TikTok to invest US$1.5bil in Indonesia shop pact with GoTo Group
ByteDance Ltd's TikTok has agreed to invest US$1.5 billion in a joint venture with Indonesia's GoTo Group, marking a significant step towards restarting its shopping app in the largest online retail market.
In a statement released yesterday, the social media giant revealed plans to merge its Indonesian TikTok Shop business with GoTo's eCommerce unit, Tokopedia.
Under the terms of the agreement, TikTok will secure a controlling 75% stake in this combined venture, responsible for managing the shopping features within TikTok's social media app in Indonesia. This strategic move aims to overcome regulatory obstacles imposed by Indonesia in September, which mandated a separation of payments from shopping on TikTok. This forced TikTok to temporarily halt its online retail service just as it was gaining momentum against competitors such as Sea Ltd and GoTo.
The Indonesian government, prioritizing the protection of local businesses, has signalled its approval for TikTok and GoTo's new partnership. The deal is poised to address regulatory challenges, allowing TikTok to revive its online shopping service in Southeast Asia's largest retail market, with Indonesia serving as a template for global expansion from the United States to Europe.
TikTok Shop, the fastest-growing feature for ByteDance, is aiming to diversify revenue streams beyond its popular social media service. Launched in Indonesia in 2021, the shopping feature's success prompted TikTok to venture into online retail in other markets, including the United States. Earlier this year, TikTok announced plans to invest billions in Indonesia and the broader Southeast Asian region.
For GoTo, Indonesia's largest internet company, collaborating with TikTok poses risks as it assists a major online retail rival in maintaining operations in the country. However, the partnership also provides GoTo with a formidable global social media ally, potentially boosting shopping and payment volumes for both entities.
CEO Patrick Walujo, seeking to demonstrate GoTo's long-term earnings potential, is working towards profitability on an adjusted basis by year-end. This involves cost-cutting measures such as job reductions, promotional adjustments, and expense controls.
Indonesia, at the forefront of Southeast Asian countries challenging TikTok, implemented restrictions prompting Malaysia to consider regulating TikTok and its eCommerce operations. Meanwhile, TikTok faces potential bans and scrutiny in the United States, Europe, and India, driven by national security concerns.
