Baidu, Alibaba and Tencent used to be called the BAT of China. They dominated three major field in Internet—-Search Engine, E-commerce and Social Media. Although all the big three facing challenges from compliance, originality and user data privacy, the great BAT are still the internet icons in the first 2 decades of the 21st century. Until the B—-Baidu fell out.   



Baidu Inc. has once again lost its spot among China’s top 5 valuable internet companies,  elbowed out by the unicorn start-up Pinduoduo Inc.

The four-year-old e-commerce start-up PDD is now worth more than Baidu after its shares recently surged in New York. That puts it among China’s Top 5 internet companies in market value, trailing the likes of rival Inc. and food delivery service Meituan. Baidu has been pushed to sixth place.

It’s not the first time that Baidu dropped from the Top 5. NetEase Inc., China’s second-largest gaming firm, briefly overtook the local internet search leader in market value in early August. Baidu’s shares later recovered after it posted stronger-than-expected second-quarter results. The company has shed about $63 billion of capitalization since its peak in May 2018, or roughly equivalent to one Caterpillar Inc.

Once a member of BAT, Baidu is grappling with a slowdown in China’s economy and is facing intensifying competition for advertising from app factory ByteDance Inc. That popular social media giant recently launched its own Google-like general search engine, posing a direct challenge to Baidu’s core business. 


PDD has experienced meteoric growth since its inception. The shopping app, known for cheap deals and gamified purchasing experiences, is luring new users from China’s rising middle class while investing in its own logistics network — areas currently dominated by rivals Alibaba and–edited from Bloomberg

Thanks to its rapid rise, business insiders start to evaluate it as a game changer for the China digital industry—even put it as a part of the new PAT.

A Quick Win At User Experience 


Pinduoduo’s stock price has jumped 51.3 per cent in 2019, more than the 16.5 per cent gain in the benchmark Standard and Poor’s 500 Index, as the company continues to expand its E-commerce services across China as a challenger to market leaders Alibaba and

In contrast, Baidu’s stock price has declined about 35 per cent since the start of the year, as the search giant’s advertising income slowed and new entrant Bytedance announced that the company would start building a “general search engine for a more ideal user experience”.

Baidu’s market capitalisation has stagnated, even as fellow internet firms Alibaba and Tencent have surged ahead on the back of fast-growing industries such as mobile payments, gaming, e-commerce and local services. The trio are collectively referred to as BAT in China, and have been representative of China’s growing internet economy.

Currently, Alibaba is the most valuable publicly-traded Chinese technology firm, with a valuation of nearly US$450 billion. Tencent follows with a market capitalisation of US$396.5 billion. Meituan-Dianping, which runs one of China’s leading local services and food-delivery platforms in China, is also ahead of Baidu with a valuation of US$54.6 billion after listing in Hong Kong last year.


Baidu had a stranglehold on search in China with 70 per cent of the market, especially after Google exited in 2010. But a shift in internet usage patterns has chipped away at that dominance, with the rise of self-contained super-app ecosystems from rivals like Alibaba and Tencent. A user can quite easily watch a movie, read news, shop online and order takeaway food without having to leave one of these walled communities or go to a traditional search engine.

While Baidu is in the midst of fending off competitors, Pinduoduo has managed to go from an e-commerce upstart to one of China’s biggest e-commerce platforms in merely four years. The company is often held up as the poster child for the social e-commerce model, as it pioneered a “team-purchase” model where prices are discounted if users can successfully get their friends to buy an item together.

At first, Pinduoduo was known for its extremely cheap products, many of which cost less than 20 yuan per item. The company received a wave of criticism around the time it went public on Nasdaq, as consumers complained of poor product quality and counterfeit goods.

Since then, Pinduoduo has sought to dispel the notion that it sells only cheap goods to consumers in lower-tier, smaller cities in China and has taken steps to clean up its platform, working with brands to remove counterfeit products and directing users to listings by legitimate sellers.

During its earnings call earlier this month, Pinduoduo said that nearly half of its orders received in June were from bigger cities in China, such as Beijing, Shanghai, or second-tier cities such as Hangzhou and Tianjin.—edited from South China Morning Post

Marching into China’s Tie 1&2 Cities

Founded in 2015, Pinduoduo made its name using a “team purchase” model that combines social elements with traditional shopping. It offers consumers steep discounts if they invite friends and relatives to form a “team” to shop. The model quickly helped it gain large followings in smaller cities that were neglected by its biggest rivals like Alibaba and

But that is rapidly changing. As of June, orders from top cities like Beijing, Shanghai and Wuhan made up 48% of Pinduoduo’s total transactions, up from just 37% in January, founder and CEO Zheng Huang said in a call after announcing his company’s latest results last week.


Those results showed that Pinduoduo’s revenue surged 169% to 7.3 billion yuan (AU$1.5 billion) from a year earlier, while its net loss narrowed sharply to 1 billion yuan from 6.5 billion yuan over the same period.

The company’s upbeat noises may be hype, analysts said. But they also show the company is serious about shedding its long-held association with cheap products and wants to target bigger cities and wealthier buyers.

“It is a ‘natural move’ that now Pinduoduo is focusing more on bigger cities, after it already established a stronghold in less developed areas,” said Zhao Ge, a Shenzhen-based analyst at Futu Securities.

Its massive subsidy campaigns, often in partnership with established brands like Apple and Sony, are quickly winning fans. For the three months through June, Pinduoduo’s number of average monthly active users rose 88% to 366 million. Though it didn’t offer a breakdown of geography, analysts believe most are from major cities, often called tier-1 and tier-2 cities.

Average spending by active buyers also improved significantly. In the 12 months through June, the average active buyer on Pinduoduo spent 1,467.5 yuan – nearly double the amount from a year earlier, according to the company’s second quarter’s earnings report.

The company’s marketing expenses also more than doubled during the quarter to 6.1 billion yuan, partly due to promotions like the 10 billion yuan subsidy campaign. But returns from such aggressive spending are clearly outweighing the expenses. Pinduoduo’s expense-to-revenue ratio came in at 83.7% in the third quarter, down from as high as 107.6% in the first quarter of this year.

The greater return on spending may be a major factor behind the hugely positive response to the company’s latest earnings, as investors buy into Pinduoduo’s expansion strategy despite its loss-making status.

As the company encroaches on its bigger rivals, however, it is expected to see further push-back from sector behemoth Alibaba, the undisputed leader with 58% of China’s e-commerce market. But Pinduoduo’s dramatic rise to seize 5.2% as of early this year is rapidly altering the e-commerce landscape.

That obstacle could be a major one, since Pinduoduo’s biggest challenge to winning bigger city customers is its lack of branded merchants, said Shawn Yang, a Shenzhen-based analyst with Blue Lotus Capital. “Given Alibaba’s tightening grip on such merchants, it is unclear how Pinduoduo could make a breakthrough anytime soon,” he said.

Yang said even though Pinduoduo could continue leveraging its low-end expertise to tie up with smaller merchants, the smaller value of such deals could limit its growth in terms of total sales value.—edited from Caixinglobal


As people see the rise of PDD as a negative sign for China’s consumer economy—or say the alleged ‘consumption downgrade’, its original group buying model did redefine user experience on E-commerce platforms. It is undeniable that when economy slows down, people spend less; but can we businesses view this ‘minimal spenditure’ mindset from the eyes of PDD?

Edited by Joreal Qian