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Pinduoduo IC data map

Pinduoduo's performance is still growing rapidly, but its stock price has fluctuated significantly.

On August 26, Pinduoduo (Nasdaq: PDD) released its second quarter 2024 financial report ending June 30. Data showed that Pinduoduo's second-quarter revenue reached 97.1 billion yuan, a year-on-year increase of 86%, and the expected amount was 99.985 billion yuan; net profit attributable to ordinary shareholders was 32.01 billion yuan, a year-on-year increase of 144%; non-GAAP net profit attributable to ordinary shareholders was 34.43 billion yuan, a year-on-year increase of 125%.

It is worth noting that although the data is still very impressive, Pinduoduo’s senior management repeatedly emphasized profit fluctuations in the conference call: "In this process, sacrificing short-term profits is necessary. Management has reached a consensus and is willing to pay a huge current price for long-term health. Profits in the next few quarters may fluctuate and rebound, but the trend of declining long-term profits is inevitable." said Zhao Jiazhen, executive director and co-CEO of Pinduoduo Group.

It is worth noting that after the release of this financial report, Pinduoduo's stock price plummeted, falling nearly 30% as of press time.

Talking about merchant governance: 10 billion resources will be invested to support new quality merchants

Specifically, the financial report analysis stated that the growth in total revenue was mainly due to the increase in revenue from online marketing services and transaction services. Among them, online marketing services and other revenues were 49.12 billion yuan, a year-on-year increase of 29%; transaction service revenue was 47.94 billion yuan, a year-on-year increase of 234%.

The revenue of Pinduoduo's global business Temu is also included in transaction service revenue, and Pinduoduo does not give its revenue separately.

Pinduoduo's management of merchants has attracted strong attention from the outside world.

"For the long-term and healthy development of the platform, we will continue to improve the ecological construction through the method of 'support and governance'. In the next year, we will invest 10 billion resources to support new merchants and resolutely carry out merchant ecological governance." Chen Lei, chairman and co-CEO of Pinduoduo Group, said that the overall scale of the platform has reached a considerable size. Improving ecological construction is not an overnight achievement. The management has reached a consensus and is ready to sacrifice short-term profits and invest in the long term.We are prepared to accept short-term sacrifices and potential reductions in profitability.”Chen Lei said in the financial report.

“We are committed to fostering a healthy and sustainable ecosystem where quality merchants can thrive,” said Zhao Jiazhen. “We will strongly support quality merchants while resolutely cracking down on inferior merchants to continue to build a healthy and sustainable ecosystem.”

Pinduoduo announced the launch of a transaction fee reduction plan, and it is expected to reduce 10 billion yuan in transaction fees for high-quality merchants in the next year. Currently, Pinduoduo has introduced the refundable rights of resource position technology service fees and promotion software service fees to merchants.

During the conference call, Pinduoduo executives repeatedly stressed that future profits may decline. Chen Lei said that he had repeatedly stressed in the past period of time that the profit growth in the past few quarters was the result of the short-term investment cycle and the financial reporting cycle being out of sync, and could not be used as a long-term guide. "At present, our business is facing fierce competition and some external environmental factors, which will inevitably bring fluctuations to our business development and slow down revenue growth."

In terms of shareholder returns, Pinduoduo executives said that the company is still in the investment stage. The company's business is facing fierce competition and uncertainties brought about by the external environment in many areas."I and other management agree that it is not appropriate to repurchase or distribute capital at this time. We also do not think it is necessary in the next few years that our management can foresee."

Talking about going overseas: the competitive environment is intensifying

Pinduoduo executives remain cautious about the latest developments of Pinduoduo's global business Temu.

"We are still constantly iterating the form of our global business," said a Pinduoduo executive. "Our global business has now entered more than 70 markets. In the process of business expansion, we always put compliance thinking as an important prerequisite for development. As our business develops, we also feel that the external environment is changing faster, our business operations are being disrupted more, and uncertainty has increased significantly."

"The competitive environment we face is intensifying. Competition is inevitable as the main theme of the e-commerce industry." The executive admitted, "In such a fiercely competitive environment, our revenue growth may slow down. For example, in the second quarter just past, our revenue growth rate declined significantly, which also shows that high revenue growth is actually unsustainable."

According to public information, Duoduo Cross-border was launched in September 2022 and has promoted high-quality products in more than 100 manufacturing industrial belts across the country. Temu was officially launched in Thailand on July 29, officially entering its third market in Southeast Asia. Its global growth rate is amazing. According to data, Temu's GMV in the first half of 2024 will reach about 20 billion US dollars, exceeding the annual sales in 2023. As of July this year, Temu has entered more than 70 countries and regions around the world.