Indonesia-based Internet firm GoTo Group agreed to its tie-up with China-based social media giant ByteDance Ltd’s TikTok to avoid further market-share losses in online shopping in its home country, chief executive officer Patrick Walujo said, Bloomberg reported on Thursday.
TikTok Shop more than doubled its market share to 11 percent this year, Walujo said on a conference call with investors on Thursday. GoTo’s share of the pie shrank to 23 percent from 28 percent over that span, he was quote as saying.
It was reported earlier this week that TikTok agreed to invest $1.5 billion in a joint venture with GoTo that it will control, a pact aimed at addressing the Chinese company’s regulatory obstacles in its biggest online-retail market. GoTo becomes a passive backer of the venture, relinquishing control of its Tokopedia e-commerce arm.
“We were going to lose even more market share if we didn’t do anything,” Walujo said. “Once we combine, we have a very high chance to become the No 1 player in a much bigger market.”
GoTo shares were traded up 4.59 percent on Thursday at the time of writing. Its shares were up as much as 9 percent in Jakarta on Thursday, according to earlier reports.
GoTo said on Monday that Tokopedia and TikTok Shop Indonesia’s businesses will be combined under the existing PT Tokopedia entity in which TikTok will take a controlling stake.
The shopping features within the TikTok app in Indonesia will be operated and maintained by the enlarged entity. TikTok has committed to invest over $1.5 billion in the enlarged entity over time, to provide future funding required by the business, without additional dilution to GoTo.
The arrangement will allow both TikTok and GoTo to each serve Indonesian consumers and MSMEs more comprehensively.
GoTo will benefit from the growth of the enlarged entity and will remain an ecosystem partner to Tokopedia, through its digital financial services via GoTo Financial and on-demand services via Gojek.
GoTo will also receive an ongoing revenue stream from Tokopedia commensurate with its scale and growth.
The strategic partnership will commence with a pilot period carried out in close consultation with and supervision by the relevant regulators.