Is the “GoTo” merger the watershed moment for Indonesia’s ecosystem?

2021 seems to be the year for Southeast Asia.

After initial reports of the region’s biggest unicorns looking to list on public markets earlier this year talks finally came to fruition with Grab formally announcing details of its de-SPAC. 

However, that was not the end of it. 

Hot on the heels of that announcement came ride-hailing Gojek and e-commerce platform Tokopedia, who announced that they would be merging to form GoTo group. 

This has given birth to Indonesia’s most prominent technology group, the fourth most populous country globally. 

A long time in the making

The two companies first began working together in 2015, when Tokopedia partnered with Gojek to accelerate e-commerce deliveries using Gojek’s local network of drivers.

However, that was purely a partnership drive, with both busy focusing on their respective spaces. Over the years, both had gained category leadership in Indonesia in their categories of ride-hailing and e-commerce. 

Both are cut-throat competitive spaces, and things were heating up, with Grab in ride-hailing and players like Lazada, Shopee and others in e-commerce. However, despite competition, these players won out due to a focus on relentless execution. 

However, cut to 2020, and things were coming to a head. These VC-backed companies were maturing and considering liquidity options. 

In Southeast Asia, similar to China, the “super-app” concept reigns supreme, where having multiple digital services under one umbrella ecosystem enables greater cross-sell, data analytics, and ultimately, higher wallet share of consumers. 

The idea behind this is also to have a more significant push towards profitability. Standalone businesses in the ride-hailing, payments and e-commerce space at times in the past have faced issues in doing so, often being negatively labelled as cash bun, “ride to the bottom” style businesses.

This led to a merry-go-round of the super-apps, with the tech ecosystem rife with news of a potential merger between Grab and Gojek. Softbank, a significant shareholder in both, was vital in facilitating discussions. 

However, those talks petered down, with Grab opting to go public in the US via a SPAC. That valued it at US$39.6 billion. 

This then resulted in Gojek and Tokopedia discussions, which have finally born fruit in the form of an US$18.0 billion giant.

A behemoth is created 

The news of the merger was significant, most notably due to the sheer scale of the impact the combined entity would have. 

In essence, GoTo is now a digital leviathan, spanning e-commerce, ride-hailing and financial services in a country that is facing significant macro-economic tailwinds. 

As of 2021, the combined entity has over 11 million merchant partners, 100 million monthly active users and has handled more than 1.8 billion transactions with a total gross transaction of more than US$22.0 billion.

The most eye-watering detail – the combined entity accounts for 2% of Indonesia’s GDP. If there was ever a question of the power of start-ups to change landscapes, that is the answer.  

What the future holds

The next logical step for the combined entity is a listing – with plans to list in both Jakarta and New York. Sources say that it is likely to make its public markets debut late this year on at least one exchange. 

The synergies of the merger are obvious – Gojek drivers will deliver even more Tokopedia packages, merchant partners of all sizes will benefit from strengthened business solutions The combined entity can use its scale to deliver financial services to increase financial inclusion. 

Despite concerns over anti-trust and potential monopolistic behaviour, GoTo has reported that it plans to keep its ecosystem open to other competitors and partners. Gojek and Tokopedia will also remain separate brands, despite integration of their services under one ecosystem. 

While there continues to be debate on these matters, it is clear that there has been a behemoth created in Indonesia, one that represents a watershed moment in the region’s ecosystem. 

Gojek and Tokopedia were both founded over a decade ago and have unlocked the benefits of digitization of services for millions across not only Indonesia, but the broader Southeast Asia region. 

GoTo represents the beginning of a new chapter for both of them, one that is going to positively impact consumer, service providers, and merchants of all sizes.