China’s e-commerce company Pinduoduo disclosed on Wednesday that it booked RMB 7.5 billion (USD 1.05 billion) in net revenues in the third quarter of this year, missing analyst expectations of USD 1.08 billion.

Pinduoduo’s revenues represented a 123% year-on-year growth rate, beating Alibaba’s growth rate of 40% year-on-year and JD.com’s growth rate of 28.7% year-on-year during the same quarter, mainly induced by an increment in online marketing services revenues.

Pinduoduo booked RMB 2.3 billion in net loss in the third quarter, widening from a net loss of RMB 1.1 billion in the same quarter of 2018.

Pinduoduo’s active buyers in the twelve-month period ended September 30 were 536.3 million, up 39% year-on-year from 385.5 million reported during the same period in 2018. Annual spending per active buyer over the same time frame was RMB 1,566.7 (USD 219.2), an increase of 75% year-on-year.

Pinduoduo’s latest Q3 report brings the company closer to Alibaba in terms of user count. Annual active consumers on Alibaba’s China retail marketplaces reached 693 million for the 12 months ended September 30, an increase of 19 million from the 12-month period ended June 30.

“We continued to invest in our users throughout the third quarter, and stepped our marketing up a notch from the second half of September for the launch of our anniversary sale,” chairman and founder Huang Zheng said.

Huang added that his company has experienced a steady momentum of user growth, as average monthly active users raised by 64 million from the prior quarter to reach 430 million.

“Coupled with greater user engagement and frequency of visit, annual spending per active buyer has grown 75% year-over-year, driving our last-twelve-month GMV up 144% to reach RMB 840.2 billion. We will work even harder to deliver a consistently improved user experience and to build up our users’ trust and familiarity with our platform,” said Huang.

After the earnings report, Pinduoduo shares plummeted 23% on Wednesday on Nasdaq, dragging down its market capitalization to USD 36.5 billion.

On the earnings call conference held soon after the release, Pinduoduo’s management was asked over if the company will prioritize user growth or monetization. David Liu, vice president of strategy told analysts that the company’s strategy “is not so much growth versus monetization, but rather on engagement”.

Liu said that in terms of the foreseeable future, certainly for next year, Pinduoduo is going to continue to prioritize user engagement, which was also echoed by Huang.

“We are convinced that by having strong user engagement and good user experience, monetization will follow,” added Liu.

Huang also remarked that the company’s RMB 10 billion subsidy program, launched around June 18 shopping festival, has been successful. “What this has done is to change people’s perception of PDD. We don’t just sell apples, but we also sell authentic Apple iPhones.” He mentioned a positive response from both users and merchants, and added that his company has sold products such as cars and high tech goods around the first 11 days of November, or China’s Singles’ Day shopping festival.

An iPhone 11 is priced starting from RMB 5,199 under the RMB 10 billion subsidy program on Pinduoduo, while the same model starts from RMB 5,499 on JD.com. “During the first 11 days of November, Pinduoduo sold over 400,000 latest iPhone models to consumers, who might have otherwise thought twice about making that purchase,” said Huang.

David Liu, Pinduodu’s vice president of strategy, also said that Pinduoduo’s Tier 1 users are spending well over RMB 5,000 based on annualized 2019 Q3 spending, which is an example that users are spending with higher frequency and buying products at higher ASP (annual spending per active buyer).

“Ultimately, our goal is that whenever users think about buying something, coming to Pinduoduo would be second nature”, Huang said.

This article was updated to reflect developments.