• by Laurie Sullivan  @lauriesullivan, July 1, 2024

Temu has made inroads into the United States in less than two years, but some believe the Chinese ecommerce company is a bigger threat to U.S. consumers than ByteDance’s subsidiary TikTok. 

China’s ecommerce upstart Temu now attracts more repeat shoppers than eBay, Bloomberg reports.

Amazon has stepped up plans to launch a discount shopping section on its site to appeal to mainland Chinese suppliers.

Arkansas Attorney General Tim Griffin last week made claims about Temu’s app, accusing the company in a lawsuit of violating state law against deceptive trade practices.

“Though it is known as an ecommerce platform, Temu is functionally malware and spyware,” Griffin wrote in a news release posted to the AG Arkansas’s website. “It is purposefully designed to gain unrestricted access to a user’s phone operating system. It can override data privacy settings on users’ devices, and it monetizes this unauthorized collection of data.”

A Temu spokesperson said "we are surprised and disappointed by the Arkansas Attorney General's Office for filing the lawsuit without any independent fact-finding. The allegations in the lawsuit are based on misinformation circulated online, primarily from a short-seller, and are totally unfounded." 

Other analysts agree with the AG in Arkansas. Temu’s sister company is PDD or Pinduoduo, a Chinese social ecommerce company founded in 2015.

It has a business model based on advertising revenue, and differentiates itself from competitors by taking a smaller cut of each sale and outsourcing fulfillment to express delivery companies. 

Even in September 2023, analysts threw up a red flag saying that Temu displays the aggressive characteristics of an app that downloads malware and spyware.

“We engaged numerous independent data security experts to decompile and analyze Temu app’s code, integrated with experts of our own staff, and analysts who have written independently in the public domain,” Grizzly Research reported. “Contributing to the danger of mass data exfiltration is the fast uptake rate of the Temu app: over 100 million app downloads in the last 9 months, all in U.S. and Europe.”

A Temu spokesperson said Grizzly's allegations in the report are completely baseless and issued by a "small short-selling firm with a poor track record." The spokesperson said report was published with the intent to create panic and to drive down stock prices, enabling the firm to profit from short-selling decisions.

Temu is not the only alleged trojan horse allegedly sent from China, but advertisers and influencers seem to have set aside concerns that TikTok and its parent company pose a national security threat to U.S. user data.

"I’ve been thinking about how brands and creators would adapt to a missing platform,” Amrapali Gan, the founder of Hoxton agency and former CEO of OnlyFans. “If you remember Vine, when that folded communities of creators actually came together and started taking similar content and putting it on other platforms.”

There is no shortage of TikTok alternatives, it’s really about what platform is going to be the most authentic for the creators, she said, adding that newer platforms will find these opportunities tailored to niche audiences.

Others also agree that TikTok alternatives will fill the gap for creators and businesses if the U.S. government bans the platform. 

Marty Weintraub, founder of Aimclear -- an agency focused on search and social media -- says the agency takes two views. Although he says channels come and go -- and has asked the same question each time a channel crashes, such as MySpace, Digg, StumbleUpon, and Flickr -- he says audiences will go somewhere. Agencies and brands will find them.

“Social channel users are like balloons,” Weintraub says. “Squeeze them, let out the air, and they will go somewhere. What makes this situation unique --there’s a possibility that a channel burning strong could be shut down while still jamming. Sort of like a car crash and airbag deployment.”

And then there’s the “popular revolt” that will take place among TikTok users will become as important to follow than the shutdown itself.

A forced TikTok sale in January 2025 initially caused some concern, but brands agencies seem more optimistic that everything will work out.

“The spend on TikTok that we’re seeing lately from clients has risen a couple of percentage points,” says Simon Poulton, executive vice president of Innovation at the independent large agency Tinuiti. “Year-over-year, however, it’s up 50%.”

Poulton says TikTok has diversified and that successful brands see advancements coming mostly from Search Ads and its ecommerce site TikTok Shop.

Those new opportunities have dominated discussions, Poulton says. The platform has moved from being a “social platform” or “social graph.”

“Gen Z is coming to TikTok to search,” he said. “Now with commerce, they drive transactions within their walls.”

Despite concerns over China’s growing U.S. presence -- from collecting U.S. consumer data and being the first to mine minerals on the dark side of the moon to buying farmland in the U.S. -- Poulton finds it difficult to believe the U.S. government will ban the platform.

Oracle in 2020 confirmed a deal with TikTok to house its data, and then in June 2022 became TikTok’s data center for all new U.S. user data.

Discussions took more than a year to solidify, but it seemed to have only temporarily solved security and regulatory concerns about data integrity and the Chinese government.

“It would require a lot of untangling,” he said. “For one reason, there are so many jobs tied to the company.”

An Oxford Economics study underwritten by TikTok and released in March estimates the company is tied to 224,000 American jobs and 7,000 small businesses, contributing more than $24 billion to the U.S. gross domestic product in 2023.

Some creators on TikTok’s platform are looking to expand their presence -- realizing they need to expand to other platforms beyond TikTok such as YouTube and Meta.

Poulton says Meta had made major investments in its algorithm to support optimization and content recommendations tied to AI, with the intent of taking market share from TikTok.  

Colin Kirkland contributed to this story.

Update: The article was updated with comments from a Temu spokesperson.