ByteDance’s TikTok is gearing up to expand its presence in Indonesia, Southeast Asia’s largest e-commerce market, with a $1.5 billion investment.
Overcoming regulatory hurdles, the short video app is partnering with Tokopedia, the e-commerce unit of Indonesian tech giant GoTo, and TikTok Shop Indonesia, its local e-commerce division. In this collaboration, TikTok will hold a controlling stake of 75.01% in the new entity.
Unlike a single upfront investment, the $1.5 billion will be infused into the combined business gradually, as stated by the companies. Initial payment for TikTok’s stake will amount to $840 million, with GoTo maintaining a fixed 24.99% stake in the joint business.
This strategic move follows regulatory challenges faced by TikTok Shop Indonesia, prompting Jakarta’s ban on direct payments for online purchases via social media platforms. Consequently, TikTok suspended its e-commerce service on October 4, aligning with the new regulations.
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The multi-faceted deal involves Tokopedia acquiring TikTok Shop Indonesia’s business for $340 million in the fourth quarter of the current year. Simultaneously, TikTok will acquire a majority stake in Tokopedia through the new entity for $840 million.
An additional investment of up to $1.5 billion will be made over an unspecified period to further develop the joint venture. The transaction is anticipated to conclude in the first quarter of 2024, addressing the setback TikTok faced due to Indonesia’s small business rules.
With Indonesia holding a significant position in Southeast Asia’s e-commerce landscape, valued between $50 billion and $60 billion in the past year, this strategic move aims to respect local regulations and support small and medium businesses (MSMEs).
Both TikTok and GoTo emphasize that over 90% of the combined business’s merchants are MSMEs, committing to joint initiatives to bolster their growth.
Acknowledging Indonesia’s regulations, TikTok now recognizes the importance of having an Indonesian partner in its operations. TikTok Shop Indonesia, launched in 2021, boasts approximately 106 million users in Indonesia as of October, making it the second-largest market for the app after the U.S. With 167 million active social media users, Indonesia ranks as the third-largest market in Asia, following China and India.
In a joint statement, TikTok, Tokopedia, and GoTo express their commitment to transforming Indonesia’s e-commerce sector, projecting the creation of millions of new job opportunities over the next five years.
