As part of an agreement to allow the Chinese business to relaunch its shopping app in its largest online retail market, ByteDance Ltd.’s TikTok has agreed to invest $1.5 billion in a joint venture with Indonesia’s GoTo Group.
On Monday, the social media behemoth said that it will merge its Indonesian TikTok Shop company with GoTo’s online store Tokopedia. In that partnership, which will operate TikTok’s social media app’s retail functions in Indonesia, TikTok receives a 75% ownership share.
The agreement’s purpose is to remove regulatory obstacles and enable TikTok to resurrect its online shopping business in the biggest retail market in Southeast Asia. In September, Indonesia unveiled extensive laws that compelled TikTok to separate payments from purchases made within the nation. This division led TikTok to terminate its e-commerce platform at the very moment when it was beginning to gain traction in competition with Sea Ltd. and GoTo.
The Indonesian government has indicated endorsing TikTok and GoTo’s new agreement. The government has worked to defend regional competitors, including tens of millions of its smaller businesses.
The fastest-growing product for Beijing-based, privately held ByteDance is TikTok Shop. The company seeks ways to monetize itself outside its well-known social media service. It has set its sights on the 278 million-person nation of Indonesia’s e-commerce business as a model for global growth from the US to Europe.
In 2021, TikTok launched its shopping feature in Indonesia. Driven by its immediate success, the company expanded into other areas, including the US, with online retail. TikTok announced that it will make billion-dollar investments in Indonesia and the larger Southeast Asian region this year.
A partnership with TikTok could be problematic for GoTo, the biggest internet provider in Indonesia, as it would enable a significant rival in the online retail space to continue functioning there. However, it also provides GoTo a robust international social media partner, potentially increasing both businesses’ sales and payments.
Since taking over in June, GoTo’s chief executive officer, Patrick Walujo, has been working to prove that the ride-hailing and e-commerce company has long-term earnings potential. He hopes to achieve profitability on an adjusted basis by the end of the year. Northstar Group’s managing partner is carrying on his predecessors’ efforts to cut losses by reducing employment, reducing promotions, and tightening spending controls.
One of the first nations in Southeast Asia to take action against TikTok is Indonesia. Following Indonesia’s restrictions, Malaysia, which is close by, announced it is looking into controlling TikTok and its online sales. Due to national security concerns, the social media behemoth is already under investigation and may face restrictions in countries including the US, Europe, and India.
