Pinduoduo's market value surpassed Alibaba, what information was revealed?
Image source@Visual China
Text | Whale Merchant, Author | Three
It has been exactly a week since Ma Yun "liked" Pinduoduo on Ali's intranet. At present, from the perspective of market capitalization, Pinduoduo can be regarded as worthy of Ma Yun's praise.
As of today (December 6), Pinduoduo has a total market value of about $190.6 billion at $143.46 per share (pre-market), surpassing Ali's market value of $184.3 billion, which is 4.6 times the current market value of JD.com.
Although the market value has strong volatility, especially Pinduoduo, which is the new "first brother of e-commerce", although the stock price has not returned to the peak value of $212.6 per share (mid-February 2021), and the stock prices of major Internet companies such as Alibaba, JD.com, and Kuaishou have also been "cut in half" in the past two years and have failed to show a trend of climbing to the top, the "differential treatment" of the capital market is enough to reflect the gap in the future expectations of each company.
You must know that Ma Yun used to describe Ali as "unable to find an opponent with a telescope", and now he has also achieved "looking at others (including opponents) with appreciation".
It seems to be a simple change in stock price and a change in the attitude of e-commerce bosses, but the key is to return to the perspective of the transformation of the underlying business logic to examine what information this landmark event reveals.
Looking back on last week, Pinduoduo posted a financial report on the front foot, and Ali employees posted on the intranet with a sigh, "That inconspicuous one is about to become a big brother."
One stone stirs up a thousand waves. Ma Yun, the low-key founder of Alibaba, then replied to the post, "I firmly believe that Ali will change, and Ali will change." All great companies are born in the winter", and reiterated the mission and vision, "No one has been a good person, but the people who can reform for the sake of tomorrow and tomorrow, and the organization that is willing to pay any price and sacrifice is respectable".
What Jack Ma said is true. Pinduoduo's decision-making, execution, and internal management in recent years are interlinked and are the cornerstone of its development and growth.
From the perspective of expansion, Pinduoduo's decision-making power, that is, at the beginning of the business, chose to take root in agriculture, white label to brand expansion, and subsidy concession for scale. In terms of execution, once Pinduoduo's senior management discovers a new opportunity, the team will adjust and verify it within a few hours or days, land with strong execution, and adjust it at all times in follow-up practice.
For example, use low prices to capture the sinking market. With the help of WeChat traffic, Pinduoduo aggressively recruited white-label merchants and tail-end goods brands that left Taobao and JD.com, and carried out long-term viral spread through the "slash" model, stabilized the minds of "low-price" users, and penetrated "outside the five rings".
This path of "throwing money" to buy traffic continues into this year. This model made Pinduoduo's development often in a state of loss for the first five years, until 2021, Pinduoduo's net profit attributable to the parent company turned positive to US$1.082 billion, and further increased to US$4.394 billion in 2022. In addition, the number of Pinduoduo users has exceeded 869 million by the end of 2022.
The performance of Pinduoduo's main station is in line with Duan Yongping's evaluation of Huang Zheng in the early years. Duan Yongping once said, "Huang Zheng is a rare and perceptive person I know, who pays attention to the essence of things. When he learned that Huang Zheng had created Pinduoduo, he said: "I haven't used Pinduoduo yet, but I have a high level of trust in Huang Zheng." Give him 10 years, and everyone will see how great he is. ”
In a word, it is a prophecy. Huang Zheng does not need 10 years, only 5 years, has allowed consumers to experience Huang Zheng's "extraordinary".
In addition to the e-commerce business, once Pinduoduo's senior management finds that a business is close to the ceiling, they will lead the team to leave decisively and go to the next battlefield.
Take the new strategic projects Duoduo Grocery and Temu as examples. According to relevant media reports, when Duoduo Grocery opened in the early days, from the management to the front-line employees, they all slept in the warehouse, dealing with suppliers, external carriers, and trunk line dispatchers every day. Front-line personnel maintain a deep understanding of the business, making Pinduoduo's strategic planning clearer.
In the early days of Temu's expansion, Pinduoduo poached people from SHEIN with a salary increase of 50% or even double, and deployed personnel from Pinduoduo's main station and Duoduo grocery shopping. In terms of internal strategy, Temu conforms to Huang Zheng's idea of "duty", greatly simplifies the burden on merchants, and does product feedback, marketing planning, fulfillment and distribution by themselves, so that merchants have sufficient energy to manage goods. In addition, with exclusive discounts for new users, free shipping, 1 cent goods and other services, it has directly reached consumers in more than 40 countries.
The popularity of Pinduoduo's main station, Duoduo Grocery Shopping, and Temu is related to the recent hot stalk of "It's not that down jackets can't be bought, but that military coats are more cost-effective". Many people in the industry believe that Pinduoduo is taking advantage of the "east wind" of affordable consumption. However, the author believes that the next sentence of the current situation to create heroes is also timely, and the advantages of the general environment are combined with the above "wolf nature" of Pinduoduo, so that Pinduoduo has today's results.
In the third quarter of this year, Pinduoduo's revenue was 68.84 billion yuan, a year-on-year increase of 93.9%, and its operating profit reached 16.7 billion yuan, a year-on-year increase of 60%, 4 billion more than the previous quarter.
In terms of specific business, Pinduoduo's commission income in the third quarter increased by 315%, of which 39.6877 billion yuan came from online marketing services and other revenues, a year-on-year increase of 39%. The revenue from transaction services was 29,152.7 million yuan, a year-on-year increase of 315%.
Although the relevant data of Temu was not directly disclosed in the financial report, many analysts believe that Pinduoduo's revenue from trading services can grow significantly this quarter, mainly due to the growth trend of cross-border business represented by Temu exceeding expectations.
Alicia Yap, co-head & managing director of Citigroup Global Markets' Asia pan-Asia EMT division, analyzed before the earnings release that "Temu's revenue may reach $4.2 billion in the quarter, accounting for about 13% of Pinduoduo's total revenue." ”
But Pinduoduo can't be blindly optimistic. The comprehensive results of Ali and JD.com for many years are not a one-day cold.
Ali
JD.com
Increasing the "low-price market"
As of the third quarter of September 30, 2023, Alibaba's total revenue was 224.79 billion yuan, an increase of 8% from 207.18 billion yuan in the same period last year, slightly exceeding market expectations.
In terms of business, after the adjustment of the organizational structure, Alibaba's six major business groups have achieved positive revenue growth. Focus on Alibaba's pillar business, Taotian Group (which owns Taobao, Tmall, Tmall Global, Taobao Live, Tmall Supermarket, Taocaicai and other platforms), with revenue of 97.6 billion, a year-on-year increase of 4%.
In the quarter, Taotian Group's Tmall "Double 11" participating merchants, transaction buyers and order volume all achieved positive growth compared with the same period last year, and the growth rate of customer management revenue (CMR) was 3%. However, due to the impact of intensified e-commerce competition, excluding unpaid orders, Taobao and Tmall's online GMV decreased slightly.
Related to Pinduoduo, Whale Business mentioned in the previous article "After the first-level strategy upgrade, where is the low-price "sledgehammer" of 1688?", 1688 has been upgraded to Taotian's first-class business. Next, the competition for the domestic wholesale business and the sinking market in 1688 will inevitably continue. It is also inevitable that the war with Pinduoduo will continue.
The decline in Ali's market value is directly related to the performance of the financial report, and it is also related to the latest action of Alibaba's spin-off, that is, it will no longer promote the complete spin-off of Alibaba Cloud, and the Hema IPO plan has also been suspended.
Alibaba attributed the suspension and shelving of these two plans to changes in the external environment: "The United States has recently expanded restrictions on the export of advanced computing chips, and a complete spin-off of Alibaba Cloud may not achieve the expected effect of increasing shareholder value." According to relevant media reports, Hema financing is not smooth, and internal adjustments and re-evaluation are needed.
Of course, Pinduoduo is not only gradually catching up with Alibaba. In terms of market capitalization, Pinduoduo also surpasses established brands such as JD.com and Vipshop. JD.com currently has a market capitalization of $41.1 billion and Vipshop is $8.2 billion. Among them, Jingdong, which has always advocated genuine and good goods, made great efforts to label itself as "low price" at the beginning of the year, hoping to expand the sinking market.
Looking at JD.com's 2023Q3 financial report, its total revenue was 247.7 billion yuan, a year-on-year increase of 2%. As soon as the financial report was issued, JD.com ushered in a long-lost surge. But from the beginning of the year to the present, JD.com's market value has evaporated by $70 billion.
High-quality growth, all on par with AI
Ali and JD.com have already built a complex and huge business territory, from grass planting, purchase to logistics, and after-sales, all elements are interlocking. In contrast, this year's Temu liquidation, the main station "bombing the store" and other incidents, means that Pinduoduo's business still has a lot of problems to solve. Therefore, Chen Lei has repeatedly emphasized high-quality growth and the power of Chinese manufacturing.
What's more noteworthy is that in Jack Ma's rare intranet speech, Jack Ma proposed a concept - "AI e-commerce".
For large models, Ali e-commerce has been in practice. Alibaba has said that in the AI era, Alibaba will resolutely increase its investment in Alibaba Cloud, so that Alibaba Cloud can focus on the "AI + cloud computing" development strategy without distraction, and reduce the adverse impact of uncertainties on future development as much as possible;
In September this year, Taobao's large-model native AI application "Taobao Ask" was launched for external testing. "Taobao Ask" is connected to Alibaba Cloud's "Tongyi Qianwen" model, which can provide consumers with service functions such as product selection strategies, product recommendations, and itinerary suggestions.
According to reports, Taotian Group is preparing to build a large model team recently, and has begun recruitment, and the formation of the team is jointly led by Dai Shan, CEO of Taotian Group, Ruohai, CTO of Taotian Group, and Zheng Bo, CTO of Alimama. Specifically, the research on the large model of Taotian Group will mainly focus on two scenarios: search and promotion (search, advertising, recommendation) and the content of "shopping".
In the current era of artificial intelligence, large manufacturers have come up with the latest scientific and technological achievements, Ali and JD.com have launched large models, Tencent has taken out digital humans, Meituan uses drones, and Pinduoduo has not yet handed over its works.
According to reports, Pinduoduo has set up a large model team of dozens of people, and the team will explore the application of large models in Pinduoduo's customer service, dialogue and other scenarios, and will expand to its cross-border e-commerce platform Temu intelligent customer service, search, recommendation and other business scenarios.
In addition, Pinduoduo knows that as a rising star, it needs to continue to increase R&D investment in many businesses. In the third quarter, Pinduoduo's R&D expenses reached 2.85 billion yuan, an increase of 5.5% year-on-year to 2.698 billion yuan. "In the future, we will continue to reinvest in agricultural technology, supply chain technology and overall core R&D, and use technology to create long-term positive value. Chen Lei said.
In the future comprehensive competition, the market value of giants such as Ali and Pinduoduo may once again widen the gap, showing a trend of alternating leads. Whether it is a cutting-edge e-commerce force or an established e-commerce company, there are still many "hard battles" to fight in the next global reshuffle.