Pinduoduo's Net Profit Drops 47% Amid 43% Marketing Spend Surge

Pinduoduo, a leading e-commerce platform, reported a 47% year-on-year decrease in net profit for the first quarter of 2025, despite a 10% increase in revenue. The company's net profit for the quarter stood at 14.742 billion yuan, falling short of market expectations. This decline was primarily due to a 43% surge in marketing expenses, which reached 33.403 billion yuan. The increase in marketing expenditure was driven by the company's aggressive investment in user acquisition and retention strategies, reflecting the intensifying competitive landscape.

The company's total revenue for the quarter was 95.672 billion yuan, with online marketing service income growing by 15% to 48.722 billion yuan and transaction service income increasing by 6% to 46.95 billion yuan. However, the growth in transaction service income fell short of market expectations, indicating a slowdown in transaction volume growth. Operating costs also rose by 25%, primarily due to increased fulfillment and payment processing fees. General and administrative expenses were 1.66 billion yuan, while research and development expenses were 3.58 billion yuan.

Pinduoduo's management attributed the decline in net profit to strategic investments in its ecosystem, aimed at supporting merchants and consumers in adapting to a rapidly changing external environment. The company's co-CEOs, Chen Lei and Zhao Jie, emphasized the importance of these investments in creating a healthy merchant ecosystem and driving sustainable, high-quality growth. Despite the short-term impact on profitability, these investments are expected to provide merchants with the necessary space to adapt and focus on long-term growth.

In addition to domestic competition, Pinduoduo is also navigating an uncertain international trade environment. The recent changes in U.S. tariff policies on small packages have added to the complexity of its international business operations. While the U.S. initially removed the tax exemption for small packages valued below 800 USD, it later reduced the tariff rate from 120% to 54%. Pinduoduo's international expansion efforts, including its Temu platform, face potential challenges in other markets such as Japan and the European Union, which are considering similar tax measures.

Looking ahead, Pinduoduo remains committed to its ecological investment strategy, prioritizing long-term growth and sustainability over short-term profitability. The company's focus on supporting small and medium-sized enterprises is expected to drive long-term growth and create a more resilient e-commerce ecosystem. Despite the challenges posed by intense competition and an uncertain international trade environment, Pinduoduo's strategic investments are expected to pay off in the long run, contributing to the creation of a more sustainable and resilient business model.