TikTok is going to invest USD 1.5 billion in Indonesia’s e-commerce business. As per details revealed the social media giant will take a controlling stake in an e-commerce unit of Indonesia’s biggest tech firm, PT GoTo Gojek Tokopedia.
The agreement follows Indonesia’s October decision to prohibit online shopping on social media platforms, aimed at safeguarding smaller merchants and user data. This move led to the closure of TikTok’s e-commerce service, TikTok Shop.
In this arrangement, TikTok will acquire 75.01% of PT Tokopedia, Indonesia’s largest e-commerce platform, for $840 million. Additionally, TikTok Shop’s Indonesia operations will be integrated into the expanded Tokopedia entity.
The collaboration will initiate with a pilot period conducted in close collaboration with regulatory authorities, as stated in a joint announcement by the two companies.
Indonesia, with over 270 million people, boasts a significant user base of social media enthusiasts. TikTok, with 124 million users in the country and owned by China’s ByteDance, aims to leverage this substantial user base for substantial e-commerce revenue.
The transactions are set to conclude by the first quarter of 2024, with Tikopedia receiving a $1 billion promissory note from TikTok for working capital needs. The statement outlines TikTok’s commitment to invest more than $1.5 billion in the expanded entity over time, without causing additional dilution to GoTo.
Following the announcement, GoTo’s shares, involved in ride-hailing, delivery, and financial services, dropped 8.3%. This decline was attributed to some investors capitalizing on recent gains in anticipation of a TikTok deal.
In Indonesia’s competitive e-commerce market, Tokopedia competes with Sea’s Shopee and Alibaba’s Lazada. Projections indicate the industry’s expansion to approximately $160 billion by 2030 from $62 billion in the current year, according to a report by Google, Singapore state investor Temasek Holdings, and consultancy Bain & Co.