Valuable interviews about CEO of PDD, Zheng Huang
-- Secrets that few people know: The smartest people often create the most basic and popular products.
There are many secrets in this world, and many of them are even more obvious, but you may find it difficult to realize or truly understand the views that are directly in front of you.
Misplaced competition and multi-scenario matching have found new answers for survival and competition in the post-traffic era.
Financial Interview: 2018 Financial Interview with Huang Zheng
"Finance": Group buying and low prices have been long-standing tools and competitive means in the field of e-commerce. How did you turn a tactic into a strategy?
Huang Zheng: I once told people at Tencent that Tencent's failure in e-commerce was because they understood e-commerce as traffic × conversion rate = GMV. Traffic logic is not successful today. Tencent has the largest traffic in China and invested in a bunch of vertical e-commerce. If Tencent followed this logic, they would have succeeded long ago.
After Pinduoduo was launched, JD.com, Vipshop, and Mogujie have all experimented with similar models. For them, group buying is just a tool to create GMV increment.
But Pinduoduo follows human logic. We understand people through group buying and recommend products through people. Later, we will transition to machine recommendation. There is almost no search or shopping cart in the Pinduoduo app. You can imagine replacing the information flow under Today's Headlines with a product flow, and that's Pinduoduo.
So, in the early stages, everyone was focused on low prices and group buying, but our starting point and direction were different, which led to different outcomes.
"Finance": An investor once summarized that Pinduoduo's success lies in capturing the down-market brought by the third wave of mobile internet population dividend. Pinduoduo solved the problem for those who have WeChat but not Taobao.
Huang Zheng: Only people within the fifth ring of Beijing will say this is the down-market. We focus on the vast majority of the Chinese people, which is similar to the growth reasons of Kwai and Toutiao. It's like going to Shenzhen 30 years ago. You could make money doing anything, not because of anything else, but because you chose the right direction.
"Finance": A JD.com executive once commented that Pinduoduo's model is simple and rough, and the low-price strategy attracts only price-sensitive customers. This means that the middle and high-end customers may never buy anything there.
Huang Zheng: We attract people who pursue high cost-effectiveness. They may buy an Hermes bag and also buy a box of mangoes for 9.9 yuan. This has nothing to do with their consumption ability. "Traditional companies classify people according to first-tier, second-tier, and third-tier cities, but Pinduoduo caters to many aspects of a person." It's just that we still do poorly and don't have the ability to satisfy the urban population within the fifth ring road like you 100%.
"Finance": You understand Pinduoduo as "high cost-effectiveness", but many people see it as "low price and poor quality". Pinduoduo's complaint volume once ranked first in the industry, reaching 13.12%.
Huang Zheng: We also sell iPhone X, and low prices are just our way of obtaining users in this stage. Pinduoduo has a deeper understanding of cost-effectiveness than most platforms – always exceeding consumer expectations. Our core is not "cheap", but to satisfy users' feeling of getting a bargain.
For example, Pinduoduo's first product was a bag of Lays chips for one yuan, and 10,000 bags were sold in one day. As long as half of the chips are still edible, the buyer will feel it's worth it. But conversely, even if it's only one yuan, if the chips are all crushed during shipment, the consumer will feel they didn't get a bargain and may even curse you.
"Finance": In January, Taobao released a white paper stating that fake goods are shifting from Taobao to WeChat sellers and Pinduoduo. Is this true?
Huang Zheng: From a scientific perspective, I find this report amusing. I don't think they have any basis for knowing this.
"Finance": One of the best-selling products on Pinduoduo is a bottle of male-enhancement pills priced at 27.8 yuan, which has sold a total of 4.72 million units. Do you think this product could be genuine?
Huang Zheng: First of all, drugs or health products sold on Pinduoduo must have a national certification indication. Secondly, the gross profit of health products is already incredibly high, just like facial masks. Do you think a 200 yuan facial mask is effective?
"Finance": Extremely low prices require extremely low costs. How can you ensure quality and repeat purchase rates for such low-cost products?
Huang Zheng: I admit that Pinduoduo's control over the entire product and the quality of service are still very basic. We are improving product quality by upgrading the supply chain and cracking down on counterfeit products. There may be no platform in China working harder than us to combat fake goods. Our repurchase rate has doubled in the past year, and our average transaction value has risen from around ten yuan early on to forty or fifty yuan.
In addition to meeting people's basic material needs, we have also done a lot of product design and operations to meet people's different spiritual consumption needs, such as impulsive consumption, rational consumption, and cathartic consumption. This is also why Pinduoduo can still attract consumers to come back despite facing homogeneous competition.
"Finance": For Pinduoduo, is the only way to meet people's spiritual needs through lottery and red envelopes?
Huang Zheng: Lottery and red envelopes are the simplest forms of entertainment. This method may be simple, but we are indeed trying to integrate consumption and entertainment.
"Finance": Some people believe that Pinduoduo is not an upgrade of consumption, but a downgrade.
Huang Zheng: Upgrading consumption is not about letting people in Shanghai live like Parisians, but about providing kitchen paper and good fruit for people in Anqing, Anhui.
"Finance": Some people believe that Pinduoduo has replaced JD.com as Tencent's primary strategic support against Alibaba.
Huang Zheng: Tencent supports us? Where is the evidence?
"Finance": Many of Pinduoduo's tactics are prohibited by WeChat, such as inducing clicks and directly mentioning users' WeChat names, but they still survive in the WeChat ecosystem unscathed. Is Tencent tacitly approving this?
Huang Zheng: I don't think Tencent is supporting Pinduoduo. We have also been blocked many times.
"Finance": It is said that Pinduoduo has been blocked by WeChat 1,000 times. What did you do to be blocked 1,000 times?
Huang Zheng: The claim of 1,000 times is exaggerated. Didi, Alibaba, and JD have also been blocked many times. I cannot say that we are doing the best, but we are definitely not doing the worst. In fact, from the perspective of platform governance, as the organization with the largest trading volume in the Tencent ecosystem, WeChat's control over us is more stringent.
WeChat's policies have been changing all the time. First of all, many times you don't know until you try it out. Secondly, we believe that some of these practices do not cause significant harm to consumers. For example, in the scenario of delivery notifications, if you don't mention the username, there will be errors. The core is whether it is beyond the bounds for the user.
"Finance": Has Pinduoduo made good use of the loopholes and gray mechanisms of WeChat public platform in grasping the boundaries?
Huang Zheng: If someone thinks that we are using the rules, and he understands it, why can't he do it himself?
"Finance": So you deny that Tencent has given Pinduoduo more support and tolerance.
Huang Zheng: Does Pinduoduo have any privileges on WeChat? For example, Mogu Street and JD's WeChat entry for Weixuan, we can't do it at all. Before the Chinese New Year, Tencent asked us to sign a non-poaching agreement. If we want to poach Tencent's employees, we can only do it with Tencent's consent. Can Tencent ask Toutiao for the same thing?
Recently, something made me feel very wronged. A large number of rumors suddenly surfaced that Pinduoduo was engaged in fraud, and the rumors were widely spread through WeChat groups. I asked WeChat for help, but was rejected. WeChat said if it was Alibaba looking for help, they can deal with it. I can understand it, because if WeChat comes out to help me deal with rumors, the masses will say it is because Tencent is our shareholder. If WeChat helps Alibaba to refute rumors, it is called having a broad vision.
"Finance": For Tencent, this may not be a big deal.
Huang Zheng: Because if I die, Tencent won't die. Tencent has thousands of sons.
"Finance": Since the second half of 2017, Pinduoduo has gradually guided users from WeChat to its own APP. Some media have written that Pinduoduo is digging at Tencent's corner.
Huang Zheng: We didn't push the APP hard. It was more of the users' own choice. Pinduoduo may be the only e-commerce APP that does not force users to enter their phone numbers when logging in, and can be logged in directly through WeChat. Now, more than 50% of our orders come from the APP.
Creating a sharing scene on WeChat was an important reason for Pinduoduo's early rise. In the early days, we didn't have data, so we used people to understand people on WeChat, and the features of you and your friends. But WeChat is not the only and ultimate scene. When we fully understand our users, I can create new scenes by leaving WeChat through the platform, using machines to make judgments instead of "friends," and recommending the most suitable products to users. What you see now is only the early stage of Pinduoduo.
"Finance": Most of China's popular internet startups such as Didi, Ele.me, Ofo, and Mobike are products of Alibaba and Tencent's competition. Is Pinduoduo's growth also the result of such competition?
Huang Zheng: Toutiao is not, why can't we be another existence?
"Finance": This logic is obvious - Pinduoduo's existence has significant strategic significance for Tencent, and Tencent has the intention to support Pinduoduo to compete with Alibaba.
Huang Zheng: I don't think Tencent has a strong competitive logic. Tencent is more of a businessman's logic, and competition is just a by-product of commercial ROI calculation. Tencent invested in JD.com, but can JD.com really compete with Alibaba? Alibaba will compete with JD.com, even without Tencent's investment.
"Finance": What impact will Tencent and Alibaba's direct competition in the retail sector have on Pinduoduo?
Huang Zheng: Tencent and Alibaba are not yet in direct competition because both have low market shares in offline retail. Today's internet competition is mostly about grabbing traffic. When you focus on the scene beyond traffic, you will find that there is a lot of space.
"Finance": What kind of e-commerce ecosystem does Tencent want to build?
Huang Zheng: I don't think they have a clear purpose, just as investing in Didi does not mean it is a travel ecosystem.
"Finance": Is using ROI the only way to measure Tencent's behavior underestimating Tencent?
Huang Zheng: What's wrong with using a businessman's logic to do business? In an interview, Ren Zhengfei said, "What is a powerful China? He said we make tofu, they grow bean sprouts, and together they make a powerful China."
"Finance": If you didn't accept Tencent's investment in 2016, would Pinduoduo still be the same Pinduoduo today?
Huang Zheng: The logic should be that because we are today's Pinduoduo, Tencent wanted to invest. Tencent is more like an ordinary financial investor. They are neither special nor bad for us. I don't think we are part of Tencent's system.
"Finance": But your office is full of QQ dolls.
Huang Zheng: Those are gifts from others, and Tencent hasn't sent us many.
"Finance": As a fast-growing startup, when will Pinduoduo's management issues erupt?
Huang Zheng: Running a company does not have an obvious puberty like a child. Puberty accelerates at the beginning and slows down at the end. But the company is a gradual growth process. This means that problems don't suddenly erupt; problems are erupting every day.
The biggest problem now is that the system's ability cannot keep up with the scale of development. Taobao has established basic rules for platform governance, such as the merchant's credit system, which we can learn from. But it hasn't done well in some areas, such as logistics for agricultural products, which we need to explore ourselves.
"Finance": What is currently the most challenging management issue?
Huang Zheng: How to reduce manual intervention in the rules. Artificially selecting and recommending products inevitably leads to corruption. Our first-year operations manager was sent to prison for corruption. At that time, I also dismissed a third of our operations. In the future, Pinduoduo will move from manual selection to algorithm and machine selection.
"Finance": Pinduoduo is currently light, not controlling goods, and does not have its own warehousing and logistics system. Will this change in the future?
Huang Zheng: We will not do procurement and sales, nor touch logistics and distribution. Alibaba has done a good job, why do we need to do it? Many companies do everything because they don't trust others.
"Finance": What is the strategic focus for this year?
Huang Zheng: Upgrading the supply chain will be our strategic focus for a long time. The ultimate model of Pinduoduo is to enable upstream to do batch customization production, but our investment in upstream and the empowerment of the entire industry chain are too weak.
"Finance": Pinduoduo's operation staff said that their only performance indicator is GMV. How can a company with such great growth pressure balance short-term and long-term strategies at the same time?
Huang Zheng: Our assessment is based on customer retention, repurchase rates first, and GMV second. In fact, we don't want to grow now. I hope to slow down the growth rate of GMV.
"Finance": But you have invested a lot in advertising.
Huang Zheng: Investing in advertising is to tell consumers that we are not scammers.
"Finance": Your strategy and vision are different from the understanding of Pinduoduo employees about the company. In their eyes, the company still prioritizes traffic. Why is there such a gap?
Huang Zheng: Originally, these employees were educated under the original traffic thinking environment for many years. The company is only more than two years old. The unity of my and the employees' ideas has not been very good, but we are trying to implement it from top to bottom. Now I am on one side, the whole society and the media are on the other side of traffic, and the employees may be in the middle.
"Finance": Pinduoduo already has 300 million users. How long can the traffic dividend last?
Huang Zheng: All the people in China should be our users. I think the next 2-3 years will be a period of rapid growth.
"Finance": Are you spending money to buy traffic now?
Huang Zheng: Compared to Toutiao, it is definitely much smaller.
"Finance": How to build a business model for 9.9 yuan free shipping?
Huang Zheng: Alibaba has done this model very well, and it is nothing more than advertising and commission. But we only charge the payment processing fee now.
"Finance": Pinduoduo's main categories are fruits and fast-moving consumer goods. When people buy fruits, they will think, "I spent 10 yuan to buy half a box of bad and half a box of good, and I earned it." If Pinduoduo wants to expand into all categories in the future, it will face branding issues, direction issues, and growth issues. How to solve these problems?
Huang Zheng: Expanding into all categories is still a traditional traffic logic, and upgrading is also a view from the perspective of people within the Fifth Ring Road. I don't think Pinduoduo needs brand upgrading or all categories. This is wrong. We always want to match things and let the right people buy the right things in the right scenarios.
"Finance": Pinduoduo relies on the largest population in China to grow. What are the innate disadvantages of such a company?
Huang Zheng: One is that you will go through a lot of public opinion storms; the other is that companies like us must bear more social responsibilities, and our influence is even wider than Toutiao.
The recent rumors about fraud on Pinduoduo have made me very anxious. If I were WeChat or a government department, what should I do? Many entrepreneurs will come out to do PR themselves, which is a self-sacrificing approach. Can entrepreneurs of our generation not use this method? Entrepreneurs will eventually grow old, but the company must continue to survive. It should rely on a mechanism with self-response capabilities rather than a person.
"Finance": What is Pinduoduo's mission and values?
Huang Zheng: The mission is to be more affordable and enjoyable, allowing consumers to buy more affordable things and be happier in the process. The value is to be diligent and honest.
"Finance": Why has a company with a sense of responsibility like Pinduoduo been blocked by WeChat 1000 times?
Huang Zheng: Responsibility means doing what you are supposed to do in your position. We hope that consumers can do more marketing activities, which is their responsibility for a business organization. The rest is about how to grasp the boundaries of marketing outreach.
"Finance": When JD was valued at $20 billion, it already had a clear core competitiveness - logistics barrier (user experience), full-category expansion, and gathering the highest quality users from first and second-tier cities. What is Pinduoduo's core competitiveness?
Huang Zheng: I think JD's core is that express companies cannot do e-commerce, and e-commerce does not want to do express. Our core is something that people within the Fifth Ring Road cannot understand.
"Finance": One of your peers said that he thinks Pinduoduo can at least take away 40% of Taobao's orders. Do you think this is an overestimation or underestimation of Pinduoduo?
Huang Zheng: We compete in different scenarios for the same group of users, so there is no such thing as taking away a certain number of orders from Taobao. Just as Facebook grows up, Google will compete with Facebook, but in the long run, the two coexist because they are completely different scenarios.
"Finance": Wang Xing also said that competition is to move forward in the same direction, not to fight against each other.
Huang Zheng: Wang Xing talked about the boundaries of his empire, moving forward in the same direction, but he didn't say where I should stop. Didi and Meituan grew up in a highly competitive environment, but Pinduoduo's growth environment is different. We have found new business breakthroughs in a seemingly saturated field, so we don't need to waste a lot of resources on excessive competition.
Alibaba, JD, Didi, and Meituan are imperial-style competitors with clear boundaries. But I think our generation's thinking should not be like this. Pinduoduo and Taobao are more like two different dimensions slowly merging, and Pinduoduo uses Alipay and Cainiao.
"Finance": Taobao has launched Taobao Special Edition to balance Pinduoduo.
Huang Zheng: We see this as a compliment to us.
"Finance": A senior executive at Alibaba commented that Pinduoduo sees itself as the second Alibaba, but they see Pinduoduo as a low-end version of Juhuasuan.
Huang Zheng: I haven't studied Juhuasuan. We don't want to be the second Alibaba. The existence of Pinduoduo itself is a kind of model, and we are in the early stages of creating this model. You may say that I am low or primitive, but you cannot ignore me.
"Finance": Taobao has been promoting the reform of "a thousand people, a thousand faces" and distributing headlines in the past two years, which highly coincides with Pinduoduo's strategy. Where does Pinduoduo's uniqueness lie?
Huang Zheng: Pinduoduo and Taobao have fundamentally different models. Taobao is based on traffic logic, with search as the main body, and users need to find products themselves, so a large number of SKUs are needed to meet the long-tail demand. Pinduoduo represents matching, recommending products to consumers, with limited SKUs but rich structural diversity.
Taobao has always advocated C2B but cannot do it because Taobao's "a thousand people, a thousand faces" is equivalent to personalized search, but search itself is long-tail, so it is difficult to do reverse customization. Pinduoduo concentrates massive traffic into limited products, and after achieving a certain scale, it can do reverse customization, thereby greatly reducing costs. This is also the difference between Walmart and Costco. Pinduoduo's ultimate positioning is to do different Costcos for different people.
"Finance": You seem to underestimate your opponents. Currently, less than 50% of the traffic from Taobao comes from searches, and it is decreasing. Recommendations, live streaming, content, and activities account for the majority.
Huang Zheng: Taobao is moving in the right direction. But as one of the most successful companies in the previous stage, it has its baggage as it moves towards a new era. Currently, their main focus is on search, no matter what reform they make, it means they will weaken their search function. However, search is only a small part of Pinduoduo, and it is not even on the homepage. This is like Baidu wanting to do what Toutiao does, they both face obstacles brought by their previous success.
This is like me being in Shenzhen, and Taobao is in Shanghai. Shanghai used to be much better than Shenzhen, and maybe it still is, but I am young, and I have no baggage.
"Finance": Some people evaluate that all the problems that Taobao encountered before (fake goods, the end of traffic dividends, government regulation, etc.), Pinduoduo will also encounter.
Huang Zheng: We face some smaller challenges in some aspects, and we owe it to Alibaba's great contribution to China's e-commerce industry in the past decade, we benefited from their infrastructure in express delivery, payment, and e-commerce.
"Finance": What problems will Taobao not encounter, but you will encounter?
Huang Zheng: First, as a newcomer, we will face doubts. It's like a group of people eating together, when Taobao just started, the table was empty, and when Pinduoduo started, there were already five people at the table. When you try to join, the people at the table don't want you to join, and the people under the table don't want you to join either. I will inevitably be subject to double pressure; secondly, because our growth rate is too fast, we will face all the problems that Taobao had to face in ten years in a short period.
"Finance": Why not start a new table? Or find a table with fewer people.
Huang Zheng: In the market competition environment in China, every table is full.
I really like Singapore and have deep research on it. Singapore itself is like a company that achieved national prosperity in a poor environment. Moreover, because it is small, it has created a model—only a small part of its assets are stored in the country, and most of its assets are distributed in China and the United States. Singapore is a small country, but it is also a presence that blends in with all other large countries.
Even if you are very capable and can create a small Alibaba, what does it matter? From the perspective of showcasing your presence, the world will not remember you for this.
"Finance": If you replace Alibaba, people will remember you.
Huang Zheng: Even so, Alibaba was the first to create Alibaba.
"Finance": If Alibaba comes to invest in you, can you accept it?
Huang Zheng: This may be limited by investment terms.
"Finance": It is said that Pinduoduo has always refused to communicate with Meituan. Are you considering doing service e-commerce or are you afraid that the other party will enter the physical group buying field?
Huang Zheng: It's not that I don't communicate with others, I just don't hang out in their circles, and I don't want to communicate with other people. Pinduoduo currently doesn't want to do service e-commerce because physical e-commerce is already large enough.
"Finance": Pinduoduo can currently promote products, and in the future, it can also promote movie tickets. This is similar to the logic of Toutiao starting with text and then moving to video.
Huang Zheng: Service e-commerce is a traffic mindset, where traffic flows in, and different services consume this traffic. If we still use a traffic-oriented perspective to do things in the post-traffic era, we will definitely fail.
Pinduoduo's emergence is precisely because it does not use the old way of thinking. Under the human-first mindset, we should first consider what people need. What we need to do is the integration of material consumption and spiritual consumption. Spiritual consumption is not just about doing service e-commerce, but using entertainment to allow users to consume happily.
"Finance": Toutiao is now doing content information flow. Do you think it will also do commodity information flow in the future?
Huang Zheng: If they want to do it, let them do it. Can you stop others from doing what you do? But your assumption is like when Baidu wanted to do Taobao.
"Finance": China's new generation of giants are all exploring their boundaries. Just as some people believe that Alibaba should not have left a gap for JD.com, Toutiao and Pinduoduo may not enter the same track from different directions. Isn't it better to consider this in advance?
Huang Zheng: Ma Yun talked about this in an internal speech many years ago. He said, why don't we leave a competitor? He said the best situation is Intel and AMD. This society should have multiple species coexisting and merging with each other.
"Finance": There are rumors that you are Duan Yongping's godson.
Huang Zheng: I met Duan Yongping through Ding Lei's introduction. When I was studying at Zhejiang University, a stranger added me on MSN one day, claiming to be Ding Lei, and was researching a technical problem at the time. I thought he was a fraudster. In 2002, I met Duan Yongping while studying for my graduate degree in the United States, and when I worked for Google after graduation, I lived very close to his house, so I started to help him with investments.
"Finance": Duan Yongping, Ding Lei, Wang Wei, and Sun Tongyu are all your angel investors. When they invested in you, Pinduoduo had not yet been born. What do you think impressed them?
Huang Zheng: Maybe because I don't flatter people, I talked about some interesting things. I was talking to Wang Wei at the time, and I said you can't do e-commerce, have you seen any express delivery company that has succeeded in doing e-commerce?
"Finance": Did Wang Wei believe it?
Huang Zheng: He didn't believe that he couldn't do it. So what should we do?
"Finance": What inspiration did Duan Yongping give you in business and life?
Huang Zheng: He said that fast is slow, and slow is fast. He said that using a calm mind to do things will be better. He said that ordinary people are actually very difficult to maintain a calm mind. Personally, he is a person who is constantly improving himself. He is also learning and reading your articles.
"Finance": Sun Tongyu is one of the founders of Alibaba. What has been his biggest help to you?
Huang Zheng: One is his values. He is a very good person. In addition, his understanding of the platform is indeed different. Few people in China have done platforms, which is helpful. For example, he believes that platforms should consider the evolution of different stages of ecology, while brands are more about the value proposition of individual segmented populations.
"Finance": In 2006, Duan Yongping paid $620,000 for lunch with Buffett and took you to see him. You were 26 years old at the time. Was that an important day for you?
Huang Zheng: What Buffett said was actually very simple, even my mother could understand it. The biggest significance of that meal to me was probably that it made me realize the power of simplicity and common sense. People's thoughts are very easily contaminated. When you judge something, you need to understand the background and facts. After understanding, what you need is not wisdom, but the courage to use rationality and common sense to judge in the face of facts. Common sense is obvious and easy to understand, but our biases formed by growth and learning, as well as personal interests, blind us.
Duan Yongping also taught me a business common sense that prices fluctuate around value. Prices will definitely fluctuate, but as long as your value increases, the final price will be close to the value. This common sense lets you be at ease in increasing the company's intrinsic value and not overemphasize the price fluctuation of the capital market.
"Finance": How do you understand, think and judge when encountering an unknown field?
Huang Zheng: Typically, I take a more primitive approach - to experience and feel it myself. Most people overthink, but in fact, most things are obvious, and you only need to use common sense to judge them.
"Finance": For example, how do you learn and understand logistics and finance in e-commerce?
Huang Zheng: Why do you need to understand it? Most knowledge is useless, and you only need to solve problems when you encounter them. As taught by Duan Yongping, you should not have grand ambitions, just focus on doing well in the present.
I won't plan for five or ten years either. I have a distant goal and a near-term implementation plan. Just like falling in love, is the person you eventually find the one you planned for? Can you decide who is the next girl you meet?
"Finance": Do you think falling in love and developing a company's strategy are the same thing in your eyes?
Huang Zheng: Essentially, they are the same. Developing a company is also a journey. If a guy has a strong career ambition, developing a company is similar to falling in love, because you will fall in love with your company.
"Finance": Your employees say that you don't really manage the business and rarely hold meetings.
Huang Zheng: You need to think clearly, are you really that capable?
"Finance": What do you think is the responsibility of a CEO?
Huang Zheng: I am not a typical CEO. My responsibility is to instill values and culture into the company and to establish life ideals for employees. Secondly, I deal with problems that suddenly arise and are not assigned to anyone.
"Finance": Your employees say that you keep your word and your decisions are final. Do you think most people are stupid? Are your decisions and judgments obviously superior to others?
Huang Zheng: This is very different from how I perceive myself. In my mind, most people are stronger than me in most areas, and I am only stronger than a few people in a few areas.
"Finance": In what areas?
Huang Zheng: The ability to isolate external pressure and return to rational thinking. Sometimes, the ability to think in reverse. In the past, when I was doing secondary market transactions, I found that I was not easily afraid when many people were afraid, but was pessimistic when the public was enthusiastic.
"Finance": What have you been thinking about the most recently?
Huang Zheng: Recently, I have been thinking about how to measure the cost-effectiveness of spiritual consumption, which is easy to measure for material consumption, but I haven't figured out how to measure it for spiritual consumption yet.
"Finance": Share the most regretful thing in your growth process.
Huang Zheng: From childhood to adulthood, I was always the top student in school. My goal was too clear, and I wasted too much time pursuing being the first and being a good student. I realized this too late.
"Finance": Before starting Pinduoduo, you had already achieved financial freedom. What is different about the drive for entrepreneurship this time?
Huang Zheng: In plain words, I wanted to make my presence felt by starting this company. When you create something that others think is cool, different, and worthy of respect, it's fulfilling.
When Steve Jobs returned to Apple, he made an advertisement that said, "You can praise him, insult him, say anything you want about him, but there's one thing you can't do, and that's ignore him."
"Finance": Why do you care so much about making an impact?
Huang Zheng: Because when you're not pursuing money, and you don't need money, what else can you pursue?
Some people pursue being the most respected company, but that is hard to measure. Some people pursue being the biggest or most profitable company, which is easy to measure, but pursuing these two things is terrifying. The best company should be incomparable - unique to the point where others cannot compare themselves to you.
"Finance": Besides Pinduoduo, what do you want to do or achieve the most?
Huang Zheng: I hope to transition into a true researcher in the future. A great model for this is Benjamin Franklin, whose image is on the hundred-dollar bill. He stopped participating in business after the age of 40 and focused on research, inventing the lightning rod. I think non-profit, wholehearted research work will make a greater contribution to humanity.
"Finance": You have always said that you want to be a unique presence, so why did you start an e-commerce operations company and a gaming company in the early days of entrepreneurship?
Huang Zheng: Why did I still do things that make money? It's because I haven't evolved to the point where I can do things that don't make money. In the future, I hope to do research that doesn't make money, but doing business without making money is immoral. You should be a responsible businessman and follow the logic of business.
"Finance": An investor who knows you well once said that you are a person without ambition.
Huang Zheng: From the perspective of operating a company, if you were born a mouse, you should not have the ambition to become an elephant, because that would kill the mouse. If you were born an elephant and you only want to be a mouse, then the elephant will die out. It's hard to say whether I have ambition or not. Ambition is determined by your genes and what you can do.
"Finance": It is said that the valuation of Pinduoduo has exceeded $15 billion, but you have never disclosed the true valuation. Why?
Huang Zheng: If everyone is lying, and you tell the truth, then the truth is the same as a lie. When I first started my business and went to raise funds, the company was in good shape, but the truth I told investors was seen as a lie. No matter what number you report, they will discount it by 20% or even 50% according to industry standards. Later, when Pinduoduo gained some fame and I went to raise funds again, it was funny because even if you lie, they believe it's true.
It's like when my dad bought a real watch, everyone said it was fake. Later, when I had money, my dad wore a fake watch, and they all said it was real. That's how the world works.
CCTV Interview Before Pinduoduo's IPO
On the evening of July 26th, Beijing time, Pinduoduo will officially be listed on NASDAQ. The issue price is $19, and the market value will reach $24 billion. Upon NASDAQ's proposal, Pinduoduo will ring the bell simultaneously in Shanghai and New York, which is the first time in NASDAQ history.
As the founder of Pinduoduo, Huang Zheng owns 46.8% of the shares and 89.8% of the voting rights. By this calculation, Huang Zheng's personal net worth will reach $11.23 billion.
On the morning of the 26th, Zhou Bo, member of the Standing Committee of the Shanghai Municipal Committee and Executive Vice Mayor, met with Huang Zheng at the Hengshan Hotel in Shanghai. Huang introduced Pinduoduo's new e-commerce model and the plan to invest billions to help agricultural products go upstream throughout the country.
From founding to listing in less than three years, Pinduoduo is one of the representatives of Shanghai's new economy and has attracted much attention.
On the afternoon of July 26th, Pinduoduo founder Huang Zheng was interviewed by various media, including Jiemian News, at the Shanghai office. He responded to many rumors, "Not going to the US to ring the bell is because I had middle ear inflammation before, and it was difficult to adapt to the changes in air pressure. It's not a big deal where to ring the bell."
Huang Zheng summarized that Pinduoduo's listing is "the trend of the times. It is absolutely impossible to achieve it with just individual or small team strength."
The following is the original text of the CCTV interview
Q: After Pinduoduo's listing in the United States today, your net worth may enter the top 30 of China's domestic rich list. Do you have any special feelings about this?
A: I don't have any special feelings, I'm just like before. There may be some negative impact on me personally.
Q: Recently, many Chinese internet companies have been listed in clusters. What do you think is the common reason behind this?
A: I think Pinduoduo's case may be relatively special. When we were considering listing, we didn't consider the market environment too much. It was more of our strategic choice because Pinduoduo's attributes are a bit different from other companies. It is a platform-based company with stronger social attributes, and as its scale grows, its public attributes become stronger.
We hope that through listing, on the one hand, the company can become more public and can do better under public supervision. On the other hand, listing can also make the company more credible globally.
Q: Some people say that it may be a capital winter, and Pinduoduo may feel that it lacks money. Did you consider this?
A: If you see the cash in Pinduoduo's account, you won't ask this question. Since Series C, we haven't used our cash, and our advertising revenue is very strong, so there is no phenomenon of lack of money, at least not for us. Moreover, the overall dilution ratio of Pinduoduo's stock issuance this time is also relatively low.
Q: When Xiaomi went public, the executives also went to the United States to do a roadshow. Why didn't you go to meet foreign investors?
A: We also have roadshows, but we participate in fewer of them. On the one hand, we may have set a relatively fair price, so we can save a lot of things. On the other hand, our team is very capable, and everyone has done their job, so investors don't need to see me to make a decision.
Q: There are various rumors about why you didn't go to the United States to ring the bell. Why did you choose to ring the bell in Shanghai?
A: Is this such a big deal? Because I had otitis media before, I still feel uncomfortable with changes in air pressure. The bell-ringing ceremony is more about letting consumers participate, and it's quite troublesome for consumers and merchants to go through the visa process.
Q: Does this listing cover all of Pinduoduo's business?
A: Yes. Specific numbers cannot be disclosed.
Q: Is Pinduoduo's model easy to be copied by other companies?
A: At the beginning, there were quite a few hundreds or thousands of companies trying to copy us. Personally, I think cross-border copying is feasible in the internet field, such as "Copy to China" in the early days and bringing the Chinese model overseas today. However, it is rare to succeed in copying someone else's model in the same market.
Until today, I never doubted one thing, that WeChat can incubate new business models. Now one App of WeChat consumes 50% of your battery power, but think about how many business models this 50% of power consumption has created?
Q: Do you agree with Liu Qiangdong's statement that "consumer experience is the most important"?
A: Fundamentally, I agree with Liu Qiangdong's statement. However, commercial experience includes comprehensive experience such as cost-effectiveness, logistics, etc. I don't know the background of Liu Qiangdong's interview when he said this. But this is the result of Pinduoduo's choice. For example, with fruit, it's acceptable to customers if one or two pieces are damaged in logistics at a relatively lower price.
For ordinary people, they will complain, but they may come back next time after a refund. This is a problem of a company's values, choices, and balance. When you can't have both, you have to consider whether it's worth it or not, and whether this thing is cost-effective before considering whether to show off.
Now, uneven consumption is the fundamental problem. This is the direction of our upgrade. In most areas, what should be obtained is fair consumption. China's unfairness lies in the fact that things in first-tier cities are cheaper than in smaller places. Electrical appliances in Suqian are more expensive than in Beijing. What really needs to be upgraded is from material consumption to spiritual consumption. What really needs to be upgraded are nutritious articles and books.
Q: How to handle the conflicts with merchants now?
A: The platform should ensure fairness, protect good people, punish bad people, and avoid the phenomenon of bad money driving out good money. The platform ecology is rich, and there are always some bad parts in a rich environment. This is like a couple quarreling. The earlier the conflict is exposed, the earlier it can be resolved. Don't wait until the last fight to get divorced.
Q: How to attract young people? (Question from a reporter born in 1995)
A: Maybe you haven't done a survey. Our proportion among student groups is very high.
Q: Is there a possibility of doing offline business?
A: There is a possibility. But we won't follow the trend to do this new retail thing.
Q: Why emphasize the concept of agricultural products going upstream?
A: We do agricultural products. Batch agricultural products have structural advantages in China's farming. The United States has a farm. China's farms are scattered. In this situation, Chinese agricultural products become very non-standardized. This non-standardization is quite difficult for e-commerce companies (Huang Zheng mentioned this logic in a previous interview).
After the group-buying model came out, fruit, for example, this model has structural advantages. In the process of Pinduoduo's development, we found that the Pinduoduo model coincides with China's current situation of agricultural products, which is hitting the jackpot in a different way.
Q: What role will Tencent play after the listing?
A: You can check the prospectus. Tencent did not have our shares in the previous year and a half. Tencent did not have our shares before Series C. At that time, our development was more difficult, and our reliance on WeChat and Tencent was higher. This also shows that Tencent's platform is relatively fair. At that time, there were already many e-commerce companies in the WeChat ecosystem. In that case, we did not receive unfair treatment.
After Tencent invested in us, we did not deliberately seek more things that were beneficial to us. Now, as our scale becomes larger and larger, cooperation between the two companies in WeChat payment and business will increase, and the degree of mutual dependence will become higher and higher.
Q: From B2C to C2C model in the early days?
A: The platform is a very difficult thing to do. At first, we could only sell by ourselves. After merchants were willing to come in, we found that self-operation and third-party were not in conflict. You shouldn't be both the referee and the athlete.
Q: Changes in user growth?
A: Looking at MAU, there may be changes, and more people may have downloaded the App now. But looking at the overall structure, there is no change in user growth.
Q: Profit model? And the increase in customer acquisition costs?
A: Alibaba has proven that advertising and commissions are feasible. This profit model is mature enough and has a large enough scale. We started with advertising because we had advertising traffic positions and engineers did the allocation, and this model grew rapidly.
Traditional channel customer acquisition still works well. Before the first half of 2017, customer acquisition was very low, and it still exists now. The platform scale is getting larger, and the service is getting smaller. In the past two quarters, our marketing expenses have skyrocketed. An important reason is that advertising revenue is increasing. At this stage, if you want to spend money on worthwhile things, it's brand building. At this stage, users' awareness of our brand is still weak.
Consumers seeing Pinduoduo from CCTV is different from seeing it from WeChat Moments.