The trade relationship between China and the United States has many frictions. But at least one area is booming: Chinese startups looking to gain a presence in the West are spending billions of dollars advertising on 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 ridiculously cheap products. With an initial public offering looming, fast fashion retailer Shein is flooding Instagram with ads for cut-price clothing and accessories. Developers of China’s game and video streaming apps are pouring marketing dollars into Facebook, X and YouTube to lure 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 from two years ago. In the past year, Temu has placed approximately 1.4 million ads worldwide on Google services and at least 26,000 different ad versions on Meta, according to Meta’s Ad Library.
“What companies like Temu have done is really open up a fire hose of money that they throw at advertising,” 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 be more self-reliant. Chinese companies gain access to huge consumer audiences, and Silicon Valley companies make money from a market they otherwise don’t operate in.
Marketing is fueled by the global ambitions of Chinese startups. At home, the economy is no longer growing in leaps and bounds as it has been for years, and companies are subject to a raft of government regulations that have stunted their growth.
The crackdown on companies such as e-commerce giant Alibaba and once-high-flying stock provider Didi underscored the message that a company, no matter how successful, can be brought to its knees if it runs afoul of China’s Communist Party and 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 overseas as long as they toe the line within China.”
But going global comes at a cost. It’s hard to attract significant amounts of digital attention without paying Google’s parent company, Alphabet, and Meta. Together, the two companies sell the majority of all Internet advertising largely through their online properties such as Google Search, YouTube, the 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, which prompted employee protests at both companies.
Alphabet and Meta have such significant reach in the rest of the world that Chinese companies are now turning to them.
The rush of spending by Temu and Shein has “inherently driven up” the cost of digital advertising, Josh Silverman, Etsy’s chief executive, said on a call with analysts in November.
Chinese discount e-commerce companies have gained attention in the United States in recent years, luring shoppers with low-cost goods when inflation has driven up prices.
Temu opened its website in the US in September 2022. It sold things like a garlic press for $2 or a cotton swab for $1.50. Temu is now available in 50 countries.
With the slogan “Shop like a billionaire,” Temu was a voracious buyer of all forms of advertising, from low-cost Facebook ads to expensive spots 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 it served about 30 million daily users in the United States. Temu’s app has the most downloads on both 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 spend aggressively on marketing. It does not sell products in China, although it was founded in Nanjing and relies heavily on Chinese vendors and the country’s supply chain.
It has run about 80,000 ads on Google in the past year alone, including product ads that appear next to search results. On Meta, Shein has over 7,000 active ads, according to Meta’s ad library.
For Temu and Shein, spending big on Facebook won’t guarantee success. Almost a decade ago, Wish, another popular e-commerce app focused on low-cost goods sourced from China, spent hundreds of millions of dollars on Facebook ads. But the retail app failed to keep shoppers interested. Last month, Wish was sold to Singapore’s Qoo10, another e-commerce platform, for $173 million, one-hundredth of its 2020 IPO valuation.
Shein and Temu allow third-party sellers to upload product images directly to Meta’s advertising systems and display those products in their Instagram and Facebook ads. These ads, which target user interests based on Meta’s vast amount of data, are generally more effective at attracting buyers.
Advertising spending is not limited to retailers. In recent months, Instagram has been flooded with previews of short addictive dramas — soap operas for users with limited attention spans. Each episode is typically one minute long, with the series running for approximately 80 to 100 episodes.
The shows tend to be overly dramatic, with catchy titles like “The Double Life of My Billionaire Husband” or “30 Days Till I Marry My Husband’s Nemesis.”
These short dramas are popular in China, and a few companies – apps like Reelshort, DramaBox and FlexTV – are competing to export this form of entertainment. Instead of selling monthly subscriptions like, say, Netflix, short content apps use a model similar to online games, requiring users to buy what are known as coins that can be used to pay for episodes. A viewer can also earn coins by watching ads.
Similar to games, these apps require a steady stream of users to get hooked on samples of the programs and feel compelled to keep spending to see how the show ends. On Meta, DramaBox runs more than 1,000 active ads, according to Meta’s ad library, while Reelshort and Flex TV run 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 previews have enticed players to download the app. It is the fifth most downloaded app on Google Play and the 12th most downloaded app on Apple’s App Store.
Sensor Tower estimated that the game brought in $22 million in revenue last month.
Marketing on platforms like Meta has given game developers a lifeline to customers outside the country as the Chinese government has made it harder to do business. The most recent example was in December, when Chinese regulators announced plans to limit how much money people could spend on online video games. The agency that drew up the plans withdrew its initial proposals in the face of protests, but Beijing has taken an increasingly tough stance against the games industry.
The message has not been lost on game developers. On its website, Beijing Yuanqu Entertainment, the parent company of First.Fun, said it focused exclusively on overseas markets because it “firmly believes that China’s Internet industry will continue to internationalize.”
Claire Fu contributed to the report.
