Pinduoduo, China’s third largest e-commerce firm, has eclipsed search giant Baidu in market value, making it the fifth-largest publicly-traded Chinese technology firms.

Nasdaq-listed Pinduoduo was up 8.66% on Thursday, closing at US$33.61, resulting in a market capitalization of US$39 billion. Comparatively, Baidu’s market capitalization as of Thursday was US$36.7 billion.

Pinduoduo’s stock price has jumped 51.3% in 2019, more than the 16.5% gain in the benchmark Standard and Poor’s 500 Index, as the company continues to expand its e-commerce services across China as a challenger to market leaders Alibaba and JD.com. Alibaba is the parent company of the South China Morning Post.

Pinduoduo listed on Nasdaq in 2018. (Picture: Reuters)

In contrast, Baidu’s stock price has declined about 35% since the start of the year, as the search giant’s advertising income slowed and new entrant ByteDance announced that the company would start building a “general search engine for a more ideal user experience.”

Baidu’s market capitalization has stagnated, even as fellow internet firms Alibaba and Tencent have surged ahead on the back of fast-growing industries such as mobile payments, gaming, e-commerce and local services. The trio are collectively referred to as BAT in China, and have been representative of China’s growing internet economy.

Currently, Alibaba is the most valuable publicly-traded Chinese technology firm, with a valuation of nearly US$450 billion. Tencent follows with a market capitalization of US$396.5 billion. Meituan-Dianping, which runs one of China’s leading local services and food-delivery platforms in China, is also ahead of Baidu with a valuation of US$54.6 billion after listing in Hong Kong last year.

Baidu has had a stranglehold on search in China with 70% of the market, especially after Google exited in 2010. But a shift in internet usage patterns has chipped away at that dominance, with the rise of self-contained super-app ecosystems from rivals like Alibaba and Tencent. A user can quite easily watch a movie, read news, shop online and order takeaway food without having to leave one of these walled communities or go to a traditional search engine.

While Baidu is in the midst of fending off competitors, Pinduoduo has managed to go from an e-commerce upstart to one of China’s biggest e-commerce platforms in just four years. The company is often held up as the poster child for the social e-commerce model, as it pioneered a “team-purchase” model where prices are discounted if users can successfully get their friends to buy an item together.

At first, Pinduoduo was known for its extremely cheap products, many of which cost less than 20 yuan per item. The company received a wave of criticism around the time it went public on Nasdaq, as consumers complained of poor product quality and counterfeit goods.

Since then, Pinduoduo has sought to dispel the notion that Pinduoduo sells only cheap goods to consumers in lower-tier, smaller cities in China and has taken steps to clean up its platform, working with brands to remove counterfeit products and directing users to listings by legitimate sellers.

During its earnings call earlier this month, Pinduoduo said that nearly half of its orders received in June were from bigger cities in China, such as Beijing, Shanghai, or second-tier cities such as Hangzhou and Tianjin.

(Abacus is a unit of the South China Morning Post, which is owned by Alibaba.)