Last fortnight, GoJek acquired Indonesia’s mobile payments startup Moka for $120MM, paving the way to becoming the leading digital payments player in Indonesia.
Onboarding Offline Ojeks
In 2011, an app called UberCab was launched in San Francisco, after a pilot launch in 2009, aiming to fundamentally alter urban mobility patterns.
Around that time, an HBS MBA grad had moved on from his consulting job at McKinsey to join an Indonesia-based fashion e-commerce giant, Zalora, as its managing director. A year later, Nadiem Makarim took his learnings from building a mega fashion startup to a payments startup, Kartuku, one of the pioneers of cashless payments solutions in Indonesia.
All this while, he kept working on building his own venture which would go on to create history in the startup history of the country.
As a frequent user of an Ojek, a motorcycle in Indonesia, he saw a significant business opportunity in it.
Mr. Makarim also realized that the Ojek market was the fragmented middle. The cab market was already run by BlueBird. GoJek turned a weakness into a strength
GoJek, for the first 4 years was a call centre with 15 employees manually matching people with two-wheeler ride-hailing and courier services.
In an interview with show host Prita Kemal Gani, Mr. Makarim elaborates on how the startup struggled over the first 3 years and nobody was willing to fund the company.
In 2015, technology took over and it launched its app with a wider range of services on offer, all based on the concept of on-demand intra-city transportation. Food delivery was a no-brainer and then came retail shopping orders.
GoJek had technically offered every user with an army of personal drivers (or assistants). As Mr. Makarim lived and breathed GoJek, the company began to scale.
4 years of tough love would turn into an “overnight” rocketship.
Jostling in Jakarta
By mid-2015, daily orders grew from 3,000 to 100,000.
While the system was still evolving to handle such volumes, orders climbed to 300,000 per day by 2016. By late 2015 it had already built a driver fleet of 20,000+ drivers, outnumbering Bird Song, Indonesia’s largest automobile taxi company.
100x growth in its first year of launch begs an explanation.
To put things in context, Jakarta, the capital city of Indonesia, has had a track record of being one of the worst cities for traffic globally. In 2012, average car speeds in the city were around 16 kilometers per hour (down from 20 km/hour in 2008).
About 10 million vehicles would hit the road each workday and the congestion only increased with frequent rains. 70% of the people commuting from outside to the city used private transport, adding to the traffic frenzy. The unreliable public bus-subway system, TransJakarta, was witnessing a fall in ridership with passenger numbers dropping by 34% in early 2015.
As we had covered in our piece on ride hailing startups, Jakarta is one of the worst cities to move around.
However, this was also the time when the world’s attention was turning towards this archipelago in Asia for reasons other than traffic.
Indonesia had become one of the fastest-growing economies with GDP growth surpassing 6% in 2012 while others were still recovering from the aftermath of the crisis. With rising benefits of demographic dividend and exploding internet penetration, it was set to become a $300Bn internet economy by 2025 and the 4th largest smartphone economy.
Indonesia was ripe for disruption and Mr. Makarim was ready to ride the wave.
Unlike the US where Mr. Makarim had spent time studying, Indonesia was a different beast.
As a native with deep understanding of the Indonesian market, he understood that putting more 4-wheelers on the road in a city like Jakarta is going to make matters worse.
Thus, as opposed to its western counterpart, he started with motorcycle-hailing services. Slowly and steadily GoJek built a brand for itself which became synonymous with green jackets making their way through the near-standstill traffic in Jakarta.
For GoJek, though, they were simply leveraging the trust they had built to offer various services.
GoJek started with a simple premise of delivering convenience in a trusted manner to both Ojek drivers and passengers. Identifying high repetition daily-use case phenomena, it leveraged the trust it had built to create a flywheel effect of ‘convenience’.
It was building a logistics network and added multiple economic value-generating activities on it.
Starting initially with Go-Food and Go-Mart, between 2016 and 2017, it ventured into beauty services with Go-Glam, ticket bookings with Go-Tik and mobile recharge with Go-Pulsa.
As if increasing its share of the consumer internet economy was not enough, it entered payments with Go-Pay, a wallet to facilitate cashless payments for all transactions on GoJek. To consolidate its position, it acquired three payment companies in 2017, one of which was Kartuku, the payments startup where Makarim spent his earlier days.
Along the way, it also acquired an Indian tech company, C42, as it setup an entire engineering team based out of Bengaluru.
In just 2 years, GoJek had become Indonesia’s leading on-demand delivery and payments solution. GoJek had now become a “super-app” and the one-stop go-to-app for Indonesians
Its revenue model primarily consists of a commission fee earned through the use of various services on the platform. Each time one takes a ride, hires a beautician or orders groceries GoJek earns a commission. It has perfected the ability to monetize its users with the ability to earn through as many as 4-5 transactions done by a user per day.
Multiple funding rounds have helped GoJek’s aggressive vertical expansion. The company is on track to close another $2B funding round by the end of the year, bringing its total fundraising to $5Bn.
But why has it grown so quickly and garnered attention?
Trusted to Transact
GoJek’s growth boils down to its core principle, building trust.
By providing high-quality services on ride-hailing, GoJek thought of adding more services via its Ojek partners who their user’s trust.
GoJek focused on expanding its use cases and increase the engagement time for a user on its app. By monopolizing the user’s time, it has collected massive amounts of data which has helped understand consumer behavior.
Leveraging network effects have allowed it to intelligently refine existing service offerings and introduce new ones keeping a user ‘hooked’ and spend a disproportionate amount of time and wallet share on the app.
But it would not be alone as it attempted to Grab market share.
Grab would enter the Indonesian market as it looked to dominate the SE Asia market. In a case of friends turned friendly rivals, GoJek’s CEO Nadiem Makarim and Grab Founder Anthony Tan were classmates at business school.
GoJek protected its turf by creating an emotional bond with the target segment. It regularly pitches being the first unicorn born out of Indonesia. Its drivers wear green jackets and helmets, with an Indonesian flag embroidered on the front.
The biggest factor which has probably helped it go one up over Grab was the introduction of its wallet, Go-Pay which offered a quick, convenient, cashless way to offer all the services.
Users were also given the option to add money to the wallet through its driver network of 400,000 in 50 cities. This strategically allowed even the unbanked users to get on the bandwagon, as only 37% Indonesians have a bank account. Go-Pay has since allowed users to purchase goods online, settle electricity bills and pay road tolls
Complementing Go-Pay has been ‘Go-Points’ where each transaction enables users to earn points redeemable on iPhones, concert tickets, trainers among other things. This Ola Pay meets CRED situation incentivizes users to opt for Go-Pay for daily use needs. The simple points system has engaged users.
GoJek has also expanded into Grab’s territory by entering into Singapore, Vietnam and Thailand.
As Uber sold its SE Asia operations to Grab, GoJek quickly committed $500MM to enter Vietnam, Singapore, Thailand, the Philippines highlighting the significance of these markets and the continued investor confidence in both the players to dominate
The gloves were off, and the fight had begun.
GoJek’s Good Game
Google teamed up on platform mobility, Tencent on payments strategy, JD.com on logistics operation and Meituan Dianping on merchant transactions and deliveries. Not to forget the ‘Ant-Man’esque Go-Ventures investing in startups in SE Asia with strategic importance to their business
Grab has focused on adding depth in its transportation business through GrabTaxi, GrabCar, GrabBike, GrabBajay, GrabShare contextualizing these services according to region-specific nuances. It has realized that inadequate transportation services remain a big area to solve.
In contrast, GoJek has kept it relatively simple, realizing that transportation is just a means to get users to hop on other services such as lifestyle, food delivery and financial services. With its range of 21 services GoJek handles 2.5MM user requests at any given time
In fact, Grab has followed GoJek into food delivery and acquired UberEats to expand in the segment. This means that in some markets such as Indonesia and Vietnam there is a Zomato vs. Swiggy like battle playing out between GrabFood and GoFood.
In other areas such as Groceries, Grab partnered with HappyFresh while GoJek scaled down. In cashless payments too, Grab has maintained a lead with GrabPay in Singapore, Malaysia and Philippines. Both have entered into partnerships with Grab tying up with Thailand’s Kasikornbank to launch a mobile wallet while GoJek has partnered with DBS through Paylah.
But challenges do remain in the battle.
GoJek has found it hard to become profitable in its core segment of transportation. The richness of a large user base has not spilt over to make it unit profitable in its core, although it mentioned that it is extremely close to reaching profitability in others. Still, that does not perturb the company as ride-hailing represents <25% of overall gross merchandise value with payments and food being the top two.
Ride-hailing was simply Trojan horse to get into the user’s wallet.
While Go-Jek has maintained dominance in its home market of Indonesia, Grab has continued on the first-mover advantage in most of the SE Asian markets
Newer avenues such as their foray in other financial services and insurance are still wide open. Fintech remains the crucial battle and is equally indispensable for both players as they look to focus on profitability and list on public markets in the next few years. Monetizing digital pay at scale will be an interesting challenge to face.
In Indonesia, though, GoJek is clearly winning.
GoJek is at the forefront of innovation in Indonesia, and potentially South East Asia.
If you asked someone ten years ago though, few would have predicted that the mobile, banking, and connectivity revolution in South East Asia would come from an app that was initially meant just for motorcycle taxi booking.
While being in the increasingly competitive battle for end-consumers’ wallet share through transportation has been GoJek’s bread and butter since its inception, their answer to AliPay and WeChat’s desired expansion outside of China was GoPay.
Even within Indonesia, each component of GoJek’s services faces strict competition. While we’ve discussed their relationship with Grab, Go-Jek sees multiple competitors in banking as well. Go-Pay is Indonesia’s fourth-biggest e-wallet service, behind the country’s largest lender Bank Mandiri’s e-Money, Bank Central Asia’s Flazz, and state-owned telecom firm Telkomsel’s T-Cash, according to a survey by research firm JakPat.
Even so, Go-Jek has an advantage – the survey found nearly 47 per cent of respondents mainly used digital cash for transport.
But all is not rosy in for online banks in Indonesia.
Notwithstanding a strict regulatory climate which has encouraged GoJek to consider QR code payments and app-based payments like Chinese and Indian apps, only 1.9% of transactions in Indonesia and through e-money and less than 40% of consumers have a bank account – which might indicate both a lower current opportunity as well as a massive room to grow.
Regardless of these limitations, GoJek would continue to grow and raise funding round after funding round to build out their operations and services in Indonesia.
In 2018, GoJek decided to launch expansion into Vietnam, Thailand, Singapore and the Philippines – starting with ride-hailing but aiming to replicate the multi-service offering which had worked so well for them in their home country.
With Uber out of the picture, GoJek would take a leaf out of Uber’s playbook, but not repeat missteps as GoJek attempted to expand.
In the same vein to the way Uber expanded in its early days, GoJek decided that operations in new economies will be run by local founding teams.
GoJek providing technological support and expertise gathered over the past three years as Indonesia’s most revolutionary tech business. The local teams would determine their own brands and identities to ensure good traction in each new market.
The approach of picking a few markets that demonstrated similar nuance and characteristics to the Indonesian economy that GoJek had understood so well over time worked well in their favour.
When the average person thinks about global ridesharing, the 800-pound gorilla in the room that comes to mind is Uber. It’s worth noting that Uber made many missteps in its quest to become the world’s ‘local driver’.
From payment methods to social conventions, Uber found itself entering new countries, burning through money to keep up with the competition. It eventually exiting through shuttering operations or selling to a competitor.
Build a smart team to understand local nuances and create a similar product to what worked in Indonesia – while keeping the parent company in the loop as advisors.
GoJek seems to share a number of similarities to Uber. But there are some important differences that show its superior understanding of the local market conditions.
GoJek focuses on scooters not cars. This has a number of key advantages. First, in emerging economies, more people can afford to buy and run a scooter than a car. This means that the supply of drivers is easier to grow.
GoJek’s better understanding of the local market and its ability to get scooter owners onto its platform meant it was able to get to “scale” more quickly than Uber, which entered the market late.
In startup business language a company is scaling when its revenue is growing without it having to increase operational cost.
Second, in dense urban environments, such as Jakarta, scooters offer a much better and more flexible mobility solution. Third, GoJek rapidly built on ridesharing to integrate a broad range of personal services onto its app.
GoJek has built a full-stack commerce solution in a developing, densely populated Asian market. But it raises a question, why can’t any Indian player replicate the super app?
Attempts to build super apps have definitely been made.
If you have been to a movie theatre in recent time you would have seen a TVC with Amitabh Bachchan throwing away all apps for a frightened-looking man before announcing ‘JustDial’ as the one-stop saviour for him. Paytm, Amazon, Ola, Reliance have all been trying their hand.
But nobody seems to have succeeded like GoJek.
Part of the reason is that the Indian market has more depth than the Indonesian market. It would be unviable for an Indonesian Swiggy to exist, and it would be better as an extension of GoJek. GoJek did not focus on perfecting one use case early on, it expanded rapidly to others. It would indicate that Ola is best placed to build a super app in India, but the real super app to look at is eastwards.
That super app is WeChat, of course.
For a larger market, where verticals can viably exist, building an ecosystem on a messaging service is most natural. People spend hours on messaging apps like Whatsapp. Doing commerce is a natural extension.
If one could order food on Whatsapp, they would. On Ola, which one would open twice a day, it seems unlikely. On Paytm, which you may open once a day, it seems even more unlikely.
India’s super-app will, therefore, be built on messaging.
There has been no pervasive Indian messaging app, and as you are beginning to realize, India’s super-app could be Whatsapp. Whatsapp’s incredible patience with Indian regulatory authorities for payments is indicative of it being the tip of its commerce iceberg.
GoJek, though, has been incredibly successful in navigating regulations in Indonesia.
GoJek’s success in Indonesia, as you would realize also lies in being Indonesian.
GoJek has been more successful in navigating the local regulatory environment due to its strong local connections.
Unlike other ride-hailing companies, which tends to enter markets and follow with an army of publicists and lawyers to bash its way through local regulatory conditions, GoJek has skillfully navigated its way into the market by avoiding a head-on conflict with the entrenched taxi industry.
Changes in regulation introduced earlier this year have further constrained Uber, forcing it to work through rental car companies and limiting its use of surge pricing.
GoJek’s approach has not only allowed it to succeed in the vibrant Indonesian market but has positioned it to expand into other emerging markets in the region. Other ride-hailing players have only just now starting to broaden its range of services to food delivery and is well behind what is offered by its rivals in emerging markets.
As Grab has spread in many geographies, it hasn’t been all smooth sailing. GoJek has had to fire its Vietnam CEO twice, signalling that the Indonesia strategy may not necessarily work well everywhere.
So where does a company like GoJek which is already valued in the billions, prominent in multiple locations and provides a wide range of services, go from there?
The short answer – potentially, everywhere.
Go-Jek’s founder and CEO, Nadiem Marakim quit quite fittingly after 10 years at the helm of a company that reimagined transportation in Indonesia. He was appointed as the Indonesian Minister of Education and Culture and will leave control of Go-Jek to two tenured co-CEOs with a long history of performance at the company.
After consolidating its position in the Indonesian market, it can replicate the same playbook in other Asian markets. GoJek now has 10 million weekly active users, roughly 40 million app downloads, 50% of the country’s transportation business and 95% of Indonesia’s food-delivery market. Taking the scrappy, localized approach that helped it win Indonesia, it is likely to focus on new markets with limited competition.
If it succeeds, it could grab South East Asia’s Internet Market.