Temu: What It Is, and Why It Matters

Was asked exactly this earlier this week.   Especially in this domain, good to know what is emerging and why  Considerable piece, below an intro ....

Temu: What It Is, and Why It Matters   by Connie Chan  In A16z

Over the past four months, a little-known shopping app has quietly overtaken TikTok, YouTube, and Amazon to become the most downloaded free app in both the Apple App and Google Play stores in the U.S. Launched last September, Temu is a discovery-based shopping app that offers users a personalized feed of recommended and relatively inexpensive products, in addition to searchable categories of products. Users can also earn credits and better deals if they play certain in-app games (e.g., raise a family of digital fish to earn a $12 pair of shark slippers) or recommend the app to their friends on their social media feeds. 

Fans of the site say Temu is taking off because it offers a wide range of products, including from brand names, at dirt-cheap prices; Lenovo wireless earbuds, for example, are available for just $8.98. Critics dismiss Temu’s current top status as the result of Pingduoduo, Temu’s Chinese parent company, being willing to spend big on paid marketing to draw in customers. But these cursory observations about pricing and marketing spend, while true, obscure two major insights about Temu’s launch in the U.S. 

First, Temu’s marketing-heavy strategy reflects a fundamental disconnect between how Chinese and U.S. consumer companies do business. While many consumer startups and venture capitalists in the U.S. are allergic to relying on paid spend for growth, in China, consumer companies—particularly those focused on AI-driven recommendations and discovery—recognize that deploying a high marketing budget at launch is often the price they must pay to get off the ground. Such companies can’t wait to steadily develop a growing user base because their algorithm recommendations won’t work on small user sets. Instead, they need an initial explosion (zhà in Chinese) of a lot of user data, and paid spend is the fastest way to get there.   ... '