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Congress is terrified about TikTok, but Temu is playing the long game

Chinese video platforms and online shopping have had a symbiotic relationship for decades. The videos are just the movie theater that brings you to the mall.

Ryan Broderick, Adam Bumas

7/3/24 10:58AM

The Chinese app invasion is here and America is panicking. Well, at least our lawmakers are. They've given TikTok's Chinese owner, ByteDance, until the end of the year to divest the popular short-form app and sell it to an American owner or face a ban in the US.

The app is a financial and cultural juggernaut, but Congress’ issue with it comes down to its potential ties to the Chinese government. Legislators who support the ban, like Rep. Michael McCaul, say the app is like “a spy balloon in Americans’ phones.” Opponents of the ban, which include plenty of researchers and millions of users, see it as nothing more than a moral panic and "security theater" that won't actually do anything to protect Americans' data.

The US government's obsession with TikTok looks even more misguided, though, when you compare its popularity with other Chinese apps. According to data we've been collecting from Appfigures, which analyzes mobile-app downloads, TikTok is not China's biggest digital export right now. It’s Temu.

But to understand how the massive Chinese online marketplace conquered both Amazon and American mailboxes, we have to go back two years, to the moment Chinese apps blew up in the West.

The US government's obsession with TikTok looks misguided when you compare its popularity with other Chinese apps.

In 2022, TikTok became the world’s most downloaded app. It saw enormous numbers on iOS, but even higher numbers on Android; in the US, it rose 58% between December 2021 and January 2022. It's possible the sudden leap may not have been totally organic. That year, Samsung customers began to notice TikTok would auto-download as an "essential app" on certain new phone models.

Regardless of what was driving it, TikTok's rapid rise was enough to spook American lawmakers. Nineteen US states announced some form of a TikTok ban for public employees at government agencies. But perhaps that panic distracted from a much bigger Chinese power play. TikTok had become the door through which other huge Chinese apps entered the US market, specifically e-commerce platforms, and the pandemic supercharged this both in China and in the US.

Since the pandemic, TikTok has emerged as the dominant social network in America. Weekly downloads peaked in early 2022 at just under 2 million, divided evenly between iOS and Android users. Other Chinese apps quickly figured out they could launch in the West by flooding TikTok with ads. Shein, the fast-fashion outlet that’s grown in the US thanks to the chaotic state of post-pandemic retail, rallied again in 2022 and stayed there. In April, Shein was downloaded over 700,000 times a week combined across Android and iOS, a milestone achievement.

Later that year, TikTok’s video-editing partner app, CapCut, saw its own explosion thanks to TikTok trends. Downloads more than doubled in the last quarter of 2022 on Android and iOS, peaking the last week of the year with close to a million iOS downloads. That was the first time CapCut surpassed TikTok, and since then it’s rarely fallen behind. But just as CapCut started lapping TikTok, Temu beat them both.

The e-commerce platform launched in August 2022 and outpaced TikTok and Shein in daily downloads on iOS and Android within three months. By the last week of 2022, the same week as CapCut’s peak, Temu had over a million weekly downloads on both operating systems. By the second half of the following year, it was consistently being downloaded at double the rate of TikTok.

After just 16 months, Temu had captured a staggering 17% of market share in the US. This year it’s forecasting $60 billion in sales. The popularity is ultimately thanks to its owners, the huge Chinese conglomerate Pinduoduo, having so much money to spend on it. And because the app’s prices are “mind-bendingly” low, the company is manufacturing most of the products itself.

Temu also rolled out with an intense marketing push, spending over $1 billion on marketing outside China. That bought it a Super Bowl ad in February and a flood of partnerships with users on TikTok and other video platforms. Speaking to MIT Technology Review in 2022, analyst Juozas Kaziukenas said the app’s success was “driven almost exclusively by ads.”

But if Temu has another secret weapon, it’s gamification. The app features simple games in the “FarmVille” mold and rewards people who regularly log in to play with free products. It also gives generous incentives and discounts for the use of referral codes, encouraging users to tell others to download the app and make purchases.

Temu launched in August 2022 and outpaced TikTok and Shein in daily downloads on iOS and Android within three months.

In fact, there are dozens of Facebook groups with tens of thousands of followers devoted solely to swapping codes. Reddit communities like r/Temu and r/TEMU_Official blew up in early 2023, but people were creating so many bot accounts to share codes that these communities were shut down by July for spam.

According to our data, Temu and Shein have staked out territory as the No. 1 and No. 2 most downloaded apps in the US. In June, Temu had 4.4 million downloads to Shein’s 2.4 million. Temu specifically has been so popular that Amazon is reportedly planning to emulate its discounting features. Yet despite having long since overtaken TikTok in sheer numbers, these apps haven’t faced anywhere close to the same kind of scrutiny from legal or governmental bodies, especially in the States.

It's possible that's because TikTok is a social app and Temu is an e-commerce platform. It's easier to fret about Chinese algorithms brainwashing the youth of America than it is about the increasing ubiquity of Temu's signature orange bags cluttering everyone's doorstep. But this is a very American misunderstanding of how Chinese apps work.

Chinese video platforms and online shopping have had a symbiotic relationship for decades. It's not uncommon for them to exist on the same app, like Chinese online-shopping portal Taobao, which has featured livestreaming shopping influencers for years. By 2019 newer video apps, like Douyin, were more popular than traditional online-shopping sites and even physical stores.

This would explain why TikTok is investing so much money in its TikTok Shop right now — it has always seen itself as an e-commerce platform. The videos are just the movie theater that brings you to the mall.

Some US lawmakers are finally beginning to understand this. Just this week, Arkansas filed a lawsuit against Temu, alleging the app’s true goal is to “illegally sell stolen data from Western country customers" — latching onto the same anti-China panic that spurred the TikTok ban. However it fares, the suit doesn’t seem to have sparked the same kind of debate as those against TikTok. Regardless, instead of understanding how they work and why they're so popular with Americans, or doing the hard work of developing real legal frameworks and regulations, our lawmakers are trying to put up a Great Firewall. And China has a lot more experience navigating those than we do.

Garbage Day is an award-winning newsletter that focuses on web culture and technology, covering a mix of memes, trends, and internet drama. We also run a program called Garbage Intelligence, a monthly report tracking the rise and fall of creators and accounts across every major platform on the web. And we'll be sharing some of our findings here in Sherwood. You can subscribe to Garbage Day here.

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OK, so when was the longest shutdown in US history?

The US government officially shut down at 12:01 a.m. on Wednesday after senators failed to agree on a last-minute funding bill. Though initially shrugging off the threat of a shutdown during yesterday’s session, stocks were mildly in the red on Wednesday as investors reacted to what is now the 11th shutdown in the government’s history.

Until this latest shutdown, there had been 20 government funding gaps experienced since 1976 — though not all ended in a full shutdown, with full closure averted in half of those cases.

Indeed, prior to the 1980s, funding gaps didn’t typically have major effects on government operations, with agencies continuing to operate on the basis that the funding would come eventually. However, a more stringent interpretation of the rules led to a stricter appropriations process from the early 1980s onward, with many subsequent funding gaps resulting in a shutdown of affected agencies (unless the gaps were quickly fixed or occurred over a weekend).

Obviously, the duration of the latest shutdown is still unclear, but it will continue until Congress passes a funding bill — most likely via a “continuing resolution,” which has ended every shutdown since 1990. Data analyzed by USAFacts suggest that it might not be a one- or two-day affair, as funding gaps have lengthened in recent years.

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Indeed, the last shutdown, which began in December 2018, ended up becoming the longest in history, at a whopping 34 days. By the time the government reopened in January 2019, about $3 billion (in 2019 dollars) had been wiped from the GDP in Q4, per data from the Congressional Budget Office, with approximately $18 billion in “federal discretionary spending” delayed over the roughly five-week stretch.

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Also likely elevating GM was a Reuters report that the Trump administration is exploring taking a 10% stake in Lithium Americas, the automaker’s partner in a yet to open Thacker Pass lithium mine. Shares of Lithium Americas surged 68% in the premarket.

GM, which invested $625 million into the lithium mine last year, holds a 38% stake in the joint venture. The mine is expected to become the Western Hemisphere’s primary lithium source in 2028, when it’s slated to open, producing enough of the metal to make 800,000 electric vehicle batteries.

Prior to its plans for Lithium Americas, the Trump administration last month said it would take a 10% stake in Intel. In July, it announced a 15% stake in rare earths miner MP Materials.

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Delta said it was disappointed in the decision, adding that the termination will “cause significant harm to U.S. jobs, communities and consumers traveling between the U.S. and Mexico.” CEO Ed Bastian previously said that the administration’s regulatory stance could be a “breath of fresh air” for the aviation industry.

The Biden administration tentatively decided last year to not renew the antitrust immunity agreement covering the joint venture. At the time, Delta said “$800 million in annual consumer benefits would evaporate” if the partnership were terminated.

Collaboration isn’t over between the two airlines: the Department of Transportation said Delta can maintain its 20% stake in the Mexican airline and the partnership can continue through “arms-length activities such as codesharing, marketing, and frequent flyer cooperation.”