Chinese e-commerce entity, Temu, has given a substantial lift to the advertising revenues of Meta Platforms Inc (NASDAQ: META) and Google parent company Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) through its hefty ad spending.
What Happened: PDD Holdings (NASDAQ: PDD), the parent company of Temu, is said to have spent close to $2 billion on ads at Meta last year, catching the social media giant's executives by surprise. Temu also ranked among Google's top five advertisers in terms of spending, reported The Wall Street Journal citing people familiar with the business.
Despite a Temu representative contesting the $2 billion figure, they refrained from disclosing the company's spending levels at Meta.
The unexpected surge in advertising from Temu, which was launched in 2022, has taken executives at both tech companies by surprise. The Chinese e-commerce platform's hefty ad spending has not only escalated digital advertising prices but also aided the recovery of Meta and Google's ad businesses.
Temu's ad spending has also significantly influenced the shipping industry, with the company's high volume of product deliveries proving to be a windfall for the sector.
Advertising analyst Brian Wieser cautioned that if Temu decides to cut back on its advertising, it could pose a challenge for tech behemoths like Meta. However, Wieser also noted that given the extensive spending originating from China, a pullback by Temu wouldn't significantly dent Meta's overall growth.
Temu has responded to Benzinga's query about the report. The company's spokesperson stated, "Just like any business, Temu uses different ways to let both current and future customers know about our services and products. As our business grows and more people start using it, we're finding that recommendations from friends and others are becoming even more important."
They have denied disclosing the actual advertising spend but have confirmed that the $2 billion number is incorrect.
Why It Matters: Temu's aggressive ad spending strategy comes as the company is making strides in the e-commerce industry. In February, Temu made headlines with its 'Shop Like A Billionaire' Super Bowl commercial, which drew both positive and negative attention.
Temu's rivalry with fast-fashion competitor Shein has also intensified, as it woos sellers previously affiliated with Shein. The company's strategic focus on the U.S. market has resulted in substantial growth in traffic and sales, with 172 million app users and 43 million web visitors within a year.
However, potential challenges loom as U.S. lawmakers contemplate a possible import ban on Temu over alleged connections to forced labor in China's Xinjiang region. This has sparked concerns among investors and market analysts.