Rhodri Morgan said Conservatives had run a sophisticated operation
First Minister Rhodri Morgan has said Welsh Labour's funding is "at a very low ebb" as it seeks to regain support in time for the general election.
Discussing some of the reasons behind the party's poor European election performance in Wales, he said Welsh Labour was "very under-resourced".
Outgoing Labour MEP Eluned Morgan has already warned that a "lack of money really worries us as a party".
Labour performance last Thursday was its worst in a Welsh poll since 1918.
The Conservatives gained the largest share of the vote.
Speaking on BBC Radio Cymru on Monday, Ms Morgan described the result as a "kicking" and said "we have to rebuild the party in Wales".
"That won't be easy," she warned,
"There's a myth about a Welsh Labour machine - there isn't much of a machine and at the moment lack of money really worries us as a party."
Mr Morgan, also Welsh Labour leader, was asked to comment on Ms Morgan's observations at a briefing for journalists at the Senedd.
He said: "What she is saying about the machine in Wales being very under resourced is absolutely true. It is certainly true that Labour funding is at a very low ebb at the moment."
Assessing how Conservative campaigning methods had contrasted with Labour's, he said his opponents appeared to have deployed a "below the radar" and "very, very well-funded, sophisticated operation to effectively identify voters and communicate with them with "constant follow up letters on nice paper".
He said the Tories achieved "very good telephone canvassing, very good postal vote identification operation - all done below the radar (with) no visible campaigning but it was very effective".
"We've got to learn from that, and then learn what we can afford on the much more modest resources that we've got, " he added.
Welsh Conservative leader Nick Bourne denied the suggestion that his party had not been campaigning on the ground.
Mr Bourne said he had not encountered Labour in the run-up to polling day, other than hearing Mr Morgan's wife, Cardiff North MP Julie Morgan, "on a loud hailer driving through Whitchurch, on one occasion".
Mr Bourne said he personally had "knocked on a lot of doors and spoke to a lot of people up and down Wales".
Writing on his Welsh language politics blog, BBC Welsh Affairs Editor Vaughan Roderick said "the internal party machine of the Labour Party in Wales is pretty much an empty shell and fails to compete with the Conservative and Plaid Cymru machines, and perhaps even the Lib Dems".
But Vaughan Roderick said that in the past Labour in Wales had "more staff than the total of all the other parties put together, and during an election period numerous union officials were on hand to ensure Labour's hegemony".