SINGAPORE – ByteDance’s TikTok announced an investment in Indonesia’s biggest technology firm in a deal that would allow the Chinese company to restart its shopping app in its biggest online retail market.
TikTok will take a controlling stake in the e-commerce unit of GoTo Gojek Tokopedia, a partnership that will see TikTok invest US$1.5 billion (S$2 billion) over the long term, the two companies said on Dec 11.
The social media giant will combine its Indonesian TikTok Shop business with GoTo’s e-commerce unit Tokopedia.
TikTok gets a 75 per cent stake in that combination, which will run the shopping features of TikTok’s social media app in Indonesia.
With the new deal, TikTok users in Indonesia can once again shop and pay for their purchases without leaving the super-popular video app, according to a message the company sent to merchants.
That is because the shopping component is now owned by a separate entity, Tokopedia.
The shopping service will relaunch on Dec 12.
The deal is unusual for ByteDance, which is effectively taking over a prominent local online-commerce player in a major overseas market.
The agreement, under which GoTo becomes a passive backer of the Tokopedia operation, allows ByteDance to restart its Indonesian business and comply with regulations which were introduced to halt its online retail service just as it was gaining traction against Sea and GoTo.
GoTo shares fell 13 per cent in Jakarta as investors assessed the impact of TikTok gaining control of its e-commerce business.
Top Indonesian digital lender Bank Jago, in which GoTo owns a stake, advanced as much as 7.9 per cent.
A tie-up will potentially boost and funnel payments and e-commerce transactions for Jago-operated platforms.
The Indonesian government, which has sought to protect local contenders including tens of millions of its smaller enterprises, has signalled that it is approving TikTok and GoTo’s new pact.
As TikTok grew to become a major rival to Tokopedia and local commerce operators, Jakarta established regulations in September forcing social media players like TikTok to separate their payment services from content.
TikTok Shop is the fastest-growing feature for ByteDance, which is seeking new revenue sources beyond its popular social media service.
It has targeted the online shopping market of Indonesia, a country of 278 million, as a template for a global expansion from the United States to Europe.
TikTok started the shopping feature in Indonesia in 2021.
The feature’s instant success encouraged it to expand into online retailing in other markets, including the US.
In 2023, TikTok said it will invest billions of dollars in Indonesia and the broader South-east Asian region.
For GoTo, Indonesia’s largest Internet company, a deal with TikTok could be risky as it would help a major online retail rival to keep operating in the country.
But it also gives GoTo a strong global social media partner in an arrangement that could boost shopping and payment volumes for both companies.
GoTo also will not be required to fund Tokopedia going forward, and its 25 per cent in the venture will not be diluted by further funding by TikTok, the company said in a note to investors.
Chief executive Patrick Walujo, who took over in June, is trying to bring GoTo to profitability on an adjusted basis by the end of 2023 to show the ride-hailing and e-commerce company has long-term earnings potential.
The managing partner of shareholder Northstar Group is continuing his predecessors’ campaign to reduce losses by slashing jobs, cutting promotions and tightening expense controls.
Indonesia is among the first countries in South-east Asia to push back against TikTok.
Following Indonesia’s restrictions, Malaysia said it is studying the possibility of regulating TikTok and its e-commerce operations.
The social media giant is already facing possible bans and scrutiny in the likes of the US, Europe and India on national security concerns. BLOOMBERG, AFP
