What’s new: Nasdaq-listed shares of Pinduoduo Inc. plunged 16% on Friday as the e-commerce giant reported lower-than-expected growth in revenue and buyers.
Revenue in the quarter ended Sept. 30 grew 51% year-on-year to 21.5 billion yuan ($3.37 billion), according to a press release, missing analysts’ average estimates of 26.6 billion yuan and marking its slowest quarter of growth this year.
Net profit attributable to ordinary shareholders was 1.64 billion yuan, compared with a loss of 785 million yuan in the same period last year, the document said. In an earnings call on Friday, CEO Chen Lei said the earnings will go toward Pinduoduo’s 10 billion yuan agricultural initiative announced in August.
Annual active buyers — user accounts that placed at least one order on Pinduoduo’s app or through social networks — rose 2% from the previous quarter to reach 867.3 million, compared with 4.5% growth in the first quarter and 3.2% in the second.
“Given our current scale, our user growth will inevitably be more moderate going forward. At the same time, as we serve a larger user base, we also face more diversified and even evolving user needs. Our task has become increasingly difficult,” Tony Ma, vice president of finance, said during the call.
The background: Pinduoduo generates revenue in three main ways: online marketing services, transaction services and merchandise sales.
The company has long relied on subsidies to gain new users. But it's now reducing sales and marketing expenses and spending more on research and development, according to Ma.
Marketing expenses as a percentage of revenues this quarter was about 45%, compared with 69% for the same quarter in 2020, he said.
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
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