- Temu spends heavily on advertising, reportedly spending nearly $2 billion on Facebook and Instagram last year.
- This is great for Meta, as Temu was the No. 1 advertiser in 2023, according to a new report.
- However, Temu's Chinese parent company is very mysterious and poses a potential risk to Meta and Google.
Temu is an e-commerce app that offers quirky, boomer-friendly deals, and it's serving Meta very well.
The company spent about $2 billion on ads on Facebook and Instagram last year, making it No. 1 in terms of revenue on Meta, according to a Wall Street Journal report citing people familiar with the matter. It was the main thing. Some Meta employees even joked that they should give Tim a gift card as a thank you.
Other Big Tech companies are also benefiting from Temu's ballooning ad budgets. According to the magazine's report, the company is also one of Google's top five advertisers. And his CEO at Pinterest pointed to the Temu effect during a recent earnings call, calling Temu a “great contributor.” (He also spent tens of millions of dollars on three Super Bowl ads.)
Temu is a division of China-based PDD Holdings, which also operates Pinduoduo in the country. They deploy a well-known strategy of spending heavily on social advertising to acquire customers and app downloads. This is clearly in the hope that the large advertising spend will pay off later. In some cases, this may work. This may not be the case. Wish, a Chinese e-commerce app, made the same move in the late 2010s, but it fizzled out.
It appears to still be working. Temu was his second fastest growing website in 2023 after OpenAI. According to one report, nearly one in three US shoppers have used Temu.
A representative for Temu told Business Insider that they disputed the $2 billion figure reported by the magazine. The company did not disclose Temu's actual advertising budget.
Temu's ad spend is lining Meta and Google's pockets.
Meta and Google are probably happy with their ad revenue for now.
Meta just posted record profits last quarter, its stock is soaring, and it briefly mentions in its earnings report that 10% of its global advertising revenue comes from e-commerce and gaming advertising in China. .
But there's something strange about it. New York Magazine's John Herman finds a paradox in how big tech companies are so happy to publicly distance themselves from China. (Meta happily threw Tiktok under the bus.)
From Herman:
At the same time, the technological interdependence of China and the United States is having an impact in various ways. increased. Ad-supported companies like Meta and Google have benefited from huge spending from companies like Shein and Temu. Online retailers, including but not limited to Amazon, have effectively become conduits to new forms of direct cross-border commerce through loopholes.
I've shopped at Temu before, and as someone who loves cheap junk, I can see the appeal. But there are serious concerns about possible forced labor practices at suppliers, and also about how the addictive nature of gamified cheap shopping can lead to our trash heaps. There are concerns.
(Temu's representative told Business Insider that “Temu's commitment to full compliance in the markets in which it operates has been unwavering since its founding.”)
But there's something else going on that could worry companies like Google and Meta, which enjoy Temu's advertising profits. The Financial Times published an extensive investigation into Temu's parent company, PDD, which concluded that it is mysterious in ways that are not typical of publicly traded companies.
Fundamentals such as who owns a company and where its offices are located, as well as simple aspects of business models and finances such as the total value of products, are mysteries.
Why does PDD look like its much smaller peers when comparing staffing levels and research spending? Why aren't competitors accounting for the impact of PDD's rise? Balance sheet Why do metrics change at a different pace than revenue? Why does a $200 billion company own less than $150 million in hard assets?
The Financial Times investigation makes a strong case that Temu's parent company is indeed mysterious and quite different from other Chinese e-commerce competitors such as Alibaba. However, it is not clear what conclusions should be drawn. (A PDD spokesperson told the FT that they “disagree” with the company's opaque characterization.)
Mysterious advertisers may raise red flags
But for Meta and Google, it's not so much that one of their top advertisers has an opaque and mysterious business model that has been the subject of a flashy media investigation in which no one knows how it works. I would like to humbly say that this may not be a good thing. earn money.
But in any case, it may not be that important. The recent advertising blitz from Temu and Shein is expected to subside, Business Insider reports.
Advertising industry officials expect retailers' ad spending to continue through most of 2024 and then shrink by next year. Far from being a new, big-spending category, experts expect the surge from the retail market to be as short-lived as any advertising-driven spike. cryptocurrency and Buy now, pay later companies years ago.
Temu's $2 billion ad spend may not be noticeable. Susan Li, Meta's chief financial officer, told the Journal that Temu and the other top 10 ad spenders account for only a third of the country's advertising revenue bucket. he said.
Ultimately, Meta and Google will be able to handle the loss of Temu's ad revenue when that day comes. And it faces larger existential threats, including the Meta lawsuit over child harm and Google's Gemini fiasco.
But Temu quickly became a company that resonated across Big Tech.
March 8, 2024 — This article has been updated with comment from a Temu representative.
On February 28, Axel Springer, the parent company of Business Insider, joined 31 other media groups in filing a $2.3 billion lawsuit against Google in Dutch court, alleging losses caused by the company's advertising practices. Ta.
