Why Temu Is Spending On Marketing Like A Billionaire

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Advertising in big events like the Super Bowl, if done right, can give a huge jolt to a company’s exposure and brand recognition. Shopping app Temu seemed to meet that objective with flying colors. With a colorful animated ad featuring a sprightly jingle (which is also an earworm), the company immediately got noticed. What also made viewers take notice was the multiple times the ad played during the game. The commercial aired three times—potentially costing $21 million—and twice afterward. Even casual viewers of the Big Game likely saw Temu imploring them to “shop like a billionaire.”

Temu, which is owned by Chinese e-commerce giant PDD Holdings, certainly got its exposure. While younger consumers were already familiar with Temu through its ads and presence on social media, it has become a household name for consumers of all ages. Ever since the Super Bowl, Temu has ranked as the number one downloaded free app. EDO, which measures online activity driven by Super Bowl ads, found that Temu’s ad generated 1,343% more engagement than the median ad.

Temu has also been the talk of marketing analysts. Ad intelligence platform MediaRadar, which tracks campaigns and spending, found that Temu spent $505 million last year on advertisements, increasing its marketing spending by 1000%. I talked to MediaRadar CEO Todd Krizelman about Temu’s marketing strategy—from its Super Bowl ad in 2023 until today—and how the company is building brand awareness. More from that interview is later in this newsletter.

In the last two weeks, many media outlets have written stories explaining what Temu is. And those with knowledge of the Asian business landscape and PDD’s general business plan have good theories on Temu’s likely game plan. Goods are inexpensive, allowing anyone to “shop like a billionaire,” though PDD is likely taking a loss on most Temu sales at the moment, writes Forbes senior contributor Peter Cohan. And Temu is targeting to keep people coming back through gamifying the shopping experience: Enticing consumers to buy items they never dreamed they needed at prices so low, they don’t mind the expense, writes Forbes contributor Drew Bernstein.

It’s apparent that Temu has been spending on marketing like a billionaire, but it remains to be seen if it will be earning like a billionaire on its U.S. shopping app. Although PDD is a public company, it traditionally hasn’t broken out its Temu earnings, so much of its specific performance is a guessing game.

FROM THE HEADLINES

Walmart is making a big acquisition to further its advertising and media business. The retailer announced this week it was buying smart TV maker Vizio in a cash deal of $2.3 billion. From the press release, Walmart seems more interested in Vizio’s SmartCast operating system than the TVs and soundbars that the company manufactures. Walmart plans to bring Vizio into Walmart Connect, its U.S. media business, creating new opportunities for brands to connect with consumers.

“We believe VIZIO’s customer-centric operating system provides great viewing experiences at attractive price points,” Walmart U.S. Executive Vice President and Chief Revenue Officer Seth Dallaire said in the release. “We also believe it enables a profitable advertising business that is rapidly scaling. Our media business, Walmart Connect, is helping brands create meaningful connections with the millions of customers who shop with us each week. We believe the combination of these two businesses would be impactful as we redefine the intersection of retail and entertainment.”

Walmart has been advancing its media and messaging capabilities for the last five years, and this acquisition seems like a logical next step. The company bought Silicon Valley marketing firm Polymorph Labs in 2019 as a way to bring greater technology to ad targeting. In 2021, the retailer renamed the marketing division Walmart Connect, promising new opportunities to connect with customers in the Walmart shopping environment and off-site media. With Vizio, Walmart will own a media streaming platform with more than 18 million active accounts. Walmart will also own an electronics manufacturer, but streaming has been Vizio’s largest revenue source recently. In its most recent earnings report, streaming brought all of Vizio’s year-over-year growth, and the press release says Vizio currently has more than 500 direct advertiser relationships.

ARTIFICIAL INTELLIGENCE

AI-generated videos may soon be much easier to make. Last week, OpenAI unveiled Sora, its new model that can create a video up to a minute long from a simple text prompt. Videos made through Sora, showcased on OpenAI’s X account, display detailed scenes featuring cities, emotions, landscapes and a bit of fantasy. Sora isn’t available to the general public just yet, and the company did not give a release date. OpenAI is working on safety steps for the tool. And is “adversarially” testing it with experts in misinformation, hate and bias.

OpenAI’s announcement created a lot of buzz, but many other companies are working on platforms that do similar things. Google, Meta, xAI and Amazon have all announced they were working on similar AI-enabled text-to-video systems, with some even demonstrating how they operate, though none of those large companies has anything out for public use. Runway, Stability AI and Pika Labs, all of which are solely focused on AI video generation, have similar tools available now.

STREAMING

Sports streaming service FuboTV filed a lawsuit against Disney, Warner Bros. and Fox to block the creation of their recently announced sports streaming service, which is slated to begin this fall. Fubo says that this mega-network will harm competitors, and the parent companies will not allow Fubo to bundle some of their sports channels together, which is part of Fubo’s current business model.

“Each of these companies has consistently engaged in anticompetitive practices that aim to monopolize the market, stifle any form of competition, create higher pricing for subscribers and cheat consumers from deserved choice,” Fubo cofounder and CEO David Gandler said in a release. “By joining together to exclusively reserve the rights to distribute a specialized live sports package, we believe these corporations are erecting insurmountable barriers that will effectively block any new competitors from entering the market. …Simply put, this sports cartel blocked our playbook for many years and now they are effectively stealing it for themselves.”

ON MESSAGE

MediaRadar’s Todd Krizelman On Temu’s $500M Marketing Strategy

With $505 million dollars spent on advertising in just a year, Temu quickly went from a new e-commerce entity in the U.S. to a household name. Its commercial during the Super Bowl might have been missing celebrity cameos or memorable pop culture references, but its exposure and brand recognition appear to have paid off. MediaRadar CEO Todd Krizelman said Temu’s thrice-aired Super Bowl commercial is one of the latest iterations of a massive marketing campaign for the brand. We talked about what Temu’s strategy appears to be, and what we can expect from Temu in the future. This conversation has been edited for length, clarity and continuity.

What do you see as Temu’s overall strategy?

Krizelman: The majority of the spend, something like 75% of it, is in social media. Their concentration of spend is very high with Meta on the Instagram and Facebook platforms. You could infer a couple things by that strategy. One is Facebook and Instagram are proxies for the American public in 2024. This is not some niche segment. …During the Super Bowl, I asked my daughter, ‘Do you know Temu?’ And she said, ‘Oh, I know Temu really well already.’ But I asked my mom, who’s in her 80s. She also knew Temu really well. That kind of money in such a concentrated period of time creates enormous reach to the American public.

In the Super Bowl, their ad was so different than others. Why do you think they chose this sort of an advertisement, and what kind of strategy was at play?

Most companies that spend anywhere near this kind of money do a lot of audience testing ahead of time. Despite whatever pundits say about it—I’m aware it didn’t end up in the pundits’ favorite, most fun advertisements in the endemic news—in the test that they did, my strong expectation is that this scored well.

A lot of times when a product has a very broad audience, it is sometimes difficult to use actors and actresses because people do respond to what’s in an ad. If you see only young women in an ad, subconsciously people will assume this product may be for young women. …That’s one other hypothesis: They wanted to be accepted by the whole population. And so as a result, they didn’t want to anchor it on any one demographic. That’s another clever way. It was all in their color orange. This is just fun. We’re emphasizing price and the products and the experience, and that’s it. Not allowing people subconsciously to think, ‘Maybe this is not for me.’

Why do you think they ran the same ad so many times? It’s certainly an expensive proposition.

I think it’s a way of really creating durability of the message. It is a noisy two or three hours of advertising, and if you’re already saying you’re going to spend a half billion dollars, and you’re doing it very fast, to buy three spots instead of one, [you] know that you really become part of the narrative. …They become part of the dialogue.

It is a mature market. Very saturated, lots of entrenched competitors. …You have to compete against that. I think the bar is very high to get me off of Amazon or Target or Walmart, or any of the other places who have my credit card. I have to be convinced to go there and to try it out, and that’s a big ask these days.

Bigger picture: I do think at a time when you sort of feel like, ‘Hey, isn’t e-commerce fully baked in 2024?’ No. There are new entrants willing to really buy their way in to get to the American public. That, I think, is a really fascinating thing that caught me off guard. I thought the social media narrative was also the same: There’s no one else gonna be new. In five years, TikTok absolutely became a major player in the market that none of us saw coming.

Who else has used this kind of marketing strategy in the past? How did it work?

Amazon doesn’t invest quite as much as they used to, but there was a time when every year we saw Amazon invest more and more and more. You may remember it. Even 10 years ago, there used to be all these holiday ads with Amazon, and they were just running 24/7 to condition us, to train us, to go online when that was still a newer thing for holiday shopping. …They still do it, but they don’t have to do it as much because they already have a direct conduit into your phone, for most people on their app. It doesn’t cost them anything.

Another example of this is when the big streaming stations launched. …All of that was happening right at the beginning [of the Covid-19 pandemic] when we were stuck inside our homes. We also saw major lifts to promote Hulu and to promote Paramount+ and to promote Max. These were things where they had to train people to go out and buy subscriptions. Disney+, even though we all knew Disney. In short order, they signed about 50 million subscribers in the first six months.

What do you think we’ll see from Temu in the next six months?

I certainly would not be surprised if they slowed the marketing down for a few months to see the durability of their investments. Is it working? Is there ROI? Are people buying repeat purchases? We certainly have seen that many times in the past.

There’s a lot of investment that goes into delivering e-commerce successfully. I assume, if it’s working, it’s really forcing them to expand and grow. If it was working a lot, you might actually see them slow the advertising down so they can digest all the new customers, make sure word of mouth is positive. That people say, ‘Yeah, they delivered my product. It was great.’ If that works, and people are having a good experience, I would expect as we go into summer again, it will ratchet back up.

FACTS + COMMENTS

The recent sale of the Baltimore Orioles to a group led by billionaire David Rubenstein did not mention a price allocation of the team’s 77% stake in the Mid-Atlantic Sports Network, which broadcasts Orioles and Washington Nationals games. The reason: The rights fees MASN pays the teams consume all of its cash flow.

$1.72 billion: Valuation of the Baltimore Orioles, based on the deal

$304 million: Amount of back rights fees MASN owes to the Orioles and the Nationals from the 2017 to 2021 seasons

‘Change always presents an opportunity’: MLB Commissioner Rob Manfred said earlier this month about the future of the less-than-ideal agreement with MASN

QUIZ

Former President Donald Trump announced his latest business venture last weekend: $399 golden sneakers featuring the U.S. flag. According to a communications firm, how long did it take for them to sell out?

A. They haven’t sold out

B. Three days

C. 12 hours

D. Under two hours

See if you got the answer right here.