TikTok and GoTo are combining their e-commerce businesses in Indonesia, after the social media company was forced to halt transactions to comply with recent regulations.
TikTok aims to move back into Indonesia’s e-commerce market thanks to a new agreement with GoTo.
Under the agreement, GoTo’s Tokopedia and TikTok Shop Indonesia will combine into a single entity under the Tokopedia name. TikTok will have a controlling stake of this company and plans to invest up to $1.5bn to support the combined business.
The move comes two months after TikTok was forced to suspend its e-commerce services in the country after regulations banned direct payments for online purchases on social media platforms. This new deal appears to be a way to navigate past these regulations.
GoTo will retain a stake of just under 25pc and this percentage will not be diluted by any future funding from TikTok, according to an investor update. The deal will provide GoTo with an ongoing revenue stream from Tokopedia, without the need to continue funding the business.
“This also means we will continue to directly benefit from the rapid growth of the Indonesian e-commerce industry while enabling GoTo to direct its resources and capital toward its market-leading on-demand services business,” GoTo said.
The deal has a rather complicated path, as Tokopedia will first acquire TikTok Shop Indonesia for $340m in the fourth quarter of 2023. Meanwhile, TikTok will buy the majority stake in Tokopedia for $840m, Reuters reports.
The shopping features within the TikTok app in Indonesia will be operated and maintained by the new, enlarged Tokopedia entity. The deal is expected to close in the first quarter of 2024. GoTo said the partnership will begin with a “pilot period” this year, which will be carried out under the supervision of regulators.
“TikTok, Tokopedia and GoTo will transform Indonesia’s e-commerce sector, creating millions of new job opportunities over the next five years,” GoTo said in a statement. “More than 90pc of the combined business’ merchants are MSMEs and the companies will undertake a series of joint initiatives to support them.”
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