In-Depth Look: TikTokopedia
💰 ByteDance's TikTok Reshapes E-commerce Landscape with $1.5 Billion Investment in GoTo's Tokopedia
Good afternoon 👋
It’s Monday, December 11, and welcome to Brevity Margin’s new experiment 🚀
Today's spotlight is on the recent merger between Bytedance and Tokopedia. This segment aims to offer an insightful yet accessible take on the intricacies of this significant development in the tech and commerce sphere.
Join me as I break down the details and explore what this alliance could mean for the evolving landscape of e-commerce. Let's dive in.
Simon Torring, co-founder of Cube Asia
🆕 ByteDance's TikTok has agreed to invest $1.5 billion in a joint venture with Indonesia's GoTo Group, securing control over the venture and restarting its shopping app in the country. Under this pact, TikTok will merge its Indonesian TikTok Shop business with GoTo's e-commerce unit Tokopedia, with TikTok gaining a 75% stake in the combined entity responsible for running the shopping features of TikTok's social media app in Indonesia.
This deal marks ByteDance's takeover of a significant local online commerce player in a key overseas market, allowing it to comply with regulations and revive its Indonesian business.
Study of ByteDance:
Beijing-based ByteDance, the parent company of TikTok, is navigating strategic shifts in light of challenges surrounding its initial public offering (IPO).
Sources reveal that ByteDance is offering to repurchase up to $5 billion worth of shares from existing investors as its IPO plans face uncertainty.
The buyback price of $160 per share mirrors the valuation offered to employees, resulting in a total company valuation of $268 billion, approximately 10% lower than a year ago.
Recent reports suggest that ByteDance is experiencing a robust revenue surge, with a notable 40% increase in the second quarter. The company is poised to rival Meta (Facebook's parent company) in terms of revenues.
In the second quarter, ByteDance even surpassed Tencent Holdings in revenues, securing a position among China's top three Big Tech companies, alongside Alibaba Group Holding and Meta.
Indonesia Setback— TikTok faced a setback in Indonesia when it suspended TikTok Shop in September, intended to monetise the app's popularity through e-commerce.
This collaboration signifies a transformative development in Indonesia's e-commerce landscape, as the industry is set to expand to about US$160 billion by 2030 from US$62 billion this year, according to a report by Google, Singapore state investor Temasek Holdings, and consultancy Bain & Co.
🔎 Key Impact Analysis
📉 Market Reaction: GoTo Group saw a 13% decline in Jakarta as investors evaluated the impact of ceding control of its e-commerce business in a rapidly growing market.
Conversely, PT Bank Jago, in which GoTo holds a stake, experienced up to a 7.9% increase, indicating potential positive outcomes for Jago-operated platforms.
🗳️ Government Approval: The Indonesian government focused on protecting local enterprises, has signaled approval for TikTok and GoTo's collaboration.
This comes after regulations were implemented in September to separate payment services from content for social media players like TikTok.
➡️ Resumption of TikTok's Business: With this partnership, TikTok users in Indonesia can seamlessly shop and pay for purchases within the video app, addressing previous regulatory challenges.
TikTok Shop and Tokopedia’s partnership will start with a pilot period, which the pair will look to carry out in consultation with and supervision by Indonesian regulators.
Beli Lokal, which is launching on December 12, will be the partnership’s first campaign.
Beli Lokal enables TikTok’s over 106 million users in the country to engage and shop with local merchants. The campaign will be available on both TikTok and Tokopedia platforms.
🌏 Global Expansion: ByteDance's move to secure a prominent position in Indonesia's online shopping market serves as a template for its global expansion strategy.
📊 Financial Dynamics
💸 Investment Structure: TikTok will invest $1.5 billion in the joint venture and hold a 75% stake in the combined entity. Tokopedia will pay $340 million to acquire TikTok Shop's Indonesia business, with TikTok subsequently acquiring its majority stake in the partnership.
🤝 Strategic Collaboration: While GoTo relinquishes control of its e-commerce potential, the collaboration offers mutual benefits. TikTok's 125 million active users are expected to enhance GoTo's logistics, payments, and banking services.
🚀 Market Competition and Regulatory Considerations
📈 Competitive Landscape: The deal introduces a significant shift in Indonesia's e-commerce landscape, potentially disrupting the equilibrium maintained by dominant players like Shopee and Tokopedia. The collaboration challenges the competitive dynamics in a market where Shopee and Tokopedia share nearly equal market share.
Tokopedia competes in Indonesia’s e-commerce market with Shopee from Singapore-headquartered Sea and Lazada from Chinese e-commerce giant Alibaba Group Holding.
👨🏽⚖️ Regulatory Scrutiny: The collaboration faces regulatory scrutiny, considering Indonesia's robust competition laws. The Commission for the Supervision of Business Competition (KPPU) enforces laws to prevent monopolistic practices and unfair competition, raising concerns about potential anticompetitive impacts.
🇮🇩 Regional and Global Implications
🛒 Southeast Asia Market Dynamics: TikTok's investment in Indonesia aligns with its broader strategy to invest billions of dollars in Southeast Asia, aiming for diversification and revenue generation. The region, with a population of around 630 million, represents a significant market for TikTok.
👥 Government Evaluations: Governments worldwide are likely monitoring Indonesia's response to TikTok's expansion into e-commerce, especially considering the platform's commitment to invest significantly in Southeast Asia. This move could influence TikTok's approach in other markets, including Malaysia, where regulatory scrutiny is under consideration.
The Philippines launched a TikTok ‘threat assessment’ as it considers a partial ban to cover the state security sector, not the general public.
Nepal bans TikTok over allegations of ‘disrupting social harmony’ and tightens control over all social media platforms.
💻 Cybersecurity Concerns
In March 2020, a hacker infiltrated Tokopedia's systems, compromising the details of 15 million users. The leaked information included sensitive data such as full names, emails, phone numbers, hashed passwords, dates of birth, and various profile-related details.
The breach also exposed account-related information like email activation codes, password reset codes, location details, messenger IDs, hobbies, education, and more.
While the hacker couldn't crack the hashed passwords using the SHA2-384 algorithm, the absence of "salt" random strings, which enhance password security, makes the passwords susceptible to potential decryption efforts.
The merger between ByteDance and Tokopedia demands meticulous attention to cybersecurity, particularly in light of Tokopedia's past data breach. The Indonesian government must prioritize robust security measures for users in the evolving landscape of Indonesian e-commerce.
Regulatory evaluations and market reactions will shape the trajectory of this strategic alliance, setting precedents for global expansions in the dynamic e-commerce industry.