Meta Platforms may see a US$7 billion drop in advertising revenue in 2025 due to ongoing trade tensions between the US and China, according to a research note by MoffettNathanson.

The report highlights that Chinese retailers, such as Temu and Shein, may reduce their advertising budgets on Meta’s platforms, including Facebook and Instagram.

In 2024, Meta generated US$18.35 billion in revenue from China, representing more than 11% of its total sales.

A significant part of this revenue came from advertising by Chinese companies, which could be impacted by escalating trade disputes and tariffs.

A CNBC report highlighted Temu’s ad spend decline, which coincided with a drop in its Apple App Store rankings, signaling further cuts to Meta’s ad revenue.

Furthermore, the analysts warned that a potential economic recession, coupled with trade tensions, could result in Meta losing up to US$23 billion in advertising revenue in 2025.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Advertising proves vulnerable to trade tensions and economic cycles

Meta’s potential $7 billion advertising hit illustrates a fundamental pattern in marketing economics: advertising budgets are among the first casualties during economic uncertainty.

Research shows that during previous downturns, companies quickly slash ad spending to preserve cash flow, with analysts predicting a potential $45 billion drop in U.S. ad spending if recession fears materialize 1.

This pattern creates a paradoxical opportunity for strategic advertisers. Those who maintain marketing during downturns typically see longer-term gains, as evidenced by historical cases like Kellogg’s success during the Great Depression 2.

The cost efficiency advantage is substantial. With reduced competition for ad space during economic uncertainty, remaining advertisers can achieve greater visibility at lower costs, effectively increasing their return on investment 2.

For Meta specifically, the potential combined impact of recession and trade tensions could slash 2025 advertising revenues by $23 billion, representing a 25% earnings reduction according to MoffettNathanson’s analysis.

2️⃣ Meta’s unique exposure to China reveals advertising’s borderless nature

Despite having no users or active platforms in China, Meta generates $18.35 billion in revenue from Chinese advertisers (11% of total sales), making China likely Meta’s second-largest revenue source after the United States.

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