Pinduoduo: What to know about the Chinese e-commerce rival to Alibaba

In April 2018, Pinduoduo completed a new round of financing raising $3 billion at a valuation of nearly $15 billion. Given Pinduoduo’s WeChat-based ecosystem, Tencent joined the round as a returning investor. Price and social features are not only the only path to Pinduoduo’s meteoric rise, and spotting the right user profile is the last piece to the puzzle. Pinduoduo is now valued at a market cap of $81 billion which means its forward price to earnings multiple stands at around 32x. Since the listing of the Pinduoduo Inc ADR on the NASDAQ in July 2018, the Pinduoduo stock price has increased by more than 100%. The GMV basically represents the value of the total amount of goods purchased on the company’s platform.

The strong results boosted shares of PDD’s (PDD) Nasdaq-listed shares Wednesday, propelling its market value past $204 billion and making it China’s most valuable e-commerce company, ahead of Alibaba (BABA). Pinduoduo’s Temu is a cross-border e-commerce website with most products likely to come from overseas, especially China. China’s biggest technology companies from Tencent to Pinduoduo’s e-commerce rivals Alibaba and JD.com continue to pursue international hyperforex broker review markets.

How did the Pinduoduo team arrive at this business model?

“Our team has reverse engineered that code and we can confirm that it tries to escalate rights, tries to gain access to things normal apps wouldn’t be able to do on Android phones,” said Hyppönen. Google Play is not available in China, and Android users in the country download their apps from local stores. In March, when Google suspended Pinduoduo, it said it had found malware in off-Play versions of the app.

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He would then go on to start Xunmeng, a gaming studio that created web-based role-playing games. Xunmeng would form the basis for many of the gamification elements that are now present in Pinduoduo’s app experience. Users can play a game called Duo Duo Orchard, which requires them to plant and nurture a virtual tree with droplets that they earn from using the app.

The success of Pinduoduo has relied on its unique business model, a combination of group buying and social shopping. The business model of Pinduoduo is dependent on users sharing products with their network, which effectively lowers the customer acquisition cost. Buyers are encouraged to share product information on social networks and invite their friends and family to form a shopping team and benefit from attractive prices. Hence, buyers actively introduce others to Pinduoduo allowing the company to lower customer acquisition costs and increase organic traffic without too much difficulty.

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The Free Pass Card enables users to enjoy the group-buying discount without having to form a team. Users usually get one Free Pass Card libertex review after completing two purchases on Pinduoduo. The company capped the year off by turning another cost center, payments, into a revenue-generating outlet.

• While many apps collect vast troves of user data, sometimes without explicit consent, experts say e-commerce giant Pinduoduo has taken violations of privacy and data security to the next level.
• Users will get one Brand Card after they purchased a branded item, and they can alternatively share with their friends to attract them browsing and ultimately purchasing the branded products.
• Even though the analysis didn’t directly name the shopping giant, the report spread quickly among other researchers, who did name the company.

It’s no coincidence that founder Huang “Colin” Zheng, an ex-Google engineer, had prior startup experience on a consumer electronics e-commerce site as well as a WeChat based role playing game company. He deliberately sought to combine a game-like experience with e-commerce. This is evident in many game-like features that Pinduoduo uses to re-engage users, including special deals and promotions.

To “unlock” the discount, they have to form “shopping teams” of two or more people. They can join an existing team of friends or strangers or create their own team. Lastly, Pinduoduo also makes money from so-called merchandise sales, which are primarily fruits and other fresh produce sold via is Duo Duo Grocery platform (previously Pin Hao Huo).

The company has tended to focus on lower-income consumers by offering heavily discounted products. And it has been focusing on bringing agricultural products onto its platform to differentiate from rivals. The unique value of Pinduoduo mostly lies in its strong user engagement which differentiate itself and Groupon. The group buying model though is not just financial stimuli, besides, Pinduoduo utilizes the group buying model as its social incentives to encourage consumers to help them expand the user base through social platform sharing. Lastly, Pinduoduo also focused on attracting users from China’s lower-tiered cities.

Pinduoduo’s main users from these low-tier cities earn less salaries, they also spend less on housing, leaving them income available for frivolities. Many of Pinduoduo’s users only became internet users in recent years, and use the app not only for shopping, but as a way to spend their free time. Lesser-known brands were chosen over famous brands to erase any premium that comes from branding. Additionally, the costs for advertising and marketing are also lowered through user sharing to social media.

An ensuing report from Bloomberg said a Russian cybersecurity firm had also identified potential malware in the app. Multiple experts Day trading forex identified the presence of malware on the Pinduoduo app that exploited vulnerabilities in Android operating systems. Company insiders said the exploits were utilized to spy on users and competitors, allegedly to boost sales. It is one of China’s most popular shopping apps, selling clothing, groceries and just about everything else under the sun to more than 750 million users a month.