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Can Pinduoduo Ride the Digital Advertising Boom in China?

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Pinduoduo’s ad revenue jumped 927%

By allowing shoppers to team up and make purchases as a group, Pinduoduo (PDD) has built a model that allows it to add new customers quickly because existing customers are incentivized to invite their friends to form shopping teams and unlock huge discounts. Pinduoduo exited the third quarter with 385.5 million active buyers on its platform, up from 343.6 million in the previous quarter and 157.7 million a year earlier.

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With its rapidly expanding customer base, Pinduoduo has been able to attract more advertisers to its platform. In the third quarter, Pinduoduo generated $433 million in advertising-related revenue, a whopping 927% YoY (year-over-year) increase. Advertising revenue rose 18% YoY at Baidu (BIDU) in the quarter. Advertising accounted for more than 88% of Pinduoduo’s revenue in the quarter.

Most advertisers to increase spending

The future looks bright for Pinduoduo’s advertising business in China thanks to its rapidly swelling audience. According to a report from AdMaster, close to 80% of Chinese advertisers intend to increase their digital marketing budgets in 2019. China’s digital advertising market expanded 27% to $62.6 billion in 2018, according to eMarketer estimates.

Pinduoduo generated revenue of $491 million in the September quarter, an increase of 697% YoY. Alibaba (BABA), JD.com (JD), and Vipshop (VIPS), Pinduoduo’s domestic rivals, grew their revenues 54%, 25%, and 16% YoY, respectively, in the quarter. Amazon (AMZN) and eBay (EBAY) reported revenue growth of 29% and 6.0% YoY, respectively, in the third quarter.

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