Temu: When money talks
The story of how the 'Chinese Amazon' turned the whole world orange with one of the largest ad spends in history
When Jeff Bezos woke up on the morning of February 11 this year, he probably thought it would be just like any other patriotic Super Bowl Sunday—filled with beer, chicken wings and the game that almost half of Americans will tune into. Walking out onto the deck of his $500 million megayacht in some sunny, sandy Caribbean tax haven, Jeffy B was blissfully unaware of the orange tsunami quickly approaching.
That night, as footballs were thrown and TV camera operators battled with the urge to spend every ad break filming Taylor ‘private jet to the grocery store’ Swift, Temu was ready to continue its marketing frenzy.
As we know, one of the most beloved parts of America’s biggest sporting event is not the touchdowns but the celebrity-filled and very expensive ads. This year saw these 30-second ad slots hit an eye-watering $7 million a pop and Temu bought not one but six, the most ads bought by one company in Super Bowl history.
This exorbitant display marked the start of what is shaping up to be one of the largest marketing campaigns in history as Temu, a Chinese-backed e-commerce behemoth, is set to smash the Meta ad spend record for a second year running. Last year they spent roughly $1.7 billion, an amount so large and never before seen that it caused the average price of ads on Meta to increase by 24% due to the bidding-based advertising system Meta uses.
As we now move deeper into 2024, they are showing no signs of slowing down with an expected ad spend of nearly $3 billion this year, almost doubling the very record they just set. To give a better idea of just how insane this ad spend is, Goldman Sachs reported that, on average, Temu made a loss of $7 per order throughout 2023.
For many of us, none of this will be too shocking as our phones have been filled with slightly off-putting Temu ads for many months now, but how did we get here?
A very, very short history lesson
Now, you may be thinking, surely the story of how this company grew to become one of the biggest ad spenders in the world would be long and filled with twists and turns but that’s not the case. You see, Temu was launched in September 2022. That’s right, the company that broke the Meta ad spend record in 2023 and is on track to double it in 2024 has been here for less than two years.
How is that possible? Well, the answer is quite simple; a whole load of Chinese money and a limited-liability shell company founded in Shanghai, China, now headquartered in Dublin, Ireland which goes by the name PDD Holdings. Slightly confused? Just hang in there for a little while longer.
PDD Holdings, formerly PinDuoDuo, was founded in Shanghai, China in 2015 by Colin Huang, an ex-Google employee and software engineer. Starting out as a cheap online retailer selling fresh produce, PinDuoDuo quickly expanded into selling a wide array of inexpensive everyday products. Over the next seven years, they grew domestic operations rapidly, with yearly turnover surging to just over $27 billion in 2022. In September of that year, they founded Temu in Boston, Massachusetts and thus began their meteoric rise worldwide.
The gamification of online shopping
So, how do you turn the act of purchasing mundane, everyday items into a fun, entertaining experience? Through a flashy, gamified, dopamine-filled online shopping experience, of course. Much like TikTok, Instagram reels and YouTube shorts, Temu preys upon our human desire for short-term dopamine release.
Studies have shown that the experience of getting a good deal is similar to that of a gambler chasing the next win or a smoker craving nicotine. It’s a highly addictive feeling that fades quickly leaving you wanting more, and virtually every CEO on the planet knows this, especially Colin Huang.
With his background in the gaming industry, Huang created an online shopping experience entirely designed to keep users entertained and endlessly shopping. On Temu, you will find leaderboards showcasing users with the most referrals, group discounts that get better as more users join in and mini-games where users can win discounts. When combined, all these features create a shopping experience entirely designed to keep you hooked.
And hooked we have become as shoppers are now spending significantly more time on the Temu app than any of its closest competitors. Not only that but, since October 2022, its active US user base grew rapidly from 5.8 to 104.2 million active users in April 2023, an increase of 1696% in just 6 months.
Hopefully, you now have a better understanding of Temu’s history and how they were able to justify the purchase of six Super Bowl ads this year. But this newsletter isn’t about history (that one will come later), it’s about marketing, so let’s take a look at the ad this gigantic marketing budget created and see if it was any good.
The first thing to understand about this cute, simple and catchy ad, is that it was by all metrics a massive marketing success. Search results for Temu increased by 1139% in the days following the game and the video has racked up 180 million views on YouTube, making it the most successful Super Bowl ad by some margin. Despite this, I can’t help but cringe every time I see the slogan “Shop Like a Billionaire”.
When you see the word billionaire, what comes to mind? For many, the idea of a billionaire is grotesque, especially in the economic climate in which we find ourselves. With rising grocery bills, rent, healthcare and education costs, the average consumer does not wish to be reminded of their spending capacity compared to that of a billionaire. It becomes even more problematic when you consider the whole driving force behind Temu is buying everyday, inexpensive products at incredible discounts, something no billionaire needs to do. Maybe I’m overthinking it but it just feels a little tone deaf.
However, despite the questionable slogan, this ad has, by all accounts, been a massive success which I’m honestly not too shocked about. It’s a very catchy tune with lyrics simply repeating the brand's name as happy cartoon people dance around in a colourful paradise. It ensures the brand name is front and centre which many other Super Bowl ads seem to struggle with and ultimately ticks all the boxes for an inoffensive brand awareness ad. I just feel that, instead of trying to make us all feel like billionaires, Temu should have used a slogan that highlights what made them so successful in the first place; amazing discounts on a wide range of everyday products on an easy-to-use, entertaining and engaging platform.
Wrapping up
So, what does this all mean for the average consumer? For many, the rise of Temu has been a blessing with the incredible discounts on everyday items allowing shoppers to save money while having an entertaining and engaging (aka addictive) experience.
Their massive ad spend in 2023 and now 2024, while extremely costly and probably not sustainable long term, has catapulted them into the consciousness of the general public, cementing them as one of the world’s largest online retailers. For this, Temu should be viewed as nothing other than a marketing success story, to be used as a case study in business schools everywhere.
However, I do feel uneasy about the rapid growth of the orange giant and now, after spending so many hours researching Temu, I think I know why. They aren’t special. You see, their ad spend on Meta has been record-breaking but their yearly marketing budget is quite small compared to that of Amazon. Additionally, gamification, the tactic that makes Temu’s shopping experience so addictive, is reportedly being used by 70% of the top 2000 companies, including the likes of Starbucks, Duolingo and Google.
All this to say, if we can recognise that the methods Temu has used to fuel its growth are manipulative and predatory, we can also recognise that other major companies have and are continuing to employ similar tactics. Perhaps this is a time to reflect on what marketing methods we, as a society, should allow and which should be left to the history books.
The thing is, Temu has me in their ecosystem now.
They don't need to send me another ad. I bought a vaccuum off temu and it worked good.
I got 4 belts and they came as described.
When I was looking at alternatives to Amazon for items like clothing (the Amazon fake brand problem is a problem) I just go to Shein and Temu now. Skipping Amazon entirely>
They spent money acquire me but they don't necessarily have to spend anywhere near as much to keep me. There is a chance they can lower the adspend and just make bank off of people like me who now net promote for them.
Thanks for posting this - I haven't really followed Temu but this has given me a better understanding of them. Just to say, in my experience, fast growth often leads to a fast decline - as the saying goes, what goes up quickly, comes down quickly! Let's see how they develop and if they are still around in ten years time. And don't get me wrong, I'm not complacent here - all competition and marketing strategies should be studied to ensure your own business is performing as effective as it can - continuous learning for sure.