On the evening of Aug. 21, Pinduoduo announced second-quarter 2020 results: GMV grew 79 per cent year-on-year in the past 12 months (from which it can be inferred that GMV grew by about 50 per cent in a single quarter); operating revenue grew by 67 per cent; deducting non-net losses narrowed sharply; annual active buyers (AAC) grew to 683 million, while monthly active users (MAU) increased to 569 million.

The results are clearly mixed and destined to spark a new round of controversy, as both bulls and bears can find sufficient and persuasive arguments:

• At the user level, Pinduoduo added 55.1 million years of live buyers and 81.4 million monthly active users in just one quarter-an incredible feat.

• In the same quarter, JD.com added only 30 million-year-old live buyers, and Taobao / Tmall added only 16 million-year-old live buyers; after getting a lot of promotion resources, the MAU of Taobao special version reached 40 million, which is still far lower than Pinduoduo's new MAU in one quarter.

• Note that the MAU announced by Pinduoduo only includes its own APP, excluding third-party channels such as Mini Program.

• At the GMV level, however, the growth rate of Pinduodo has slowed significantly. We can calculate that its quarterly GMV growth rate was about 90% last quarter and only 50% this quarter; ARPU must have declined in a single quarter.

• By contrast, the GMV growth rate of Tmall entities has reached 27% year-on-year, that is, Pinduoduo's speed of catching up with Taobao / Tmall has greatly slowed down.

So the question is: why does the user growth of Pinduoduo continue to be high, while the growth rate of GMV slows sharply? Why does the unit price of its customers fall instead of rising? Is this the company's active choice, or is it the result of hitting a growth bottleneck?

Furthermore, is Pinduoduo's barbaric growth in the past four years coming to an end?

JD.com launched a fierce offensive against Taobi e-commerce in 2014-17, and was confident that he could catch up with Taobi within three years, but was narrowed by the gap again in 2018-will the same thing happen to Pinduoduo?

These questions are not that easy to answer. We need to understand what Pinduoduo has done and planned to do since 2020. Let me first talk about my general conclusion, which is divided into the following three points:

• Pinduoduo's advantage in the traffic side is unshakable, and the competitiveness of its social / commodity / leisure game trinity guest acquisition system has not been weakened. The economic situation in 2020 has prompted more consumers to turn to Pinduoduo, and efforts in agricultural products have also helped to develop user habits. There is no need to worry about this.

• As can be seen from the financial results, Pinduoduo seemed to have cut subsidies last quarter, at least without increasing them (measured by subsidy / GMV or subsidy / income); this may be the main reason for the slowdown in GMV growth. In addition, in this year's 618th Shopping Festival, BABA and JD.com have invested heavily in the army, while Pinduoduo is more conservative-in the final analysis, the stage of the Shopping Festival is not very suitable for Pinduoduo. Therefore, the slowdown in GMV and the sharp reduction in non-net losses occurred at the same time.

• In terms of product iteration, Puduo is very clear-headed: not to cater to the current aggressive live e-commerce trend (very correct! ), but vigorously develop small circles and strengthen the store's attention function. In this way, Pinduoduo can not only further consolidate user stickiness, but also make comprehensive preparations for brand upgrading. Since the mind of Pinduoduo is clear, it will not decline.

Let's start the discussion.

First of all, Pinduoduo's guest acquisition / retention / pull back systemIt depends on three main factors:

The social and interesting nature of Wechat communication, low-cost popular style goods (most white cards + a small number of big brands), as well as casual games within the application. The above-mentioned "trinity" has given Pinduoduo a huge advantage in many aspects, such as the length of time used by AAC/MAU/DAU/ users, and the advantage has not yet shown signs of weakening. None of the competitors can replicate this advantage--

Some people say that the MAU of Jingxi Mini Program has exceeded that of Pinduoduo in the second quarter of 2020, but as far as I know, this is not the case. Whether it is Jingxi, Taobao special version or Ju bargain, in the flow end is far less than Pinduoduo. I know someone will definitely leave a message about how powerful Kyung-hee is, but that's not true.

The high degree of macroeconomic uncertainty in 2020 has increased consumers' price sensitivity, prompting them to rely more on platforms such as Pinduoduo. In 2017-19, many self-styled "high-end consumers" may deliberately not use Pinduoduo purely for the sake of face, but such people should be rare this year.

Now Pinduoduo has made great efforts to develop agricultural products, including fruits and vegetables, grain and oil, and local agricultural products, which are often consumed frequently. All in all, I expect that AAC/MAU of Pinduoduo will continue to grow rapidly until it reaches the upper limit of about 1 billion users, which is the total number of China Mobile Limited netizens.

Second, judging from the financial results, Pinduoduo seems to have reduced the intensity of subsidies, at least not increased.In this quarter, Pinduoduo's sales expenses were 8.9 billion yuan, an increase of 50% over the same period last year, roughly similar to the growth rate of GMV in a single quarter.

The proportion of sales expenses to operating income has dropped to 73%, the lowest level since listing-you know, Pinduoduo's sales expenses reached 108% of operating income last quarter! Pinduoduo could have expanded the 10 billion subsidy program indefinitely in exchange for more GMV, but it did not do so.

Pinduoduo's choice to tighten subsidies in the second quarter may have been affected by the "worst shopping festival in history": JD.com and Taobao / Tmall all invested heavily here, making it look like Singles Day.

In fact, Pinduoduo only began to hold his own 618 event in 2019, and this kind of shopping festival, which focuses on middle and high-end brands, has never been its home. It may be a more cost-effective strategy to avoid the fronts of Taobi and JD.com around June 18 and then fight back quietly in the traditional "e-commerce off-season" in the third quarter.

Thirdly, the iterative thinking of the product is correct and can avoid the mistakes made by competitors.

Since 2019, live e-commerce has become the focus of market attention, but Pinduoduo is not very interested in it. It has launched the live broadcast function, but only gives less resources. In fact, live e-commerce is not a new "business model" at all, but only a form of promotion.

It is not essentially different from issuing coupons or full deductions. Taobao, Douyin and Kuaishou Technology develop live e-commerce for different purposes: Taobao is to capture the length of time users use, while Douyin and Kuaishou Technology use live streaming as a tool to enter e-commerce transactions. Obviously, Pinduoduo does not have the above purpose, so there is no need to vigorously develop live e-commerce.

Pinduoduo's most important new feature this year is to spell small circles, which is so far the only successful "e-commerce social" platform. In the long run, it can also reduce Pinduoduo's dependence on Wechat. This function is very interesting, adhering to Pinduoduo's consistent "playground style".

At the same time, the strengthening of the attention function of the store is also worthy of attention: in history, Pinduoduo focused on the single-product SKU operation, and the store operation was not the key point; however, in order to enter the middle and high-end brand e-commerce, we must emphasize the store operation.

It seems that Pinduoduo knows exactly what to do and what to do, and the product iteration is on the right path, so there's nothing to worry about.

To sum up, this quarter's results seem to me to be mixed, but the happy factor is long-term, while the worrying factor is short-term.

What the market is most worried about is whether the "high growth period" of Pinduo will come to an end and enter the track of "steady growth", just like JD.com at that time-this worry is unnecessary.

The macro-economy, the industry situation and its own product iteration are all on the side of Pinduoduo, while its management keeps a clear head. However, the market seems to interpret the report as negative, so the share price has fallen as much as 10% before trading.

This is probably because Pinduoduo's previous rise was too fierce, and the market fulfilled too many positive expectations prematurely. Market sentiment is like a pendulum, always swinging between excessive pessimism and excessive optimism, even if the market capitalization reaches the scale of BABA and Tencent.

Pinduoduo will eventually face a bottleneck, waging a more fierce battle of blood and fire with Amoy and JD.com-but not now, but in the second half of 2021 or 2022.

At that time, the GMV of Pinduoduo will infinitely approach JD.com, and reach Taobao's 1max 4 or even 1max 3; it is in urgent need of conquering more territory, improving ARPU and monetization.

Therefore, it will launch a fierce attack on BABA's core categories of clothing and cosmetics, as well as JD.com 's core 3C categories. The scale and intensity of that battle will dwarf today's "tens of billions of subsidies".

It will be a very long war, and it may take more than a decade, and we are not even half the way yet. There are still a lot of good shows to come, at least for now, the momentum is still on Pinduoduo's side.