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Temu&rsquo s Push Into America Pays Off Big Time for Meta and Google
The e-commerce platform&rsquo s parent company spent nearly $2 billion at Meta last year and it was a top advertiser at GoogleMeta Platforms&rsquo META 1.20%increase green up pointing triangle
A Temu spokesman disputed the $2 billion figure but declined to disclose the company&rsquo s spending levels at Meta.
The volume of advertising from Temu, which launched in 2022, has caught executives off guard at both tech companies, which have long been the dominant players in digital advertising.
Temu, fast-fashion giant Shein and other online shopping platforms with Chinese roots are spending aggressively to reach American consumers, pushing up digital advertising prices, poaching logistics employees and delivering so many products that they have become a boon to the shipping industry.
The volume of advertising from Temu, which launched in 2022, has caught executives off guard at both tech companies, which have long been the dominant players in digital advertising.
Temu, fast-fashion giant Shein and other online shopping platforms with Chinese roots are spending aggressively to reach American consumers, pushing up digital advertising prices, poaching logistics employees and delivering so many products that they have become a boon to the shipping industry.
The ensuing ad battle in the e-commerce space is welcome news for Meta and Google, helping the tech giants&rsquo ad businesses rebound after they were hampered by an advertising slowdown and new policies that hurt the platforms&rsquo ability to target ads.
Meta&rsquo s stock price surged in early February after it posted its best quarterly sales growth in more than two years. Revenue from the company&rsquo s China operations nearly doubled last year, reaching $13.69 billion, a big reversal from the prior year, when revenue fell almost 3% to $7.4 billion. By contrast, revenue growth from U.S.-based customers was up only 5.5% to $49.78 billion for 2023.
Internally, Meta employees joked that they should thank Temu by sending them a hefty Temu gift card, a person familiar with the issue said.
Goldman Sachs estimated that Temu&rsquo s marketing spending contributed to an average loss of $7 an order in 2023.
&ldquo Temu is likely losing money on every sale, as it attempts to invest their way into a position in the marketplace,&rdquo said Brian Wieser, an advertising analyst. &ldquo If it doesn&rsquo t work, or if it decides that they&rsquo ve spent enough money on advertising,&rdquo that would become a headwind for big tech companies such as Meta. However, Wieser noted that because spending coming from China is so broad, a pullback by Temu wouldn&rsquo t make a significant dent in Meta&rsquo s overall growth.
Google executives called out the growth in revenue from Asia in 2023 in its fourth-quarter earnings call. &ldquo We had particular strength in retail in APAC, a trend that began in the second quarter of 2023 and continued through the end of the year,&rdquo the company said in January.
Google, part of parent company
While Temu&rsquo s advertising playbook has concentrated on using online marketing to lure in customers, the company has also used TV&rsquo s biggest night of the year: the Super Bowl.
Temu dropped tens of millions of dollars on its Super Bowl marketing effort, which included airing several commercials during CBS&rsquo s broadcast of the big game. It ran a 30-second ad four times during Super Bowl LVIII and again during the post-game coverage. This year, brands paid roughly $7 million for 30 seconds of ad time during the Super Bowl, the priciest ad real estate on TV.
Temu&rsquo s animated commercial, which touted &ldquo shop like a billionaire,&rdquo showed a girl dancing around and throwing out low prices. It was Temu&rsquo s second appearance in the Super Bowl after the company made its debut in the big game in 2023.
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The Super Bowl ad barrage last month helped Temu generate plenty of buzz online. Temu was the second-most-mentioned Super Bowl advertiser this year on social media platforms&mdash after , which ran an ad featuring Beyoncé , according to Sprout Social. The social media analytics firm found that Temu had 40,448 mentions and 420,714 engagements, including likes, shares and comments on game day.
Not all of the buzz was positive.
Before the Super Bowl, multiple Republican lawmakers called on CBS to pull Temu&rsquo s ads from the lineup over its alleged use of forced labor. Temu has come under allegations that some of its products contained cotton sourced from China&rsquo s Xinjiang region. A 2022 U.S. law largely bans the import of goods tied to that region, where the U.S. has accused Chinese authorities of committing genocide and using forced labor in its repression of mostly Muslim Uyghurs. Beijing has denied the allegations.
&ldquo We strictly prohibit the use of forced, penal, or child labor,&rdquo the Temu spokesman said.
&ldquo We&rsquo ve definitely seen very positive growth from Temu. It does feel like it&rsquo s more post-Super Bowl,&rdquo said Andy Whiting, founder and chief executive of last-mile delivery company Better Trucks. The regional carrier delivers parcels in 21 U.S. cities such as Chicago, Milwaukee, Cleveland, Detroit, Houston and the metro area around New York.
E-commerce companies ship 10,000 tons of goods a day by air out of China, and Shein and Temu account for more than 70% of the packages, Steven Wang, chief executive of e-commerce logistics company Baixiao estimated. In the U.S., Shein and Temu each ship an estimated one million packages a day, according to parcel-shipping consultant ShipMatrix.
The volume of ads bought by Temu, Shein and other players is raising the prices of certain ad spots, according to some CEOs.
&ldquo They&rsquo re spending a large amount of money on marketing,&rdquo Chief Executive Josh Silverman said in November. &ldquo I think those two players are almost single-handedly having an impact on the cost of advertising, particularly in some paid channels in Google and in Meta.&rdquo
&rsquo s CEO welcomed the big spenders during the company&rsquo s third-quarter earnings call. &ldquo Temu has been a nice&mdash I will not comment on any one specific, but just sort of Asian e-commerce exporters generally have been a nice contributor. But we don&rsquo t feel particularly concentrated or exposed there given that our strength in retail has been very broad-based,&rdquo he said.
Amazon
Meta Chief Financial Officer Susan Li told investors that although Chinese advertising has been strong this year, the level of growth in 2023 would be hard to replicate because 2022 spending was lower due to Covid lockdowns. She also said the market is broad.
&ldquo Two-thirds of our China ad revenue came from advertisers outside the top 10 spenders in that country in 2023,&rdquo she said. &ldquo So even within that it is a diverse advertiser base.&rdquo
Shen Lu, Salvador Rodriguez and Esther Fung contributed to this article.
Write to Dana Mattioli at [email protected], Suzanne Vranica at [email protected] and Miles Kruppa at [email protected]
chartiskao ( Date: 06-Mar-2024 16:58) Posted:
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