The trade relationship between China and the United States has many frictions. But at least one area is booming: Chinese startups looking to establish a presence in the West are spending billions of dollars advertising services owned by some of Silicon Valley's biggest tech companies.
Temu, the international arm of Chinese e-commerce giant Pinduoduo, is flooding Google with ads for absurdly cheap products. With an initial public offering on the horizon, fast fashion retailer Shein is flooding Instagram with ads for clothing and accessories at rock-bottom prices. Gaming and video streaming app developers in China are pouring money into marketing on Facebook, X and YouTube to attract potential users.
Meta, the parent company of Facebook and Instagram, said in a call with analysts that China-based advertisers accounted for 10 percent of its revenue, nearly double what it was two years ago. In the last year, Temu has placed about 1.4 million ads worldwide on Google services and at least 26,000 different versions of ads on Meta, according to the Meta Ads Library.
“What companies like Temu have done is actually open a hose of money that's being invested in ads,” said Sky Canaves, senior retail analyst at eMarketer. “You can't escape their ads on Facebook, Instagram and Google Search.”
The increase in spending shows how interconnected China and the United States remain, despite each country's vigorous efforts to become more self-sufficient. Chinese companies are gaining access to vast consumer audiences, and Silicon Valley companies are making money in a market where they would not otherwise do business.
The marketing blitz is driven by the global ambitions of Chinese startups. At home, the economy is no longer growing by leaps and bounds as it had for years, and businesses are subject to a tangle of government rules that have stifled their growth.
The crackdown on companies like e-commerce giant Alibaba and once-successful ride-sharing provider Didi underscored the message that a company, no matter how successful, can fall to its knees if it comes into conflict with the Chinese Communist Party and its leader Xi Jinping.
“There is a limit to the extent to which a company can grow in China,” said Andrew Collier, founder of Orient Capital, an economic research firm in Hong Kong. “Xi Jinping is very happy for Chinese companies to make money abroad, as long as they toe the line within China.”
But globalization has a cost. It's difficult to capture significant amounts of digital attention without paying Google's parent company, Alphabet and Meta. Together, the two companies sell the majority of all advertising on the Internet through their online properties such as Google Search, YouTube, Google Play App Store, Facebook, Instagram, WhatsApp and Messenger.
For the most part, Alphabet and Meta products are not available in China. Efforts to offer their services in China meant complying with Chinese government censors, prompting protests from employees of both companies.
Alphabet and Meta have such significant reach in the rest of the world that Chinese companies are now turning to them.
Temu and Shein's spending spree has “single-handedly” raised the cost of digital advertising, Etsy CEO Josh Silverman said on a call with analysts in November.
Chinese discount e-commerce companies have attracted increasing attention in the United States in recent years, tempting shoppers with low-cost products when inflation drove up prices.
Temu opened its US site in September 2022. It sold things like a garlic press for $2 or a cotton swab dispenser for $1.50. Temu is now available in 50 countries.
With the motto “shop like a billionaire,” Temu has been a voracious buyer of all types of advertising, from low-cost ads on Facebook to expensive ads during the Super Bowl. Temu has the deep pockets of PDD Holdings, which operates Pinduoduo.
Bernstein Research estimates that Temu spent $3 billion on marketing last year. In a lawsuit filed against Shein in December, Temu said he served about 30 million daily users in the United States. Temu's app is the most downloaded in the Apple and Google app stores, according to Sensor Tower, an app analytics firm.
Shein, which entered the US market about seven years ago, also continues to invest aggressively in marketing. It does not sell products in China, although it was founded in Nanjing and relies heavily on Chinese sellers and the country's supply chain.
Last year alone it ran around 80,000 ads on Google, including product ads that appear next to search results. On Meta, Shein has more than 7,000 active ads, according to the Meta ad library.
For Temu and Shein, spending a lot on Facebook will not guarantee success. Nearly a decade ago, Wish, another popular e-commerce app focused on low-cost products from China, spent hundreds of millions of dollars on Facebook ads. But the retail app failed to maintain shoppers' interest. Last month, Wish was sold to Singapore's Qoo10, another e-commerce platform, for $173 million, one-hundredth of its 2020 public offering valuation.
Shein and Temu allow third-party sellers to upload product images directly to Meta's advertising systems and feature those products within their ads on Instagram and Facebook. Those ads, which are targeted to users' interests based on Meta's wealth of data, are generally more effective at attracting buyers.
Advertising spend is not limited to retailers. In recent months, Instagram has been inundated with trailers for short, addictive dramas – soap operas for users with limited attention spans. Each episode is usually one minute long, and the series has between 80 and 100 episodes.
The shows tend to be overly dramatic, with catchy titles like “The double life of my billionaire husband” either “30 days until I marry my husband's nemesis.”
These short dramas are popular in China and a handful of companies (apps like Reelshort, DramaBox and FlexTV) are competing to export this form of entertainment. Instead of selling monthly subscriptions like, say, Netflix, short-form apps use a model similar to online games, requiring users to purchase what are known as coins that can be used to pay for episodes. A viewer can also earn coins by watching commercials.
Like games, these apps require a constant flow of users who get hooked on samples of the shows and feel compelled to keep spending to see how the show ends. On Meta, DramaBox serves over 1,000 active ads, according to Meta's ad library, while Reelshort and Flex TV serve hundreds of ads.
Another major Chinese advertiser on Meta is a Hong Kong-based game developer called First.Fun. The developer appears to be blanketing Facebook, Instagram, and even X with ads to promote its flagship game, Last War: Survival, with hundreds of paid previews.
The advancements have attracted gamers to download the app. It is the fifth most downloaded application on Google Play and the twelfth in the Apple App Store.
Sensor Tower estimated that the game generated $22 million in revenue last month.
Marketing on platforms like Meta has given game developers a lifeline for customers outside the country as the Chinese government has made business difficult. The most recent example was in December, when Chinese regulators announced plans to limit the amount of money people could spend on online video games. The agency that drafted the plans backtracked on its initial proposals in the face of protests, but Beijing has been taking an increasingly tough stance against the gaming industry.
The message has not gone unnoticed by game developers. On its website, Beijing Yuanqu Entertainment, First.Fun's parent company, said it was focusing exclusively on overseas markets because it “firmly believes that China's Internet industry will continue to internationalize.”
claire fu contributed reports.
