E-Commerce Disruptor “Temu” Emerges as Top Advertiser, Surprising Tech Giants

E-Commerce Disruptor “Temu” Emerges as Top Advertiser, Surprising Tech Giants

Edited by: TJVNews.com

In a surprising turn of events, Temu, an e-commerce powerhouse hailing from China, has rapidly ascended to become one of Meta Platforms’ top advertisers by revenue in 2023, as was reported by The Wall Street Journal on Thursday. The upstart discounter, founded in 2022, has sent shockwaves through the digital advertising landscape, catching executives at Meta and Google off guard with its aggressive spending.

PDD Holdings, the parent company of Temu, reportedly shelled out nearly $2 billion on advertisements at Meta last year alone, according to insiders familiar with the matter, as was indicated in the WSJ report. This unexpected influx of advertising dollars from Temu has not only raised eyebrows but has also underscored the e-commerce giant’s growing influence in the American business arena.

While Temu’s spokesman disputed the $2 billion figure, the company’s meteoric rise as one of Google’s top five advertisers by spending further highlights its formidable presence in the digital advertising space, according to the information provided in the WSJ report. The volume of advertising from Temu has disrupted the status quo, pushing up digital advertising prices and reshaping the competitive landscape.

The emergence of Temu, along with other Chinese-rooted online shopping platforms such as Shein, has ignited an intense ad battle in the e-commerce sector. The WSJ reported that this surge in advertising activity is proving to be a boon for tech giants like Meta and Google, revitalizing their ad businesses following a period of stagnation and challenges posed by new Apple policies.

Meta’s stock price experienced a notable surge in early February following its best quarterly sales growth in over two years. The company’s China operations witnessed a significant revenue boost, nearly doubling to $13.69 billion in 2023, signaling a remarkable turnaround compared to the previous year’s decline, the report in the WSJ said. However, revenue growth from U.S.-based customers saw comparatively modest growth, reflecting the shifting dynamics in the global e-commerce landscape.

Internally, Meta employees have humorously entertained the idea of thanking Temu by sending them a substantial gift card, according to insiders familiar with the situation. Despite the potential benefits to tech giants like Meta, Temu’s aggressive marketing spending has raised concerns among industry analysts, the report added.

Goldman Sachs estimates that Temu’s marketing expenditures contributed to an average loss of $7 per order in 2023. Advertising analyst Brian Wieser emphasized that Temu’s ambitious investment strategy may prove unsustainable in the long run, the report in the WSJ indicated. However, Wieser noted that while a potential pullback by Temu could pose challenges for big tech companies, its impact on Meta’s overall growth trajectory may be relatively limited due to the broad nature of spending originating from China.

While financial details for Temu are not publicly disclosed, insights into its parent company, PDD, shed light on its financial prowess and marketing endeavors.

A Temu spokesman, when questioned about the company’s profitability, pointed to PDD’s financial statements. PDD, which also operates the Chinese e-commerce platform Pinduoduo, reported a substantial profit of $2.1 billion in the third quarter of 2023. Additionally, the WSJ reported that the company allocated nearly $3 billion towards sales and marketing during the same period, signaling a robust investment in advertising and promotion.

Google, a major player in the digital advertising space, acknowledged the significant revenue growth from Asia during its fourth-quarter earnings call. The company highlighted the strength of retail in the Asia-Pacific region, a trend that commenced in the second quarter of 2023 and persisted throughout the year, the WSJ report said. Google executives have actively courted Temu’s business, engaging in discussions with Temu executives regarding advertising spending levels and supply chain issues.

While Temu has primarily relied on online marketing to attract customers, its marketing prowess extends to traditional mediums, including television. Notably, Temu made a splash during TV’s biggest night of the year: the Super Bowl, as was noted in the WSJ report.  Investing tens of millions of dollars, Temu aired multiple commercials during CBS’s broadcast of the Super Bowl, seizing the opportunity to reach millions of viewers.

During Super Bowl LVIII, Temu aired a captivating 30-second commercial four times, emphasizing its message of “shop like a billionaire,” according to the WSJ. The animated advertisement featured a spirited girl dancing and highlighting Temu’s competitive prices. This marked Temu’s second appearance in the Super Bowl, following its debut in the prestigious event in 2023.

The Super Bowl serves as a prime platform for new brands aspiring to gain widespread recognition. With a staggering 123.4 million viewers tuning in to witness the game, it presents an unparalleled opportunity for brands to elevate their visibility and solidify their presence in the market, as per the information contained in the WSJ report.  Temu’s strategic investment in Super Bowl advertising underscores its ambition to establish itself as a household name on a global scale.

Following Temu’s bold advertising blitz during the Super Bowl, the e-commerce giant found itself at the center of both praise and scrutiny. The report in the WSJ said that while the company succeeded in generating significant buzz online, it also faced criticism and calls for action from lawmakers over alleged labor practices.

According to Sprout Social, Temu emerged as the second-most-mentioned Super Bowl advertiser on social media platforms, trailing only behind Verizon, which featured Beyoncé in its ad. The WSJ report also said that Temu garnered 40,448 mentions and over 420,000 engagements on game day, a testament to the impact of its advertising strategy.

However, not all the attention Temu received was positive. Prior to the Super Bowl, several Republican lawmakers urged CBS to remove Temu’s ads from the lineup due to allegations of forced labor. The information in the WSJ report indicated that the controversy stemmed from accusations that some of Temu’s products contained cotton sourced from China’s Xinjiang region, where the U.S. has accused Chinese authorities of committing genocide and utilizing forced labor.

In response to the allegations, a Temu spokesman emphasized the company’s strict prohibition of forced, penal, or child labor. Despite the reassurances, the controversy raised concerns and cast a shadow over Temu’s high-profile advertising campaign.

Nevertheless, the impact of Temu’s marketing efforts was palpable in the shipping industry. Last-mile delivery companies experienced a noticeable uptick in Temu deliveries post-Super Bowl. According to the WSJ, Andy Whiting, founder and CEO of Better Trucks, noted the positive growth attributed to Temu, particularly in the aftermath of its Super Bowl advertising push.

The influence of e-commerce giants such as Shein and Temu extended beyond advertising, significantly impacting the logistics landscape. Baixiao’s CEO, Steven Wang, estimated that these companies account for more than 70% of the daily air shipments of goods out of China, the WSJ pointed out. In the U.S., both Shein and Temu are estimated to ship approximately one million packages a day, underscoring their substantial presence in the market.

However, the rise of these e-commerce players isn’t without its challenges. CEOs in the advertising industry have observed a notable increase in ad prices due to the significant volume of ads purchased by companies such as Temu and Shein, the WSJ report said. This trend reflects the competitive landscape shaped by these industry disruptors, highlighting their growing influence and the broader implications for the advertising ecosystem.

Josh Silverman, CEO of Etsy, highlighted the significant impact of companies like Temu on advertising costs, particularly in channels such as Google and Meta. Speaking in November, the WSJ reported that Silverman underscored the substantial financial commitment these players are making to marketing efforts, signaling their formidable presence in the industry.

Meanwhile, Pinterest’s CEO acknowledged the positive contribution of Temu and other Asian e-commerce exporters to the company’s earnings. Despite the influx of advertising spending from these players, Pinterest’s CEO expressed confidence in the platform’s broad-based strength in the retail sector, indicating a balanced approach to capitalizing on the trend, as was reported by the WSJ.

However, not all tech executives are without reservations about the sustainability of Temu’s advertising surge. Some are wary of a potential repeat of the scenario seen with Wish, another e-commerce platform that initially bolstered ad revenues for tech giants before fading away. The WSJ report indicated that Wish’s advertising expenses plummeted from $1.6 billion in 2020 to $195 million in 2022, serving as a cautionary tale for those closely monitoring Temu’s trajectory.

Susan Li, CFO of Meta, provided insights into the complexities of the Chinese advertising market and tempered expectations for replicating the same level of growth seen in 2022. Li acknowledged the impact of Covid lockdowns on spending patterns in the previous year but also emphasized the diversity within the advertiser base, as was noted in the WSJ report. Despite the dominance of major spenders, Li highlighted that a significant portion of China’s ad revenue stemmed from a diverse array of advertisers beyond the top 10, highlighting the dynamic nature of the market.

As tech giants navigate the evolving landscape shaped by the ascent of companies like Temu, they must strike a delicate balance between capitalizing on the influx of advertising spending and mitigating the risks associated with overreliance on a single player. With uncertainties looming over the sustainability of Temu’s marketing surge, tech executives remain vigilant, closely monitoring developments and adjusting strategies accordingly to adapt to the ever-changing dynamics of the digital advertising ecosystem.