Pinduoduo’s market value shrank by 400 billion overnight. Has the soaring Temu also slowed down?

It is learned that Pinduoduo recently disclosed its second quarter financial report ending June 30. Pinduoduo, which has been at the center of public opinion several times in recent times, has handed in a report card in Q2.

On August 26, Pinduoduo’s second quarter financial report was officially released. The report shows that Pinduoduo achieved revenue of 97.06 billion yuan in Q2, a year-on-year increase of 86%; the net profit attributable to Pinduoduo’s ordinary shareholders was 32.01 billion yuan, a year-on-year increase of 144%.

At first glance, this report card has many highlights, with significant growth in both revenue and net profit. However, the capital market's response to this was somewhat cold: Pinduoduo's US stock fell by about 30%, and its stock price fell below $100 per share for the first time since November 2023.

According to industry reports, as of the close of the day the financial report was released, Pinduoduo's market value was US$138.8 billion, down more than US$50 billion from the previous trading day, equivalent to nearly RMB 400 billion, which is equivalent to the evaporation of NetEase.

Not only that, the net worth of its founder Huang Zheng plummeted, with his wealth shrinking by US$14.1 billion overnight, which was his largest single-day loss in history. He was thus replaced by Zhong Shanshan as the richest man.

In fact, although the overall performance was impressive, its Q2 revenue was lower than the market expectation of 99.985 billion yuan. In Q1 2024, Pinduoduo's revenue increased by 130.66% year-on-year, and it can be seen that its revenue growth rate has declined significantly from the previous quarter.

As market competition becomes increasingly fierce and the uncertainty of the consumer environment increases, Pinduoduo's business operations are being disturbed by internal and external factors. For this reason, in the face of the current considerable revenue and profits, Pinduoduo has also proactively released risk signals that future profits will decline.

From the perspective of Pinduoduo's revenue structure, it is mainly divided into three major sectors: the domestic Pinduoduo main site, Duoduo Maicai and overseas business led by Temu. Due to the intensified competition in domestic e-commerce stocks, the revenue of Pinduoduo's main site has inevitably fallen into the dilemma of slowing growth.

Turning our attention to the overseas business segment, although Pinduoduo has not disclosed the specific sales figures of Temu, according to multiple sources, the currently booming overseas Temu has become an important growth engine for Pinduoduo.

Data shows that in the first half of 2024, Temu's sales will reach 20 billion US dollars, surpassing the total sales in 2023. It is also predicted that in 2024, Temu is expected to account for 43% of Pinduoduo's total revenue.

Currently, Temu is engaged in managed e-commerce business overseas, with its main sources of income coming from the difference between purchase and sale prices and transaction service fees. According to the financial report, Pinduoduo's transaction service revenue in Q2 was 47.94 billion yuan, and Temu's revenue was also included in this segment.

As for the current development of Temu, as the market expansion pace is getting bigger and bigger, it has already established a firm foothold in many markets around the world. According to Statista data, as of July 2024, Temu has been downloaded 680 million times.

However, after nearly two years online, Temu is now also facing the risk of weakening performance, which can be seen from the slowdown in the growth of its user numbers.

At the same time, as the saying goes, "a tall tree attracts the wind", Temu, which has been booming overseas, has inevitably been subject to key supervision in various countries. In addition, the platform's own business environment still needs to be improved. Currently, Temu is facing considerable growth pressure under its gorgeous and glamorous appearance.

For Pinduoduo, whose main site business growth has slowed down, as domestic e-commerce growth has peaked and competition among major platforms has become increasingly fierce, accelerating the layout of overseas business is undoubtedly an inevitable choice to expand new growth.

Temu’s development in the past six months also confirms Pinduoduo’s ambition. So far, Temu has entered more than 70 countries and regions in North America, Europe, Asia, etc.

At the same time, its business model has also tended to diversify. After setting off a full-hosting craze in the industry, it launched a semi-hosting model in March this year to cultivate and attract more high-quality merchants.

According to recent foreign media reports, Temu's semi-hosting service has expanded to Europe, and has officially opened registration for local European stores, inviting European merchants to join.

Since July, Temu has been officially open to companies with EU entities, including German, French, Italian, Spanish, British and Dutch companies.

But behind these series of actions, Temu is actually facing many regulatory risks.

In April this year, the US Senate asked President Biden to ban Temu on the grounds that Temu was involved in intellectual property infringement. Not long ago, on August 15, the attorneys general of 21 states in the United States launched a joint investigation, asking Temu to explain issues such as consumer data privacy and protection.

In Europe, Temu has been included in the list of platforms facing the EU's highest level of digital scrutiny and is therefore subject to the EU's strictest supervision.

In addition to external regulatory pressure and competitive challenges, Temu is also gradually losing the support of the people on the merchant side.

Since Temu was launched, it has relied on its extreme cost-effectiveness and viral marketing , capturing the hearts of a large number of overseas users, with both traffic and user scale soaring. Under the trend, many sellers who entered the market first successfully seized the opportunity, took advantage of the momentum to increase orders and expand their business boundaries.

However, as the platform continues to develop, risk control rules and regulatory policies have become increasingly strict. For example, recently, it has targeted a large number of semi-hosted stores for illegal account scanning. In addition, under the strict control of high fines, many sellers have fallen into business difficulties and even triggered a series of rights protection storms.

Under the pressure of multiple factors, a group of sellers who were the first to reap the benefits are facing operational challenges.

Today, Temu is still running wild, and has even ambitiously set a grand goal of annual sales of 60 billion US dollars. But it is obvious that its pace is getting heavier and heavier.