It’s official – Tokopedia Gojek merger heralds the arrival of digital services giant SEA
Tokopedia and Gojek talked a lot earlier this year as talks about a merger between the two Indonesian unicorns surfaced. Last month, the deal was finally struck, with the blessing of Chinese giants Alibaba Group, Tencent and JD.com, all of whom invested heavily in the landmark deal.
The merger between these two Indonesian goliaths will give birth to the financial giant “GoTo Group”, which will offer, among other things, e-commerce services, ridesharing, food delivery and financial services. GoTo, a coat rack of the first two letters of each partner’s brand, appears to be a viable competitor not only in Indonesian markets, but other Southeast Asian (SEA) markets as well.
Tokopedia and Gojek: So what’s the problem, exactly?
S&P Global Market Intelligence believes that the group has a combined valuation of approximately $ 20 billion. Local and regional players, especially Gojek’s nemesis, will face increased challenges, as GoTo Group will be sure to continue aggressive growth, not only in Indonesia, but also in SEA.
Besides the usual services of each giant, the deal “will present a variety of growth opportunities in financial services, including payments, consumer credit and lending to merchants,” said Sampath Sharma Nariyanuri, analyst in financial technology at S&P Global Market Intelligence. “The combined entity’s fintech business will deepen its ties with online and offline commerce in the archipelago nation, thereby gaining an edge over its competitors,” they added.
This puts GoTo Group a step further in the fight against regional competitor Grab, which recently doubled its valuation to $ 40 billion in one of the largest Special Purpose Acquisition Company (SPAC) transactions in the world. Last year alone, Grab was valued at US $ 16 billion.
The natural synergies between Gojek and Tokopedia would also allow tech giants to cross-sell in their respective customer pools and increase user loyalty within their ecosystem. Tokopedia’s e-commerce offerings could also be complemented by Gojek’s last mile delivery solutions, or “” Tokopedia.buy now-pay-later»Programs integrated into the services of Go-Pay and the Gojek Bank Jago branch.
Problems in the land of the unicorn?
While this merger may seem rather intimidating, it seems to have been born out of murky waters. Before that, the two unicorns saw declining market shares and bleeding money despite being among the biggest players in their respective local markets, SCMP reported.
Gojek, in particular, was pushed to explore a merger with Grab last year to avoid damage and expansion failures, as their biggest investor, Japan’s Softbank, has made it clear he will not bail out the companies. from his wallet.
This proposed merger, however, was unsuccessful as several reports claimed Grab wanted greater share and control. Additionally, the monopolistic nature of such a union would have been an issue due to anti-competitive laws in the region and could result in the same fines as Uber. when acquired by Grab.
Additionally, Gojek is struggling to tackle Grab’s food delivery services, dropping from a 90% market share in 2017 to just 50% in three years. Tokopedia, on the other hand, was facing intense pressure from Sea Group’s Shopee e-commerce platform.
Shopee had been more and more aggressively over the years, overtaking Tokopedia on several public parameters and employing 60% more people in Indonesia. On the fintech front, GoPay and Gojek’s Tokopedia faced stiff competition from OVO and ShopeePay, according to Bank Indonesia analysis in late 2019.
The impact of Tokopedia and Gojek on regional actors
This marriage will undoubtedly make other regional players nervous, especially since the digital payments market is on the rise, especially in Indonesia. Dana, backed by Ant Group and OVO backed by Grab, both fintech players, will face stiff competition, which could well lead to another merger if rumors in june last year are to play.
Grab has a powerful regional presence that Gojek had tried unsuccessfully to break into, barely making a dent in the Singaporean market. However, this merger may well give GoTo a major boost to enter other markets with renewed power over multiple digital services.
At the same time, Chinese tech companies with deep pockets such as Alibaba (through subsidiaries like Alibaba Cloud) and Tencent have taken strategic steps to capture various facets of the SEA digital economy. Tencent has announced a regional hub in Singapore, while Alibaba’s subsidiary Ant Group is exploring fintech.
While Shopee has grown considerably, Lazada, owned by the Alibaba Group, is still a leading player in e-commerce in several markets.
What is GoTo’s goto plan?
Indonesia is home to over 273 million people, which is more than a third of the entire SEA region itself. Indonesia is also the region’s largest economic contributor, with proof in its 2020 digital economy valued at US $ 44 billion, a massive spike after its valuation of US $ 8 billion five years earlier.
Research from Google, Temasek Holdings and Bain & Co predict that The Internet Economy in Southeast Asia could reach 300 billion US dollars (approximately 415 billion Singapore dollars) by 2025, three times its current annual size. As Grab prepares for a listing in the US, Tokopedia Gojek pairing has also been done – both targeting a similar value of US $ 40 billion, according to South China Morning Post last month.
This GoTo IPO proposal will come as a result of larger fundraising and, if successful, will be the first major IPO by an Indonesian tech startup. This positions Indonesia as a gigantic presence in the SEA digital economy game, if all of its players step up their game on the backs of the moves of these giants.