So, it’s official. Following last week’s report of TikTok reaching a preliminary agreement with GoTo Group to collaboratively launch an online shopping service in Indonesia, both entities have confirmed this partnership in a statement jointly released today.
As part of this agreement, TikTok will acquire 75.01% of GoTo’s Tokopedia business for approximately USD 840 million. Tokopedia and TikTok Shop’s businesses in Indonesia will also be merged under the existing Tokopedia entity, with the shopping features within the TikTok app in Indonesia to be operated and maintained by the expanded entity.
Additionally, TikTok has committed to investing over USD 1.5 billion in the expanded entity over time, providing the future funding required by the business without additional dilution to GoTo. This arrangement will allow both TikTok and GoTo to serve Indonesian consumers and businesses more comprehensively.
GoTo will benefit from the growth of the expanded entity and will remain an ecosystem partner to Tokopedia, through its digital financial services (GoTo Financial) and on-demand services (Gojek). GoTo will also receive an ongoing revenue stream from Tokopedia commensurate with its scale and growth.
Moving forward, TikTok, Tokopedia, and GoTo aim to jointly transform Indonesia’s e-commerce sector, targeting the creation of millions of new job opportunities over the next five years.
According to the statement, over 90% of merchants served by the combined entity are micro, small, and medium enterprises, and joint initiatives will be undertaken to support them. These include promoting local products on TikTok and Tokopedia, enhancing the capacity of MSMEs through a holistic program, supporting online product sales through marketing assistance, aiding local brands in international promotion, creating technology centers to nurture local tech talent, and maintaining a marketplace that encourages fair competition.
The transaction is expected to close in the first quarter of 2024. Its completion is particularly positive for GoTo Group, which has sought to strengthen its financial and strategic position after struggling to turn a profit. Earlier in March, GoTo reported a 56% increase in its net loss in 2022 to IDR 40.4 trillion (USD 2.6 billion) from IDR 25.9 trillion (USD 1.7 billion) the previous year. The widening losses brought GoTo, a listed company, to a tipping point, submitting to pressure from investors and leading to a change in leadership, with Patrick Walujo replacing Andre Soelistyo as CEO.
For TikTok, the new tie-up enables the restart of its e-commerce operations in Indonesia under a slightly different structure. This move is crucial for TikTok to stay on track with its broader plans. Specifically, TikTok has been rapidly expanding worldwide, not only in the US and Europe, but also in Southeast Asia. Indonesia has grown to become TikTok Shop’s largest market since its launch in 2021, but it faced a setback after being brought to a halt when Jakarta forced it to separate payments from shopping in response to complaints from local merchants.
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Joining forces as a combined entity may also unlock operational efficiency improvements across various areas such as shopping, logistics, payments, and more, benefiting both TikTok and Tokopedia in their competition with major rival Shopee to become Indonesia and Southeast Asia’s e-commerce market leader. Shopee currently leads the pack, with Tokopedia closely trailing in Indonesia based on market share.
The partnership is expected to be completed in the first quarter of 2024 and will begin with a pilot period conducted in close consultation with and supervision by relevant regulators. A committee chaired by Walujo, with support from members of both businesses, will be established to facilitate transition and integration.
The first campaign by the enlarged entity will be the “Beli Lokal” initiative, commencing on December 12 to coincide with Indonesia’s National Online Shopping Day (Harbolnas). This aligns with a government program aimed at growing Indonesia’s digital economy by supporting local MSMEs. The campaign, facilitated by both TikTok and Tokopedia, will promote a wide range of merchants, with a focus on Indonesian products.
Goldman Sachs is serving as the financial advisor to GoTo on this transaction.