Temu embarks on a marketing campaign, advertising costs skyrocket

Temu’s appeal is that it has low-priced items such as $2 scrunchies and $10 sneakers. The company is a fairly new company, he was founded in the United States in September 2022. But over the past year and a half, we’ve been able to drive a ton of sales by advertising on TikTok, Instagram, Google, and just about every other channel. A place where people shop. MediaRadar told Modern Retail that Temu spent more than $517 million on national advertising from September to December 2023. Temu’s parent company (PDD Holdings, based in China) does not split sales by brand; PDD’s total revenue last quarter reached 68.84 billion yuan ($9.67 billion), an increase of 94% year-on-year. Looking ahead to 2024, Temu shows no signs of slowing down its advertising ambitions.

Like Shane, Tem too. It resorted to an onslaught of digital marketing to attract new customers. Analysts at Goldman Sachs estimate that Temu spent about $1.2 billion on Meta in 2023, and Meta said Temu ran 8,900 ads on its platform in January last year. I calculated it. Last February, Tim ran his first-ever Super Bowl ad, featuring his 30-second ad encouraging viewers to “shop like a millionaire.” A Temu spokesperson told AdAge that the company “credits the 2023 Super Bowl ad campaign for putting the e-commerce giant on the map.”

Temu is also investing in paid search for its items, which appear alongside big-name brand products like Apple chargers and Stanley tumblers. In fact, a search for the phrase “Lego toys” returns more Google Shopping results for Tim than for Lego or Mike His Ryan. Head of eCommerce Insights at Smec, an eCommerce solutions provider; Pointed out by X. Temu continues to grow in popularity on TikTok, with the hashtag #Temu racking up his 11 billion views. Temu says he runs a social media influencer program aimed at people with more than 300 followers, and so far he has worked with more than 10,000 influencers.

Today, it’s hard to scroll through social media or even surf the web without coming across a Temu ad. And more Tem Orange Boxes are appearing in baggage rooms and mail rooms. Last summer, a USPS employee went viral on TikTok, pleading with people to reduce their orders to Tem. More than 100 million people are expected to watch the Super Bowl next month, which some estimates say will likely cost Tem up to $7 million in advertising.

“I’ve never seen a strategy like this,” independent e-commerce analyst Andrew Lipsman told Modern Retail.

“I’ve seen versions of it, and with this level of aggression, it just doesn’t seem to scale,” he said. “They’re creating this level of cultural awareness and perhaps allowing it to break into the mainstream in a way that other brands just trying to arbitrage traffic haven’t been able to make that leap. I think that there.”

Google Merchant Center advertising data proves this to be true in the US and internationally. For example, Temu has been ranked #1 for ‘Clothing & Accessories’ ad visibility in the UK for the past 28 days, ahead of Amazon, eBay, Asos, Shein and Nike. The company’s ad/organic ratio (meaning how often a product gets impressions from Google Shopping ads rather than organic search results) is over 100. For comparison, Amazon has a 10 while eBay has an 8.

“This shows there’s nothing organic going on here at all. They’re just flooding the market with advertising,” Smec’s Ryan told Modern Retail. “Their paid visibility alone is greater than any other company’s paid visibility and organic visibility combined. It’s truly breathtaking.”

In addition to the volume, Ryan says what’s unusual about Temu’s advertising strategy is the content of these ads. His Temu ads on social media don’t tend to focus on one category. So one carousel slide might show a flashlight, and the next carousel slide might show lingerie. “It’s really surreal,” Ryan said. “This is an untargeted, brute-force approach to advertising. In fact, we believe that ads within Google Search and Shopping are some of the most targeted advertising because Google actually handles them. .”

However, one question is: how much should you spend on this ad to resonate with people and keep them coming back? To answer this, Lipsman calculated the ratio of Temu’s daily active users to monthly active users. In September 2022, this ratio was 9%, but by October 2023 it had reached approximately 20%. “That’s a good sign that it’s getting sticky,” he said.

Other numbers also look promising. GWS Magnify estimates that there were 82.4 million active shoppers using Temu’s app in September, up from 4.6 million a year earlier. According to Google Trends, web searches for “Temu” have increased by 788% worldwide over the past 12 months. In October, 20% of U.S. adults told market research firm Civic Science that they had used Temu, double the number in March.

MediaRadar expects to see “similar advertising investment” from Temu in 2024. MediaRadar CEO Todd Krizelman told Modern Retail in an email that the strategy will likely focus on social and high-profile events. “Over time, you may no longer need the same level of investment to consistently attract attention,” he writes.

Marketing people say Temu doesn’t just run ads, it’s fundamentally changing the way the advertising environment works. Both Temu and Shein outperform other retailers with lower advertising prices and higher customer acquisition costs. Etsy’s CEO declared during his November earnings call that Temu and Shein “almost single-handedly influence ad costs,” especially when it comes to Google and Meta.

Ryan mentioned “Lego toys” in Google search results as indicative of this kind of arms race. “They killed all the other retailers that resold Lego products,” he said. “And without a doubt, any of those ads would have been more relevant than his Temu ad. What I’m concerned about is whether this is spamming the auction.”

“For me, I can imagine, but it’s unproven, that they’re the biggest advertiser of all time,” Ryan said.