How does Pinduoduo make money, why it surpass Alibaba and become No. valuable listed Chinese companies in US?


Pinduoduo related content in my books

I mentioned Pinduoduo in my previous post “Chinese apps are taking over the world, accounting for 33% of global downloads“; I also mentioned Pinduoduo (ticker: PDD), a Chinese company, in two of my books. Regarding e-commerce, the content in the book will not be repeated. Investors are advised to refer to the relevant chapters of my two books:

This post will give you a more in-depth introduction to this company.



Pinduoduo founder Colin Huang is a typical serial entrepreneur.

Colin Huang’s parents were from ordinary backgrounds. His parents received junior high school degrees and worked as ordinary workers in factories. He has been number one since childhood. Colin Huang himself was smart, hard-working and had outstanding grades since childhood. He graduated from Zhejiang University, one of China’s top prestigious schools. In 2002, Colin Huang was admitted to the University of Wisconsin-Madison in the United States to study for a master’s degree in computer science.

He once interned at Microsoft (ticker: MSFT) for a long time and stayed in research institutes in Beijing and the United States. After completing his master’s degree, Colin Huang joined Google (ticker: GOOG and GOOGL), a subsidiary of Alphabet, which was just established at the time, in early 2004 and had three years of experience. He was first responsible for the development of advertising backend systems at Google headquarters. Later, as Google entered China, Colin Huang returned to Beijing as one of the first members and participated in the preparation of Google China.

When he joined Google, it was just when Google began to develop at a rapid pace. Within half a year of joining Google, Google went public. Colin Huang’s salary has increased a lot, and the options are a huge sum of money. It is precisely because this important experience at Google will help him a lot in establishing an online e-commerce business in the future, as well as his vision of the Internet world and the technology industry.

The history of Pinduoduo


After leaving Google, with Duan Yongwen’s assistance and his own efforts, the company he founded, Oku, became the top three e-commerce website in the mobile phone and electronic education categories three years later, with annual revenue of more than 60 million yuan. Because he analyzed that he could not advance further in this field, he felt that he could not compete with (ticker: JD) in this industry, so he might as well give up voluntarily. He decided to sell the company.


Before the sale of Oku was completed, Colin Huang had hatched a new company from Oku in 2009, called Leqee, which was engaged in e-commerce agency operations. The core members were all the original members of Oku. .

Xinyoudi Studio

In 2013, while Colin Huang was running Leqi, he also transferred core personnel from Leqi and established a new company, a game company called Xinyoudi Studio.


While recuperating at home, Colin Huang played with his mobile phone every day and discovered a phenomenon: the time people spend on mobile social apps accounts for 40% of the time they use mobile phones, but the e-commerce sales achieved from this are less than the total e-commerce sales 1%. He felt that there was much to be done here.

While maintaining the operations of Leqi and Xinyoudi Studio, Colin Huang started working on a new project: using WeChat’s social connections to create group groups. The name of the new project is: Pinhaohuo. Pinhaohuo started by registering a service account on WeChat, posting information about fruit grouping, and then spreading the information virally through the community. After the customer gathers enough people in the group to place the order, the team will put together the goods and then go purchase fruit for delivery. Due to the very low price of group buying fruits, it quickly attracted the first batch of seed users and was officially launched on April 10, 2015.

As Colin Huang vigorously strengthened the construction of back-end operation capabilities, Pinhaohuo immediately began to take off. After a few months, the number of active users exceeded 10 million.


Pinduoduo has keenly observed this and used gamification thinking to design the entire shopping process so that the behavior of shopping is closely integrated with social networking and playing games. This point was later summarized by Colin Huang as: Pinduoduo is doing “Costco+Disney”, and it was written into Pinduoduo’s prospectus.

Xinyoudi Studio mobilized more than 20 people and started operating a new project, named: Pinduoduo. In September 2015, Pinduoduo was launched.

Ingeniously designed by the game company, Pinduoduo’s “Group Buying” and “Chopping” have caused viral spread on WeChat. During that time, almost every WeChat user’s phone was hacked by friends. Information bombardment comes round after round.

It is conceivable that after Pinduoduo was launched, its development speed was even more exaggerated than that of Pinduoduo. Without any advertising in the early days, relying solely on WeChat user fission, daily orders exceeded one million and monthly GMV exceeded 1 billion within one year of launch.

Afterwards, Colin Huang merged Pinduoduo and Pinhaohuo. The new company continued to use the name Pinduoduo and made rapid progress. It carved a new path between the two giants Alibaba and and grew into the third largest company in China. Big e-commerce.

Helps from noble people

William Ding

When Colin Huang was studying at Zhejiang University, he attracted the attention of William Ding, the founder of NetEase (ticker: NTES), because he published some in-depth insights on a technology forum. NetEase’s William Ding obtained Colin Huang’s communication through the Internet and solved a technical problem that troubled William Ding. After that, William Ding and Colin Huang still kept in touch. Later, Colin Huang went to study in the United States, and William Ding enthusiastically introduced his friends to him.

Colin Huang went to the University of Wisconsin-Madison in the United States to study for a master’s degree in computing. William Ding introduced him to his friend Duan Yongping, another noble person who influenced his life. Duan Yongping admired him very much as soon as he chatted with him, and soon became his lifelong friend. Since then, Duan Yongping often gave Colin Huang’er advice and taught him many principles of life, business and entrepreneurship. For 22-year-old Colin Huang, having such a big boss at his side to give guidance and support at any time will undoubtedly be of great help to his life.

Duan Yongping

Colin Huang himself believed that he was another disciple of Duan Yongping, one of Duan Yongping’s three subordinates at BBK Group. Duan Yongping responded modestly to reporters’ questions and said that Colin Huang’s achievements were his own efforts and had nothing to do with him. But later Colin Huang publicly stated that he had received guidance from Duan Yongping in various aspects, including life and entrepreneurship, and he identified Duan Yongping as his mentor in life.

Note: Tony Chen, Wei Shen, Zhijiang Jin, and Pinduoduo’s Colin Huang are known as Duan Yongping’s “four disciples”. They are now the founders of OPPO, vivo, CEO of BBK, and founder of Pinduoduo.

In 2006, Duan Yongping spent 4 million yuan to treat Buffett to a meal. At this table, in addition to his family, Duan Yongping also brought a young man. This person was Colin Huang, who was only in his 20s at that time. At that time, Colin Huang was still a little-known person, it can be seen that Duan Yongping supports and loves Colin Huang. According to Colin Huang’s recollection of the lunch many years later, Colin Huang believed that it would be extremely helpful to his future entrepreneurship, stock market, and vision.

Note: For Duan Yongping’s full story in detail, please see my another articles: “Duan Yongping’s investment empire and his BBK Group


Tencent (ticker: TCEHY) has a keen eye to recognize heroes and invested in Pinduoduo very early. Because they are large and medium-sized shareholders, and Pinduoduo relies on social networks to rise, the two parties hit it off. Pinduoduo used the WeChat social networking platform, which is controlled or almost monopolized, to spread virally and create astonishing e-commerce transaction volume achievements.

In 2019, Tencent’s shares accounted for 30.9% of Pinduoduo’s equity. Even by 2023, Tencent’s shares will still be as high as 14.7% of Pinduoduo’s shares.

Sun Tongyu

He is employee No. 003 of Alibaba and founded Taobao until 2008. If we talk about the person who has the greatest achievements and the most experience in e-commerce in China, Sun Tongyu is considered the number one. Therefore, if Colin Huang wants to find someone to ask for advice on how to build an e-commerce platform,
After searching all over China, Sun Tongyu was the most suitable person.

Wang Wei

Wang Wei is the founder and head of SF Express. E-commerce is inseparable from logistics, and Wang Wei is the leader of the domestic logistics industry. If Pinduoduo wants to improve its logistics, Wang Wei is the best person to consult.

Company operations


In July 2018, less than three years after its establishment, Pinduoduo was successfully listed in the United States with a market value of 160 billion yuan. Colin Huang’s personal assets immediately exceeded 80 billion yuan (in 2023, his shares accounted for 26.5% of Pinduoduo’s equity). It is the most amazing and fastest wealth creation myth in the history of China’s Internet development.

Success factors

There are below four factors:

  • One is to seize the opportunity of the mobile social and decentralized era. We spend about 40% of our time on mobile social products every day, mainly WeChat. Decentralization is reflected in Pinduoduo’s transformation of “people looking for goods” into “goods looking for people.”
  • Add an element of gaming to your shopping. Pinduoduo gives people a good reason: I am not doing it for fun, but to save money for my family.
  • A team that has been working together for a long time, continues to grow, and is capable of everything.
  • Luck and the help of noble people.


  • Counterfeit products are widely criticized.
  • Information bombardment.
  • Complaints from suppliers: After Pinduoduo grew stronger and regulatory requirements became stricter, many merchants began to complain.
  • Employee benefits: Many people may not know that Pinduoduo does not have weekend breaks. But when Pinduoduo went public in 2018, Colin Huang gave an internal speech and some employees asked whether they could have weekend breaks. Colin Huang denied this.

Relying on second- and third-tier low-price group buying to rise

Pinduoduo uses the social e-commerce model to closely integrate social networking and shopping, allowing consumers to do group purchases with friends and family while shopping. Allow users to place orders with sellers or manufacturers through group purchases to obtain significant discounts.

Secondly, Pinduoduo has successfully captured consumers in China’s vast sinking market. Although the purchasing power of a single consumer in this market may not be as good as that of consumers in first- and second-tier cities, the overall scale of this market is huge. Pinduoduo’s low-price strategy caters to this segment of consumers. the needs of the users.

Share price performance

The new leader in Chinese concept stocks

As of the close on 11/30/2023, it closed up 4.03% at $147.44, with a total market value of $195.9 billion. On the same day, Alibaba closed up 0.25% on the New York Stock Exchange to US$74.88, with a market value of US$190.7 billion.

Pinduoduo’s market capitalization is nearly $196 billion, surpassing historic rival Alibaba, which is worth $8.7 billion less. (Game and social media giant Tencent is also an important competitor of Alibaba, with a market value of nearly US$400 billion.) Today, Pinduoduo’s market value has surpassed and Alibaba, and it only took Pinduoduo eight years.

Reasons to surpass Alibaba

The market value of new e-commerce power Pinduoduo has surpassed that of leading Alibaba (ticker: BABA), becoming the Chinese concept stock with the highest value in the US stock market. The main reason is that Pinduoduo’s cross-border e-commerce platform Temu has grown rapidly, showing that its innovative model and future development potential are greater.

When Alibaba reached its peak in October 2020, its market capitalization exceeded US$850 billion. Since then, its stock price has plummeted, with no signs of stopping.

Pinduoduo has always used low prices as its main competitive strategy. This caters to the trend of consumers increasingly favoring cost-effective products.

When the growth of e-commerce giants such as Tmall, Taobao and began to slow down, there were many reasons why Pinduoduo achieved amazing growth: first,

Industry analysts said that Pinduoduo’s market value surpassed that of Alibaba, reflecting investors’ different views and expectations of the two companies. Investors may believe that Pinduoduo’s innovative model and future development potential are greater, and therefore give it a higher valuation. Although Alibaba’s business is diversified and mature, it may face some growth pressure.

TEMU is taking over Pinduoduo’s main website and becoming the “second curve” of performance growth. In the third quarter of this year, Pinduoduo’s commission income was RMB 29.2 billion (approximately NT$129.4 billion), a surge of 315%, which is speculated to be mainly due to the rapid growth of TEMU.

In September 2022, Temu was launched in North America for the first time. In more than a year, it has entered European and American countries such as the United States, Canada, Australia, the United Kingdom, and France, as well as Asian countries such as Japan, South Korea, the Philippines, and Malaysia. So far, it has been launched in 48 countries and regions.

Temu was the most-downloaded iPhone app in the US in 2023.

Latest quarter’s performance

Pinduoduo’s financial report released on November 28, 2023 showed that the total revenue in the third quarter was 68.84 billion yuan, a surge of 93.9% over the same period last year; the net profit was 17.0271 billion yuan, also a substantial increase of 37%. Because the revenue was much higher than expected, Pinduoduo’s stock price rose 18.08% on the US stock market that day.

Alibaba’s financial report for the same period was revenue of US$30.81 billion, a growth of only 9%. The cloud computing department performed poorly, growing only 2.2%. What’s more serious is that the plan to spin off the cloud computing department was canceled due to U.S. chip restrictions. To make matters worse, the Jack Ma family sold a large number of Alibaba shares on the New York Stock Exchange. All factors combined caused the company’s stock price to plummet 9.14% that day.

Market valuation

Pinduoduo’s forward price-to-earnings ratio is 21.4, the highest among rivals such as and Vipshop (ticker: VIPS). Alibaba has a forward price-to-earnings ratio of 7.62, according to LSEG estimates.

credit: Pinduoduo

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