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TikTok will invest $1.5 billion in GoTo’s Indonesian e-commerce company, Tokopedia.

The company behind TikTok, ByteDance, wants to do more business in Indonesia, which is the biggest e-commerce market in Southeast Asia. And since authorities made it hard to get there, they have now found a new way to do it.

In a new partnership worth $1.5 billion, TikTok is putting money into both Tokopedia, the online store of the Indonesian tech giant GoTo, and TikTok Shop Indonesia, the online store for TikTok users in Indonesia. With 75.01% of the new company, TikTok will have full power over it.

Each company said in a statement today that the $1.5 billion will be invested in the united business “over time,” not all at once. Reuters says that it will pay $840 million to get its share at first. The deal today means that GoTo will have a 24.99% share in the JV, and that will stay the same, the company said.

That part about shared ownership is very important. This agreement comes after officials criticized TikTok for its wholly-owned project, TikTok Shop Indonesia, which allowed users to shop online using TikTok’s well-known main social media app. About two months ago, Jakarta stopped letting people use direct payments to buy things on social media sites. This was done to protect the data of users and smaller local businesses. In order to follow the new rule, TikTok had to shut down its online store on October 4.

There are some parts of this deal that work against the end result. First, GoTo’s investment note says that Tokopedia will buy TikTok Shop’s Indonesia business for $340 million in the fourth quarter of this year. Second, TikTok will pay $840 million for the new company to buy the majority stake in Tokopedia. The third part is that up to $1.5 billion will be spent over an unknown time period to make the JV even stronger.

There are some expected values at play here, as well as values that have changed because of the governmental problems. GoTo says that TikTok Shop Indonesia “was valued based on a backward-looking view of the TikTok Shop Indonesia business under the current environment during the fourth quarter of 2023 and does not reflect the forward-looking potential of the combined entity.”

The deal is supposed to go through in the first quarter of 2024.

Because of Indonesia’s small business rules, TikTok couldn’t do business there, which led directly to today’s deal.

When it comes to e-commerce in Southeast Asia, Indonesia is by far the biggest player. Since last year, its worth has been believed to be between $50 billion and $60 billion, which is about two-thirds of all the money made in the area.

Small and medium-sized businesses that sell on platforms bring in a lot of that e-commerce money. These are facts that TikTok and GoTo are well aware of and are now working hard to keep in mind. Today, they said, “More than 90% of the combined business’s merchants are micro, small, and medium-sized businesses (MSMEs), and the companies will work together on a number of projects to help these businesses.”

TikTok has now also admitted that it needs to work with them with an Indonesian partner, which is a big deal.

ByteDance released the short video app TikTok Shop Indonesia in 2021. As of October, it had about 106 million users in Indonesia, making it the second most popular country in the world after the United States. The number of active social media users in Indonesia is 167 million, which is 60.4% of the total population. This makes it the third-largest market in Asia, after China and India.

Five years from now, TikTok, Tokopedia, and GoTo will change Indonesia’s e-commerce industry and make millions of new jobs possible, the two companies said in a joint statement.

Eltrys Team
Author: Eltrys Team

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