Alibaba’s value falling below the vanity PDD is a milestone for China
(Bloomberg) — Alibaba Group Holding Co. Ltd. is set to lose its spot as China’s most valuable e-commerce company to eight-year-old startup PDD, a watershed moment for an Internet industry that has been dominated by Jack Ma’s iconic company for more than a year. a contract.
Most read from Bloomberg
Alibaba shares fell as much as 1.4% in Hong Kong, leaving its market capitalization at about HK$1.46 trillion (US$187 billion) and on track to close below US-listed PDD Holdings Inc’s $188.3 billion, according to calculations. Bloomberg. PDD, the company best known for hit US shopping app Temu and local deals pioneer Pinduoduo, closed nearly 2% higher in New York on Wednesday.
The previously unimaginable shift reflects the turmoil that has engulfed Alibaba after Beijing in 2020 targeted the company and its once outspoken co-founder, unleashing a sweeping crackdown on the powerful tech sector. It also signals the rise of a generation of startups, from PDD to ByteDance Ltd., that are disrupting the traditional spheres of social media and e-commerce.
On Wednesday, Ma, the billionaire co-founder of Alibaba, surprised employees when he took to an internal forum to praise PDD and urged his company’s more than 220,000 employees to “correct course” and regain momentum. For many observers, his call to arms — after three years largely in the background — highlighted the gravity of the situation.
“In hindsight, you could say Alibaba was resting on its laurels because it had a lot of head start, but it didn’t execute or innovate as quickly,” said Fei-Cern Ling, managing director at Union Bancaire Privee. “When antitrust came along and they couldn’t use their size to force merchants to use their platforms, they were suddenly caught off guard.”
Read more: Jack Ma returns to rallying troops after Alibaba’s woes worsen
Alibaba, once China’s best candidate to become a trillion-dollar company, is trading around its lows this year, at a fraction of its peak in 2020. The company is facing internal and external turmoil, with China’s economy slowing weaker than expected. The recovery and PDD are undermining the once-dominant online retail business.
The company itself has endured turmoil, starting with the announcement of a plan to split the company into six smaller parts. Then-CEO Daniel Chang stepped down, and the company appointed two longtime Ma confidants, Joseph Tsai and Eddie Wu, to run the group. Months later, the pair announced the suspension of the long-awaited offering and the listing of its $11 billion cloud arm, a stunning turnaround that raised questions about the company’s direction.
PDD, on the other hand, has won over investors with a combination of impressive growth and strong global expansion. The market chose to overlook rising marketing costs, which pressured profit margins.
This week, shares of the company founded by billionaire Colin Hwang rose 18% after announcing a stronger-than-expected doubling of its revenue, driven by Temu’s success as well as its successes at home.
PDD’s growth has far outpaced Alibaba’s, underscoring how it uses promotions to attract bargain-hunting consumers at a time of economic uncertainty. During the just-concluded Singles’ Day shopping fest, PDD will likely achieve 20% growth in transactions versus single-digit rises for its rivals, according to Goldman Sachs estimates.
Part of this meteoric rise stems from Temu, which overtook Shein in sales in just over a year and is now considered one of the most disruptive forces in global e-commerce. The site — which follows the same discount pricing strategy used by Shein as well as PDD’s Pinduoduo — has expanded to dozens of countries.
In contrast, Alibaba first explored overseas markets with AliExpress, its sourcing platform Alibaba.com, and then international subsidiaries such as Lazada and Trendyol. But the Chinese business remains by far the largest revenue contributor despite years of efforts.
“One could argue that Alibaba had its opportunity and didn’t take it,” Ling said. “But in recent quarters, actually, Alibaba’s international business has been growing very quickly as well, so I think they’re ramping up their efforts there.”
(Updates with second chart)
Most read from Bloomberg Businessweek
©2023 Bloomberg L.P