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Editor’s note: This article is from the micro-channel public number “burning Finance” (ID: rancaijing), Author: Dawn, edit Allen, 36 krypton release authorized.

This is a very coincidental scene: Pinduoduo and Alibaba chose to release the first quarter earnings report for 2020 on the same day.
One is the big brother of e-commerce with a market value of more than 500 billion US dollars, and the other is an ambitious and controversial rising star.In the past year, they have fought from the wars of traffic, subsidies and talents to the war of words.
Even more dramatic is that after the release of the financial report, U.S. stocks opened and Ali fell 4.3% and Pinduoduo rose 4.4%.At the close, Ali’s decline reached 5.87%, and Pinduoduo’s increase reached 14.50%. The market chose to vote with its feet.
This wasn’t a magnitude game.From the perspective of income, in the first quarter, Ali was 11.43 billion yuan, more than 6.5 billion yuan, a difference of nearly 18 times.From the perspective of net profit, Ali made a profit of 3.2 billion yuan, and Pinduoduo had a net loss of 4.1 billion yuan.
But from a business perspective, the coordinate system has changed.
As of the end of the first quarter, Alibaba ’s annual active users were 726 million, an increase of 15 million from the previous quarter, and Pinduoduo ’s new users were 42.9 million, with a total of 628 million. The gap with Ali has narrowed to less than 100 million.Pinduoduo ’s GMV growth rate last quarter was 99%, and Tmall physical GMV growth rate was 10%.
It’s like, Ali drives an aircraft carrier, and Pinduoduo drives a cruiser. Although the cruiser is small, it’s fast and powerful, and you can’t fight it.At this time, it was false to say that Ali was not nervous.
Because of the epidemic situation, the first quarter financial report was a “comparative meeting” for many companies. The impact was too great, all reflected in the financial report, and Ali and Pinduoduo were no exception.
We compare the first quarter financial report to see what changes have taken place in this dramatic battle.
It’s all miserable, but it’s beyond expectations
Let’s compare the performance of the two overall.
Let’s talk about Ali first.
Revenue in the first quarter was 114.3 billion yuan, an increase of 22% over the same period last year.What is the concept of 22% growth rate?Not low, but it was the worst quarter after Ali went public.At least in the past 10 consecutive quarters, this number has never been lower than 35%.
Ali’s quarterly revenue growth rate year-on-year
It is Ali’s core business and Ali’s big entertainment that are holding back the performance.
Core businesses include Taobao Tmall, Retail Connect, cross-border business, rookie logistics, and hungry services, which account for more than 80% of Ali’s revenue, which is Ali’s basic market.In the first quarter, this piece of revenue was 93.9 billion yuan, with a growth rate of only 19%.The reasons for the slowdown in growth are, first, the decrease in orders, and second, that merchants have reduced their advertising placement, which has caused Ali’s advertising revenue to shrink.
Unlike many people’s conjecture that “the takeaway will break out during the epidemic”, Ali’s local life business (hungry + word of mouth) has a negative growth in the first quarter, and has not ushered in a performance outbreak.In addition, Alibaba Entertainment has always been an unsupportable Adou within Ali. The revenue growth rate in the first quarter was only 5%, which is the smallest contribution to the overall finance in the independent business sector of Alibaba.
Alibaba Cloud is bright.In the first quarter, revenue was 12.2 billion yuan, a year-on-year growth rate of 58%. Annual revenue exceeded 40 billion yuan. Morgan Stanley raised Alibaba Cloud ’s valuation to 77 billion U.S. dollars.Interestingly, this is close to Pinduoduo’s current market value.
In addition to the slowdown in growth, another big problem for Ali is the sharp decline in earnings.
We compare Ali’s net profit in the past five quarters, and we know how bad the first quarter is.
Ali’s quarterly net profit
From the first quarter of 2019 to the present, Ali ’s quarterly net profit has not fallen below 20 billion yuan. In the first quarter of this year, the net profit became 3.2 billion yuan, a decrease of 88%.Ali suddenly changed from a “very profitable” company to a “micro-profit” company.
The problem is investment.In the past, Ali voted a company in various fields. Most of the money invested was recorded in Ali’s accounts in the form of “fair value”.If the valuation or market value of these companies rises, Ali will earn more, otherwise Ali will accrue losses.The global stock market plummeted in the first quarter, and Ali Investment suffered a huge loss. The net profit of more than 20 billion yuan was offset by 3.2 billion yuan.
Overall, although it seems that the performance hit a new low, Ali’s revenue is still higher than market expectations.
Let’s talk more.
The financial report of Pinduoduo is fragmented.
Revenue in the first quarter was 6.54 billion yuan, and the market expectation was 4.97 billion yuan, which was 32% higher than expected and greatly exceeded expectations.In the first quarter of last year, Pinduoduo’s revenue was 4.55 billion yuan.This should be considered as overachieving performance.
But the problem is also very acute, with a net loss of 4.12 billion yuan, which also greatly exceeded expectations.Pinduoduo has been losing money since its establishment. Analysts gave a loss estimate of 2.99 billion yuan in the first quarter, but did not expect to actually exceed 38% and created a history of Pinduoduo (excluding the book losses caused by equity incentives in the second quarter of 2018.) The biggest quarterly loss.
Pinduoduo quarterly net profit
This split can be seen in the changes in stock prices.Ten minutes after the financial report was released, Pinduoduo’s stock price rose 7% before the market, but after half an hour, the stock price changed from rising to falling, with a decline of 4%.After the opening of the stock price continued to fluctuate, and finally the market sentiment was unified, closing up 14.5% that day.
All make money, but the posture to make money is different
How did the epidemic affect these two companies?
If we dismantle Ali, the Big Mac, we will find that although Ali’s business is complicated, known as “digital economy”, in fact, its core is still the e-commerce business of Taobao + Tmall.This piece contributed more than 60% of revenue to Ali.
The most conventional and routine way to get revenue is to draw commissions and second to collect advertising fees.Merchants sell goods on Taobao or Tmall. For each transaction, they have to deliver about 5% (common) deductions to the platform. In addition, in order to get more traffic, merchants also need to buy advertising spaces, bid rankings, and brush orders.
In the first quarter, Ali’s advertising marketing revenue was 30.9 billion yuan, accounting for 27% of total revenue, and it was Ali’s largest source of income.But compared with the previous quarters, this ratio is actually not high.Last quarter, this figure was 38%.This means that during the epidemic, merchants reduced their advertising or reduced their marketing budgets, which affected the realization of Ali ’s traffic.
Alibaba ’s advertising revenue and commission revenue accounted for the proportion of revenue
In addition, during the epidemic situation, it was difficult for merchants to resume work, and subject to express logistics, the order volume was reduced, which also caused Taobao Tmall’s order turnover to decrease.In the first quarter, Tmall’s physical GMV growth rate was only 10%, the worst in history.Corresponding to this, Ali’s commission income in the first quarter was 14.5 billion yuan, a negative increase compared to last year.
Ali is indeed an e-commerce company, but it mainly makes money by advertising and commissions.
Pinduoduo is a challenger and a “heterogeneous” in the e-commerce industry.The biggest difference from Ali is that it does not charge transaction commissions, only a six-thousandth payment fee. Before 2019, it did not even have a perfect advertising mechanism.
According to the point that Pinduoduo is happy to publicize, last year, it helped businesses save about 50 billion yuan in capital costs. In the first quarter of this year, the platform’s direct subsidy amount exceeded 5 billion yuan.
Of course, Pinduoduo is not a public good, it is just a tactic at a specific stage.In essence, it will eventually become the same as Taobao Tmall, with both commission and advertising.
A Pinduoduo merchant revealed to Ran Finance that before 2019, there was a lot of free traffic on the Pinduoduo platform, and novices had orders for opening stores, but since the second half of 2019, the biggest change that merchants feel is that they need toPaid, free traffic no longer exists.In other words, when the wool grows, it is finally possible to start shearing and realizing it.
More and more sophisticated advertising operation systems have also provided tools for Pinduoduo to monetize traffic.Some Pinduoduo merchants revealed that a year ago, he wanted to launch on the platform, and he didn’t know where to invest, but now, “the platform has ten ways for you to spend money.”
At present, advertising marketing revenue is the core income source of Pinduoduo.In the first quarter, revenue of 6.54 billion yuan, of which 5.49 billion yuan came from advertising.
Like Ali, the epidemic slowed the speed of commercialization of Pinduoduo.Subject to the reduction of merchant budgets and the subsidies provided to merchants, the monetization rate of Pinduoduo fell to 2.2% in the first quarter and returned to the level of two years ago.Compared with the fourth quarter of 2019, Pinduoduo ’s GMV fell by 18% month-on-month, but advertising revenue fell by 43% month-on-month.This means that a considerable portion of GMV has not been realized through advertising.
Pinduoduo is tearing down Ali’s walls
Can Pinduoduo be profitable?At this point, the market has not reached a consensus before.The way to burn money for the market is not new, and cases of loss for many years are not uncommon. The question is whether a lot of subsidies are effective or ineffective.
Spreading money, led by tens of billions of subsidies, is like an explosive package for the e-commerce industry.Ali is the defender, and Pinduoduo is the siege.Explosive packs may blow up a city wall, but whether Pinduoduo wants to carry the explosive pack and go to blow up the city wall, or carry a shovel and tear down the city wall.
In the first quarter, Pinduoduo’s marketing expenses were 7.3 billion yuan, 800 million yuan higher than its 6.5 billion yuan revenue.In other words, Pinduoduo not only spent all the money it earned on subsidies, advertising, and publicity, but also posted another 800 million yuan.Ten billion subsidies are really fragrant, but that does require money.
When the real gold and silver are smashed down, the effect is immediate.At the end of the first quarter, Pinduoduo ’s annual active users were 628 million, an increase of 42.9 million from the previous quarter, and more than the total number of new people added by Ali and JD.com.In contrast, Ali only added 15 million, the lowest among the three e-commerce giants.At this rate, it is a high probability that Pinduoduo will catch up with Ali in the next two years.
Number of live users in Pinduoduo and Ali
Let’s look at the cost of acquiring customers. In fact, the cost of acquiring more customers is not as high as many people think.According to the marketing expenses of the current season, in the first quarter, the customer acquisition costs of Pinduoduo, JD.com, and Ali were 170 yuan, 176 yuan, and 812 yuan, respectively. Pinduoduo was the lowest.Of course, Ali contains the overall data of e-commerce business.
In the third quarter of 2019, Pinduoduo spent 6.9 billion yuan in marketing expenses, pulled 53.1 million new people, and suffered a net loss of 2.3 billion yuan. After the financial report was released, the stock price plunged 23%.This time, Pinduoduo’s marketing expenses and losses did not narrow, but the stock price rose by 14.5% against the trend.Obviously, the situation has changed.
Investors in the secondary market began to believe that tens of billions of subsidies could also subsidize efficiency.And this controversial company that Huang Zheng calls “still a child” can challenge Ali.
In the past, Huang Zheng has been running under the guise of “dislocation competition” with a lot of fight.It is true that the 600 million users of Pinduoduo can be hidden in the WeChat ecosystem sheltered by Tencent.
The path Ali once walked, now seems to have to go again.From pursuing the number of users, pursuing GMV, adjusting SKU, increasing the unit price of customers, and pursuing profit data, everything is traceable.
From Taobao to Tmall, Ali has spent more than ten years to build the city wall, and now Pinduoduo is head-on.The competition with Ali is the process of tearing down the city walls.Huang Zheng once said, “Friends are seniors, and Pinduoduo is a junior. We should respect seniors. Pinduoduo is standing on the shoulders of seniors. We must thank seniors.”
* The picture is from Visual China.

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