TikTok to invest $1.5 billion in Indonesia shop pact with GoTo

The social media giant will combine its Indonesian TikTok Shop business with GoTo’s e-commerce unit Tokopedia, the companies said in a statement Monday. TikTok gets a controlling 75% stake in that combination, which will run the shopping features of TikTok’s social media app in Indonesia.

The deal is designed to address regulatory hurdles and let TikTok revive its online-shopping service in Southeast Asia’s largest retail arena. Indonesia in September announced sweeping regulations that forced TikTok to split payments from shopping in the country — a separation that prompted TikTok to halt its online-retail service just as it was gaining traction against Sea Ltd. and GoTo.

Read more: TikTok’s E-Commerce Ambitions Stall as Global Backlash Grows

The Indonesian government, which has sought to protect local contenders including tens of millions of its smaller enterprises, has signaled that it’s approving TikTok and GoTo’s new pact.

TikTok Shop is the fastest-growing feature for Beijing-based, closely held 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 US to Europe.

TikTok started the shopping feature in Indonesia in 2021 and its instant success encouraged it to expand into online retailing in other markets, including the US. This year, TikTok said it will invest billions of dollars in Indonesia and the broader Southeast 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 payments volumes for both companies.

Chief Executive Officer Patrick Walujo, who took over in June, is trying to bring GoTo to profitability on an adjusted basis by the end of the year 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 Southeast Asia to push back against TikTok. Following the Indonesia restrictions, nearby 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.

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Published: 11 Dec 2023, 08:35 AM IST