On May 22, Pinduoduo (拼多多), a fast-growing e-commerce platform in China, announced its unaudited financial results for the first quarter ended March 31, 2019. Total revenues in Q1 reached CNY 4,545.2 million (USD 677.3 million), an increase of 228% from CNY 1,384.6 million for the same period in 2018.
GMV in the twelve-month period ended March 31, 2019 was CNY 557.4 billion (USD 83.1 billion), an increase of 181% from CNY 198.7 billion compared to the GMV performance in 2018. Operating loss was CNY 2,120.5 million (USD 316.0 million), compared with operating loss of CNY 253.1 million in the same quarter of 2018.
“We kicked off 2019 with a strong quarter thanks to the continued support of our users,” said HUANG Zheng, Chairman and Chief Executive Officer of Pinduoduo. “GMV in the last twelve months increased to CNY 557.4 billion, driven by the rapid growth in our annual active buyer base and annual spending per active buyer. These metrics reflect our success in increasing user engagement and improving user experience. We will continue to invest strategically in our users and merchants in 2019 and drive greater engagement with more practical functions and fun features.”
As to the 228% increase of total revenues, HUANG added, “This was driven primarily by an increase in our online marketing services revenues. The increase in marketing spend by our merchants is an endorsement of the value that our platform offers. As our users’ shopping experience improves on our platform, they transact more frequently and confidently, which translates to greater exposure and return on investments for our merchants. We are still very early in monetizing our platform and will continue to be mindful of balancing monetization and growth.”
Despite total revenue and GMV, the market focus on two other important aspects of Pinduoduo. One is its number of users, to be more precise, the monthly active users (MAU). The other is the expenses Pinduoduo spend on sales and marketing.
Average monthly active users of Pinduoduo in the Q1 were 289.7 million, an increase of 74% from 166.2 million in the same quarter of 2018. The MAU is growing at a high rate for the past 12 months, however, if compared the MAU with last quarter, the growth continues but shows a low growth posture.
Sales and marketing expenses were CNY 4,889.3 million (USD 728.5 million), an increase of 302% from CNY 1,217.5 million in the same quarter of 2018.
Sales and marketing expenses in Q1 2018 increased by CNY 1.14 billion compared with 2017, while total revenue increased by CNY 1.35 billion for the same period. That means the sales and marketing expenses of CNY 1 can be exchanged for CNY 1.81 of revenue growth. By applying the same calculation, the sales and marketing expenses of CNY 1 can only be exchanged for CNY 0.85 of revenue growth from Q1 2018 to Q4 2018. From this perspective, it is not a very cost-effective deal for Pinduoduo’s online and offline advertisement and promotions and branding campaigns. That may also explain the slow-down of increase rate in sales and marketing expenses compared with Q3 2018.
In addition to sales and marketing expenses, Pinduoduo’s research and development expenses were CNY 667.1 million (USD 99.4 million), an increase of 816% from CNY 72.8 million in Q1 of 2018.