On March 11, China’s third largest e-commerce company, Shanghai-based Pinduoduo reported their fourth quarter results for the year 2019, missing analyst expectations on revenue. Although the company generated $1.55 billion in revenue, an increase of 91% compared to last year, Wall Street was expecting $1.57. Following the announcement, Pinduoduo’s shares on NASDAQ declined by 7% on Wednesday.
The company told investors during the call that MAUs have reached 482 million, up 77% from the same period in 2018 and comprising roughly 35% of China’s population. Pinduoduo CEO Colin Huang said that company would actually raise pay for employees, rather than have them bear the brunt of the financial impact of the COVID-19 outbreak. Huang also acknowledged the short term impact the outbreak will have on the first quarter of 2020, but remained very optimistic about the company’s long term outlook, citing the recent broader adoption of digital services in China as a boost to the entire e-commerce sector. He also highlighted increased interest from higher tier cities, leading to the increased performance of categories including electronics and beauty.
While Pinduoduo rose to prominence by relying on high frequency and volume orders, the company has implemented efforts to increase spending per user. Annual spending per active buyer during 2019 was around 1,720 yuan ($247.1), an increase of 53% compared to 2018. CEO Colin Huang described 2019 as a formative year for the company. Pinduoduo increased their annual R&D spending by 247% compared to 2018, due to increases in R&D headcount, specifically related to cloud service expenses.