ByteDance’s TikTok has reached a significant agreement to invest $1.5 billion in a collaborative venture with Indonesia’s GoTo Group. This partnership enables the Chinese tech giant to relaunch its shopping app in Indonesia, its largest online retail market.
In an official statement released on Monday, both companies revealed that TikTok would merge its Indonesian TikTok Shop business with GoTo’s e-commerce unit, Tokopedia. The resulting collaboration will be majority-controlled by TikTok, holding a 75% stake and overseeing the shopping features integrated into TikTok’s social media app in Indonesia.
The primary objective of this deal is to navigate regulatory challenges, allowing TikTok to revive its online shopping service in the biggest retail market in Southeast Asia. The Indonesian government implemented comprehensive regulations in September, mandating a separation of payments from shopping platforms in the country. This led TikTok to suspend its online retail service just as it was gaining ground against competitors such as Sea Ltd. and GoTo.
Indonesia, with its focus on safeguarding local enterprises, has indicated its approval of the new pact between TikTok and GoTo.
For ByteDance, TikTok Shop has emerged as the fastest-growing feature, prompting the Beijing-based company to explore new revenue streams beyond its renowned social media platform. Targeting Indonesia’s online shopping market, with its population of 278 million, serves as a model for ByteDance’s global expansion plans from the United States to Europe.
Initiating the shopping feature in Indonesia in 2021, TikTok witnessed swift success, encouraging its expansion into online retailing in other markets, including the United States. This year, TikTok has announced plans to invest billions in Indonesia and the broader Southeast Asian region.
This collaboration could pose a risk for GoTo, Indonesia’s largest internet company, as it assists a major online retail competitor in continuing operations in the country. However, the partnership also provides GoTo with a robust global social media ally, potentially enhancing shopping and payment volumes for both entities.
Patrick Walujo, GoTo’s CEO since June, is working towards achieving profitability on an adjusted basis by the end of the year. This strategic move aims to demonstrate the long-term earnings potential of the ride-hailing and e-commerce company. The managing partner of shareholder Northstar Group is aligning with the efforts of his predecessors, focusing on reducing losses through job cuts, promotional adjustments, and tighter expense controls.
Indonesia has become one of the initial countries in Southeast Asia to take measures against TikTok. Following Indonesia’s regulatory actions, neighboring Malaysia is also exploring the possibility of regulating TikTok and its e-commerce operations. On a global scale, TikTok is encountering potential bans and scrutiny in regions like the United States, Europe, and India, primarily due to national security concerns.
