'll see that Teemu's rank is pretty stable around number one, and that's because in their category, yeah, they're just so dominant, right. But if you look at Teemu's rank in overall app rankings, they're less dominant. There, their position is more challenged, and so you can see slippage a lot more easier. That kind of slippage isn't visible in the shopping app rankings, but in the overall app rankings. You can see that and also this trend. What I've done here because the way that SensorTower presents the data, it's per market. So I took the top five markets in Europe since this is European shopping data and I matched these. I made an average of those. So that's the average app rank movement in the top five markets in Europe and you can see I looked at a comparison between Timu's prevalence, how strong they are in these auctions, and what's happening with advertising for everyone else.
Speaker 0:Now the first thing I want to do is a little setting, a little context. I'm showing you Timu's impression share trend, their shopping impression share trend and the median shopping impression share trend. And so, for people who might be unfamiliar with that metric, this is just the percentage of impressions that you're eligible to get. Like how many? If you could get a hundred impressions and you got 50 of them, you'd have a 50% impression share. Now Timu is way below the median advertiser. They're around 30% impression share and the median advertisers are around 50% or 55%, let's say. So that might be interesting to you because you might think, well, there's so much more headroom for Timu and in a way there is. Or you might think, why is their impression share so low?
Speaker 0:These are questions I have too. I think that they just have so many products because, kind of the main factors that play into your impression share are going to be do you have budget available to get those impressions? Are your bids high enough that you're going to appear in the auctions and get those impressions. And then another factor that comes into play in shopping is about your feed and your products, and I guess that they just have so many products that are not serving impressions and I think that their feed if I think, if I try to imagine how chaotic things are with the sellers that they're working with and the products that they're working with these things don't have GTINs. These things might only exist for a limited period of time, as long as a factory is going to crank them out, or they might, I don't know. And these I don't think there's a high degree of professionalism. I'm sure there are some very professional, very efficient scaled sellers on Timu, but I think that there's also a lot of just factories that are just winging it. And you know, I just bet that the product feed of Timu is in pretty poor shape and that's a major area why. I also think that that's news to advertisers too, like how can I stand out against timu in the auctions? And having a really excellent product feed is probably a big part of that, and actually I'm going to show you something next that I think further demonstrates that. So I promise you a twist, okay, twist one. They have a super low impressions. Error maybe, but here's the big twist to me there's been a ton of debate, especially in regards to meta, and you know these debates among some brand founders and some agency founders with big followings on Twitter, for example, and they get in sort of debates Is Timu bad for CPM or CPA or what's going on?
Speaker 0:I don't have that kind of metadata. I can't tell you what's going on meta. I do have Google data and so I looked at it and it's pretty interesting because what I found is that there's this inverse relationship between CPA and Timu visibility or actually their competitive prevalence. Okay, so basically CPA, just because that term can have some different definitions. In Google Ads that is cost per conversion. That's what's being discussed.
Speaker 0:So the point is that when Teemu gets more aggressive, cpa gets lower and when Teemu is less aggressive, cpa gets higher, and that's sort of the opposite of what you might expect. If we'd be talking about Amazon, that would definitely be the opposite, but Teemu is a little bit different. I tried to understand this. I decomposed CPA and I looked at the correlations for a variety of metrics and KPIs and what I found is that kind of upstream of CPA or preceding CPA, that there's a huge relationship with the cost to me, with click-through rate and there's a moderate relationship with conversion rate. And so the point is that if Timu is side by side with you in the auction, your click-through rate is going to improve and your conversion rate might also improve and that is what's driving this positive CPA trend.
Speaker 0:Interestingly, average order value suffers a bit, so the trend is less visible in return on ad spend, although it's also there, and I want to call it a couple other interesting things here because this correlation is minus 0.7. Although it's also there, and I want to call it a couple other interesting things here because this correlation is minus 0.7. So it's an inverse correlation. That's what that minus means and 0.7 is kind of the. It'll depend what discipline you're in and what you're looking at, but it's often considered kind of the bottom threshold of a strong correlation. You're moving from a moderate correlation into a strong correlation and I think that's striking because you know Amazon didn't change what they're doing at all and Amazon has a huge impact on CPA, you can guarantee that. So Amazon is like a big dampening factor here. It would dampen or reduce the visibility of a trend. Also, when I looked at the median CPA. I looked at the CPA of all the advertisers, including there are some who do not have account level competition from Timu. They're in there too and that effect won't happen to them and so they're also. They're another dampening factor on this trend. My point being is that if you could somehow clean this data of Amazon and clean it, it would be easier to clean it of those advertisers without competition. But if you clean it, the signal in here would get even clearer and you'd see an even stronger trend or correlation. So I feel really confident that Timu is driving higher click-through rates and moderately higher conversion rates as well.
Speaker 0:The question is why. I have two theories about that. The first one I call the shit sponge, and I think that Timu is like a sponge that is soaking up shitty auctions. I think that they're bidding and budgeted so high and especially when they push into the stratosphere kind of that, they start getting into generic auctions. They start getting into low intent auctions and you know they're actually sort of taking one for the team and crowding you out in those situations, like they're filling up a lot. They'll fill up the whole docket on a lot of those bad auctions and so I think that's like you know.
Speaker 0:Yeah, they hurt impression share, that's one thing they do. They hurt impression share when they're more active, but that's that's one thing they do. They hurt impression share when they're more active, but that's quantitatively and I think qualitatively, qualitatively, whatever. I think that qualitatively you're getting better impressions, so your impression share might suffer, but it's not necessarily to your detriment.
Speaker 0:The other theory I have I'll call it like a dramatic foil, because I studied literature, so yeah, but a dramatic foil is basically when there's two characters in a play or novel or a TV show and they're opposites to each other and they kind of contrast each other. And so in psychology this is a well-known thing called a contrast effect. It's a type of bias where, for example, I'm just wearing like a normal t-shirt right now, I don't look, you know, particularly fancy or whatever. But if I'd be standing next to someone who's like really dirty and disheveled and so that same contract effect would reduce your opinion or your assessment of how I'm dressed. And so I think when Teemu is in the auction next to you, for some consumers they're going to be attracted to Teemu, but for many others they'll actually repel those users and they'll actually point them more to your ads. So again, I think that's another reason why you want to focus on these kind of fundamentals around having really like good, well-built ads within the context of shopping. There are constraints there, but it comes from your feed.
Speaker 0:Basically, and before I move on from that, I also want to note I would view this as a silver lining to the Teemu Cloud. I don't think that this proves that it's good or bad to have Teemu in the auctions. It might well be bad because Teemu still is soaking up huge amounts of impressions. We see that CPM does go up a bit, but even if the efficiency is better in terms of CPA, they still can harm your total conversion volume because they're harming the impression volume, and without impressions you can't have clicks and without clicks you can't have conversions. And you know, without impressions you can't have clicks and without clicks you can't have conversions. So I think that there's still a risk that, although their presence might actually strangely increase your efficiency, it might hurt your volume. So I promise one last twist Okay, low.
Speaker 0:In the second half of March, meta was really down in the dumps and then this happened. You know where they were. They were even below the level of competitors like Shein and Amazon. And then in April, they started adding thousands of ads per day, day after day after day, and this is an emerging trend. This isn't even the latest data. This is a few days old. We don't know what's going to happen next. That's all there is to it. But they went full nuclear on Meta and I'm still waiting to see if this will be reflected in Google as well.
Speaker 0:But I don't know what to say about this exactly. I guess I wouldn't be too worried about Meta's earnings reports, at least not long-term in Q1, there might be some softness there too from reduced spend. But right now the outlook is positive for Meta because Teemu keeps spending, spending, spending. You know, if we take the number of ads, if we accept that as a proxy for spend, which I think is reasonable. And again, by the way, you see a little logo on that chart, that's the logo for Edgewater. So I want to really thank them for sharing this data, being so generous. They write these really great reports that I love to read every quarter. Again, no affiliation, just an honest to goodness plug. But I think that wraps it up for now.
Speaker 0:I think this is a picture of the evolution of Timu that you probably won't get anywhere else, probably haven't seen before. I've tried to just bring all this information together in one place. I think there are many layers to this onion. There's just the astonishing rise of Timu in terms of advertising channels. There's the impact of that on these ad platforms and also the products that these ad platforms run on, like Google search as an experience, the Facebook feed or the Instagram feed as an experience, where it remains unclear how Timu impacts those experiences. It remains unclear if this is healthy for the platforms to have a revenue dependence on a party like Timu. It remains unclear what legislators are going to do in the US. Right now, legislators are not friendly toward TikTok in the US and there, you know there's some people who are raising red flags about Timu as well. And you know there's this whole impact toward advertisers, which is not entirely clear. And, by the way, one thing I told you that there are these contrast effects that in some ways benefit advertisers on Google. That's not necessarily going to be the case on Facebook, because Google's a bit unique in that regard. You see these shopping units next to each other. You're really side by side with your competitors instead of dispersed throughout a feed, so that direct comparison effect that seems to lift people up a bit. It's hard to say if this is transferable to Facebook and meta what's going on there, but that's going to wrap it up for today.
Speaker 0:I hope you enjoyed our first video podcast. So, and for regular listeners, I also hope that this wasn't too disruptive to you. We're going to keep producing normal audio podcasts. There will be a video feed that's available for people who want, but there should be no need to watch the video. It's just for people who would like to watch a video and see people talking and stuff like that. Thanks for listening to Growing E-Commerce. If you enjoyed the podcast, please consider sharing it with family, friends, coworkers. You can also share the video on YouTube. And again, this podcast is produced by Smarter e-commerce, also known as MEC. You can learn more by visiting smarter-ecommercecom. Thanks.