The rise and fall of Wish

In December 2020, discount shopping app Wish went public at a $14 billion valuation. Just 2 months later, it hit over $20 billion in valuation. But fast forward to just 3 years later, the company was sold for parts and scraps in a fire sale at less than $200 million. That's an over 99% collapse in valuation. And to be ironically sad about the whole thing, the company that bought them 9 months later, it was bankrupt. This video is the rise and fall of Wish.com.

Oh, and by the way, thanks to Genspark for sponsoring this video. More on them later.

Our story starts with a guy named Piotr Sosulski. He was a former Google engineer who had worked for years on advertising algorithms. In 2010, he started a startup that was going to build advertising technology, and he built some pretty cool stuff. And within a few months, Facebook came calling and they offered to buy his business for $20 million cash on the spot. Instead of taking their money, Peter decided to stay all in and keep building his business and working on the technology. By 2013, he pivoted from advertising technology to figuring out how to show people products they might want to buy. So in 2013, he launched Wish.com, which felt like, well, if Amazon was Walmart in the internet, Wish.com felt like a flea market. The target wasn't your typical online shopper. It was the type of person who really did shop at the, at the flea market. They would be happy to trade speed for massive discounts and savings. 40% of Americans can't afford an emergency spend of $400. Wish was built for these type of folks. And most great businesses are built upon a secret. And one of the not-so-secret secrets was that back then it was actually cheaper to ship a package from China or Africa to the US than it was to ship it between two states here domestically. This wasn't a weird market quirk. It was actually international law from some treaties around postal rates from years ago. Decades ago, the rich countries had gotten together to do something nice for the rest of the world to increase trade, and they created something called the Universal Postal Union, which basically meant that countries when shipping goods from developing countries like Africa or places like that would get, well, cheap rates shipping stuff to wealthy countries like the United States. And at the time, When Wish.com got started, China was still considered a developing country. At the time, shipping a 1-pound package from South Carolina to New York City cost about $6. But if you ship the same package from Shanghai in China to New York City, it would cost just over half that, about $3.50. You add in the ePacket program, which made it easy to ship goods, and then something else called the customs de minimis exemption, and allowed Wish to offer goods at ridiculously cheap prices. The de minimis rule basically, which was recently changed by the way, allowed countries and goods to enter the United States, and if they were less than $800 for the value of that package, they would enter with no customs duties or tariffs at all. 94% of Wish.com's 500,000 sellers were based in China, and they would ship stuff directly from the factory to U.S. citizens. And that meant something like a 50-cent iPhone case could sell to you or me for $3 and still be profitable. Peter now had the supply chain. It would come directly from China and use US mail to come directly to you and me. Now he just needed some customers. Peter found those customers in one place we were all flocking to at this time in the 2010s, Facebook. And quickly Wish.com started to spend $100 million a year with Facebook, quickly becoming one of their largest advertisers. But Peter's genius was they experimented with a lot of stuff, and what they found was normal ads didn't work as well as running super weird ads. They would advertise things like cat blindfolds or hamster stretchers or just kind of any kind of weird stuff that would go on. Uh, and they were so weird that people would take the ads and make them go viral by sharing them with their friends. This level of virality would help. Every share was basically free advertising where somebody would see it, show their friend, and say, man, you got to check this site out. It worked so well that in 2016, wish.com was growing so quickly that Amazon founder Jeff Bezos offered $10 billion personally of his own money to buy the site. Peter said no. A common thing you'll see with people who build big businesses here on this channel is they are entirely optimistic that they can do it and they get kind of belief in the ability they can. At the time, Peter said that he believed that his company Wish.com could get to be one quarter the size of Walmart, $100 billion a year in sales. They pushed hard. In 2017, the ambition pushed them to pay the Los Angeles Lakers $36 million to put the Wish logo on the front of their jerseys. A classic gets a modern touch. A new look, a new partner, a new era of Lakers basketball. Showtime! All this advertising totally worked in terms of growth. By 2017, the site reached over $1 billion in sales then $1.9 billion in sales, and then it broke the $2 billion barrier pushing into 2020. That year they spent an astounding $1.7 billion on advertising and marketing, which you're like, okay, cool. Well, it turns out that was two-thirds of their total revenue. It was growth at all costs. And while they plowed every dollar they had and then some they didn't into growing as quickly as possible so that by 2020 Wish was losing $0.50 out of every dollar that it made in revenue. They were going to lose $745 million that year alone. Then come in March 2020, something kind of magical happened for Wish, and that was the COVID pandemic. Suddenly nobody could go to stores anymore and everybody was bored at home shopping on their phones. Money was free at this time and it was easy to come by. It was a go-go time when the government injected so much money into the economy to keep it going, and they reached 107 million users. And the IPO market, it was wide open. So in December 2020, Wish.com went public at a $14 billion valuation. But investors were skeptical as hell. The stock faded that day over 16%, and it never hit that number again. And to show you how astounding it was, it was the worst debut of an IPO since 1995 for any company valued over $10 billion. And the next thing to come was something we called the meme stock era. And if you remember this time, people were at home on the internet trying to figure out where to put their money. And one of the things they wanted to do was figure out which stock to invest in next. And so people would take stocks like GameStop and run it to the moon, trying to make money as quickly as possible. Wish had all the things that these internet traders were looking for. It was heavily shorted, meaning people were betting that it was going to go down. It has a recognizable brand and it was kind of in trouble and had a valuation they thought could go up. So they started to pile on to see if they could make money from the Wish stock. It worked. By February 2021, just about 9 months after going public, The valuation of the company hit $20 billion and the shares hit $34. Peter, our founder, was suddenly worth several billion dollars just from being a meme stock. It seemed like nothing could go wrong. I mean, what could go wrong in a situation like that? Everybody's getting rich, right? Well, Wish was about to have perhaps the worst 2-year run of bad luck in business history.

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The first thing that happened was that in spring 2021, the pandemic started to— well, it started to fade away. Vaccines were rolling out and stores and shops and all that kind of stuff, they started to reopen. The e-commerce boom from the pandemic, it was ending. And it turned out that Wish.com's customers, they weren't very loyal to the brand. Many of those flea market shoppers, when the flea market, Walmart, and Target opened up, went right back to browsing the clearance aisles in those stores. Then in April 2021, the next bad thing to happen came along, which was Apple started to change the game of online advertising. They released iOS 14.5, which had a thing called App Tracking Transparency, and in short, it made it really difficult for advertisers to figure out who was looking at what, and that in turn made advertising online a lot less effective. With this new version of iOS, every app had to ask if it was okay to track you. And it turned out that 80% of customers said no. And most importantly, this broke Facebook's ad tracking. It was suddenly much harder for them to show effective ads to their customers. And remember, at this time, Wish is spending hundreds of millions of dollars a year to try to get customers off the Facebook platform, and their costs went up by 30 to 50%, depending upon the month. For Wish, this was existential. Their entire business was based off of getting customers off of Facebook to buy cheap crap off of their platform. Overnight, those ads got 50% more expensive. Combine that with everybody else in America was suddenly discovering online advertising, and it meant that costs were going up and the math wasn't mathing anymore for Wish.com. So in July 2021, Peter and his team at Wish.com made a fateful decision. They would go and cut advertising spend dramatically. It was a good question to ask in the boardroom.

Why?

Why keep spending $1.7 billion a year on online advertising that wasn't working? But when they shut off that faucet of Facebook ads, it revealed a pretty horrible thing about the business. Customers weren't continuing to shop. They had no loyalty. Customers went from 107 million active users to just 23 million, a 75% drop in just a few months. The active buyers, the people buying a lot of stuff, fell 44% year over year. A typical good e-commerce company will see 25 to 30% of customers make repeat purchases. Wish, well, it was in the single digits, if not lower. All of this spend on ads, well, it had just been covering the truth, which was Wish was fundamentally a leaky bucket. And the only way they had kept it going was by throwing faster and faster amounts of water in there.

But before we get to that, I want to take a moment to highlight something that we're adding to this channel. Frankly, we've just been so excited about how much you've been excited about the channel, and I love all the comments. But a lot of people also ask how this channel is able to produce 3 rise and fall videos every week.

Here's the truth. I don't do it all.

I mostly just record it.

And there's a small team behind it—

editors, producers— and we're launching a membership team to help me support the costs behind the channel. The regular videos aren't going anywhere, of course, but members will get a few extras: 2 exclusive videos every month, deeper breakdowns on companies that are actually winning, and members-only community posts. And there will be a tier with monthly office hours sessions with yours truly where you can ask me anything and we'll talk live through those things. So if you enjoy the channel and want more of the analysis going deeper, you can check out memberships in the description below and we'd love to have you be part of it as we roll this out. Thank you for watching and supporting the channel.

I've had a great time sharing all of this with you and well, it's been a ton of fun.

And if there's something you'd like to see in the membership tiers, feel free to drop it in the comments below.

All right.

Back to the story.

A big reason why retention sucked was the experience. It sucked. I remember buying something off of Wish.com. By the time it showed up, I had forgotten I even ordered it. It was like 5 weeks later and the thing I got was a piece of junk. Do not buy AirPods from Wish.com. People would often buy things and it would show up and they didn't even match the photos of the online ad. And so for many, including me, when the ads stopped, there was no reason to even think about Wish.com or even consider going back. Then later that year, in November 2021, it got even worse. French regulators came in and did an investigation of Wish.com. 95% of the toys they sampled failed the EU standards. 90% of the electrical products were offering hazards if you plug them in in your house. Nearly two-thirds of the jewelry they bought posed health hazards, including noxious chemicals. France, a big part of the EU, ordered Google and Apple to delist the Wish.com app and Search engines, they followed in turn. In many cases, Wish.com results were purged from the search results that you would see on Google or other sites. Europe was 38% of Wish.com's revenue, and this was the first time that a leading e-commerce site had been banned in an entire country. In February 2022, the board and the shareholders and the investors had had enough. Peter was shown the door. The original founder, he was out. The company continued in freefall. His replacement lasted 7 months. Then they had another CEO. He didn't last either. Revenue went down 77% from 2020 to 2022, from over $2 billion to just under $600 million. During this period, the stock went from a high of $32 during the meme stock era to just under $1, a 99% decline. But wait, things get worse for Wish.com. In September 2022, a new competitor emerged, Temu. Ooh ooh, Temu. Ooh ooh, Temu. Download the Temu app and shop like a billionaire. Tmall is owned by a company called Pinduoduo, which I can't pronounce very well, so I'll just call it PDD Holdings. It is China's third largest e-commerce company, and they're valued at over $125 billion. They have big deep pockets and tons of cash. Tmall decided to run exactly the Wish.com playbook, and they wanted to win. So while Wish was losing 50 cents of every dollar, uh, it turned out that Tmall was willing to go even one worse than that. They started to lose $30 on average for every order that they shipped. 2023, the board and the shareholders of Wish.com could only look in, well, in amazement as Temu was willing to lose $1 billion a month, uh, pushing to $9 billion that year in order to win the market. Temu spent $1.2 billion on meta ads in 2023. They made that even more so in 2024, going all in on Super Bowl ads. I think you'll remember some of them. And spending over $2.4 billion in promotion in 2024. With all this money thrown at the market, Temu went from zero to 100 million users in less than a year. Wish.com had invented the market and Temu decided they wanted to buy it. Faced with this amount of money coming from a competitor with incredibly deep pockets, there was nothing Wish could do. So in February 2024, they announced they were selling to a Singapore company called Koo10. QOO10. I don't know how to pronounce it correctly. And they were selling for less than $200 million, a 99% decline from their top. Peter, who had rejected a $10 billion offer from Jeff Bezos just 10 years before, was now watching his company sell, well, for less than, I guess, 2% of that. Not good. Deal closed in Q2 2024. And then astoundingly, just 9 months later, Koo Ten in Singapore declared bankruptcy themselves. It turned out the whole thing had been a fraud. They'd been on an acquisition spree buying up all these companies around the globe, but behind it, it was just a house of cards. They were misappropriating funds. They were holding and using people's salaries to pay stuff they shouldn't have. And eventually the Singaporean courts caught on to the whole thing. By November 11th, 2024, Koo was put into bankruptcy and went out of business. Taking down with it Wish.com, which went from a high flyer at one point worth $34 billion to selling for less than 1% that to bankrupt just a few months later. Wish.com is an example of the type of companies I see often, which is one that is built entirely on a specific platform. And in this case, they were basically taking advertising dollars, throwing them at Meta and Facebook, and then turning that into dollars on the back end. Well, that all works great. As long as you're sure that Facebook/Meta or whatever platform you're building on isn't going to come along and kill your business. And as often the case, the bigger company that you're dependent upon, they'll be the one to kill your business. But in this case, well, it wasn't Facebook's fault. Apple had made the changes and suddenly all this advertising that Wish.com was doing, it wasn't effective anymore. And that's where you have to watch out. If you're going to build your business on somebody else's platform, better make sure that platform is dang secure and isn't going to come and bite you later on and put you out of business like this one did. Oh, and if you like this video, let me know in the comments below too. It keeps me going. All right, see you next time!