First Chinese Company Becomes Top Advertiser on Meta: Mark Zuckerberg’s Mixed Emotions

In a historic turn of events, a Chinese company has emerged as the largest advertiser on Meta, leaving Mark Zuckerberg both delighted and concerned.

The Rise of Temu: A Marketing Powerhouse

Aside from attracting millions of American customers with its countless affordable products, Temu, an e-commerce platform, has become a “benefactor” for Meta, according to a report by BI. Last year, Temu spent approximately $2 billion on advertising on Facebook and Instagram, making them the top advertiser in terms of revenue on Meta. The advertising budget that Temu allocated was so substantial that some Meta employees jokingly suggested the company should express their gratitude by giving them gift cards.

Interestingly, Temu’s growing ad spending not only benefits Meta but also other big tech companies. WSJ’s report revealed that Temu ranked among the top 5 advertisers on Google as well. During a recent business performance briefing, the CEO of Pinterest acknowledged Temu’s influence, describing it as a “phenomenal” contributor. Temu even spent millions of dollars on advertising during the Super Bowl.

Temu is a subsidiary of PDD Holdings, a company based in China that also operates the domestic e-commerce platform Pinduoduo. Temu is well-known for its generous spending on social media advertising to attract customers and drive app downloads. Undoubtedly, Temu has valid reasons for such advertising expenditure, as they believe it will pay off in the future.

And it appears they have been successful: Temu was the second-fastest-growing website in 2023, only surpassed by OpenAI. A report indicated that almost one in three shoppers in the US have used Temu.

Meanwhile, in a recent business performance report, Meta announced record-breaking profits for the previous quarter, leading to a surge in their stock price. It was noted that 10% of the company’s global advertising revenue came from gaming and e-commerce advertising in China.

Concerns and the Enigma Surrounding Temu

Although Temu has enticed many Americans, some have expressed concerns about the addictive nature of the app. However, companies like Google and Meta are currently enjoying the advertising opportunities that Temu brings without displaying any worry. A large-scale investigation by the Financial Times revealed that Temu’s parent company, PDD, has many mysteries that typical publicly traded companies do not possess.

These mysteries range from fundamental questions about the company’s ownership and the location of its headquarters to basic aspects of its business and financial model, such as the total value of the company’s goods. Why does PDD appear much smaller than its competitors when comparing employee numbers and research expenses? Why haven’t competitors described the impact of PDD’s rise? Why do the financial statements change at a different pace than revenue? How can a $200 billion company possess hard assets valued at less than $150 million?

The Financial Times investigation presents compelling evidence that Temu’s parent company is truly enigmatic and distinct from other Chinese e-commerce competitors like Alibaba. However, it is still unclear what conclusions can be drawn from these findings.

Undoubtedly, it would be unfavorable for Meta and Google if one of their top advertisers had an unclear and mysterious business model. Yet, all these concerns may no longer matter. According to Business Insider’s report, the recent widespread advertising campaigns by Temu and Shein are expected to cool down soon.

Advertising industry experts anticipate that the retailer’s advertising expenditure will continue throughout 2024 before gradually declining in the following year. Contrary to becoming a new group of advertisers spending a significant amount on advertising, experts expect the surge in expenditure from the retail market to be temporary, similar to the temporary surge seen years ago with digital money or buy now, pay later services.

Even with a $2 billion advertising budget, Temu’s spending may not make the company stand out. Meta’s CFO, Susan Li, revealed to WSJ that advertising revenue in China, including Temu and the top 10 advertising spenders, only accounts for one-third of the company’s total income in that country.

Ultimately, Meta and Google have the capabilities to handle any potential loss of advertising revenue from Temu when and if it occurs. However, it cannot be denied that Temu has quickly become a reputable company within the Big Tech industry.

Source: Business Insider