For many Indonesian urbanites, their lives can be described in two phases: before Gojek existed, and after Gojek became a part of their phones. Now, the company’s green-and-white app is a staple. It covers transportation, payments, entertainment, food delivery, and more. What about e-commerce, you might ask? Well, that’s coming soon.
Gojek and Tokopedia, Indonesia’s largest e-commerce platform, are inching closer to a merger that will incubate a new entity called GoTo, with Gojek co-CEO Andre Soelistyo as its head. GoTo could become a powerful tech ecosystem connecting millions of customers, merchants, as well as driver-partners, and it would be in a solid position to go public soon.
The two companies have much to gain from this merger. Tokopedia would have access to Gojek’s logistics resources for a more efficient delivery service, while Gojek could also receive a boost from Tokopedia’s e-commerce delivery network. Gojek’s fintech arm, GoPay, and digital bank Bank Jago could target Tokopedia’s small and medium-sized enterprises to offer payments and lending services.
Increasing the app’s versatility could widen Gojek’s footprint in Southeast Asia. Despite its stronghold in Indonesia, Gojek still lags behind its rival Grab beyond its home base. Gojek is currently only available in four markets, namely Vietnam, Thailand, Singapore, and Indonesia. Grab is present in all markets where Gojek operates plus Malaysia, Myanmar, and the Philippines, and has partnered with JapanTaxi to allow Grab’s users to hail cabs at popular tourist sites in Japan.
Regional expansion seems to be one of Gojek’s main focuses right now. Last year, the company unified its Vietnamese and Thai brands, while in Singapore, it has announced plans to launch new products, including new features for corporate clients, taxi orders, and large vehicle services.
The move seems almost necessary to step up the fight with Grab, which is getting ready to go public in the US through a SPAC mega-merger with Altimeter Growth Corporation. GoTo will also likely seek a dual listing in Indonesia and in the US stock exchange this year, a decision that could be driven by the increasing interest of US tech giants in Southeast Asian startups. Gojek already has several US investors like Facebook, PayPal, Visa, and Google, while Tokopedia has backing from Google too. The two companies share even more investor DNA in Sequoia Capital India and Temasek.
“Any potential merger will be driven largely by convergence. The services provided by the two companies are highly complementary and will coalesce significant scale. A merged player will also be more financially sustainable given the more diversified revenue streams,” Kenny Liew, telecoms, media, and technology senior analyst at Fitch Solutions, told KrASIA.
Read more: All eyes on Grab, from a Harvard University project to a USD 40 billion business
Channeling western investors’ interest
Tech-empowered companies in Southeast Asia have attracted global investors thanks to the region’s growing internet economy, which is expected to carry a gross merchandise value (GMV) of USD 309 billion by 2025.
The success of Sea Group’s public listing on the New York Stock Exchange has also whetted investors’ appetite for the region’s companies, according to Hian Goh, founding partner of Gojek’s early investor Openspace Ventures.
Gojek can reassure investors thanks to the company’s operations in several sectors and the merger with Tokopedia. Gojek can be seen as a blend of Uber, DoorDash, Alipay, and Flipkart, covering ride-hailing, food and online groceries delivery, and online payments. “The diversity is usually akin to large US and Chinese tech players, which are generally well-received by public market investors,” Goh said.
Fitch Solutions’ Liew added that “unlike previous ride-hailing IPOs like Uber and Lyft, Gojek has a diversified business model with a strong presence in areas like fintech and food delivery, two sectors where there is already a clear path to profitability, and investors’ interest is extremely high.”
Projections for food delivery and digital payment in Southeast Asia are promising compared to ride-hailing. By 2025, the gross merchandise value of food delivery will reach USD 23 billion, while the gross transaction value for payments will amount to USD 1.2 trillion, according to a report by Google, Temasek, and Bain & Co. Transportation is only expected to reach USD 19 billion, the same report noted.
Companies operating in these sectors have seen positive reactions so far in capital markets. Food delivery platform DoorDash managed to land a successful debut in the stock market at the end of 2020, while Uber’s food delivery business, UberEats, reported positive growth in March 2021.
“We believe that this interest will continue for the foreseeable future as investors at all investment stages want to capture the growing Southeast Asian opportunity,” said Goh.
Adding e-commerce services can be a competitive advantage for Gojek in the race against Grab, as the Singapore-based firm doesn’t have an e-commerce arm, nor has it announced plans to merge with one at some point. Grab formed a partnership with Lazada in Vietnam in November 2020, giving Vietnamese consumers access to GrabFood from the homepage of Lazada’s app and web page, while Grab’s users in Vietnam can access Lazada’s platform via banners and widgets in the Grab app.
Gojek’s nearly 2 million driver-partners could also give GoTo a better chance of establishing a solid delivery network to compete against Sea Group’s e-commerce platform Shopee.
Yet, GoTo will need to create a solid ecosystem and improve its offerings. “To be competitive and to fend off intense competition from rivals like Shopee and Grab, Tokopedia and Gojek will need to look at creating more synergies and developing a services ecosystem which will generate greater customer spend and loyalty, rather than stick to the status quo and leave each product as it was,” Liew said.
Read more: Many forks in the road: Gojek’s ride to the stock market
Ballooning valuation and many opportunities ahead
Like Google and Uber, Gojek has become a verb used by Indonesians in their daily lingo: Gojek-in aja (“just send it via Gojek”) and nge-Gojek (“using Gojek’s transport services”). In metropolitan areas, Gojek drivers are everywhere, each donning their characteristic green jackets, ferrying passengers, delivering packages, or resting in parks during their lunch breaks.
Most offline merchants also have GoPay machines and barcodes as a payment option, reflecting the ubiquity of Gojek’s presence in Indonesians’ lives.
Tokopedia’s existence is more subtle. Unlike Amazon, the Indonesian e-commerce platform doesn’t print its logo on parcels that leave its fulfillment centers. Yet, it is the second most visited platform in Indonesia, with more than 114 million monthly web visits, according to marketplace aggregator site iPrice. The platform also claims to have more than 900,000 merchants on board. The company has tapped into small street stalls—known as warung—adding phone credit and electricity tokens to their stock.
Gojek is reportedly valued at USD 10.5 billion, while Tokopedia is at USD 7.5 billion. The union between the two would create a USD 18 billion entity. Bloomberg estimates that, with a potential dual listing in Indonesia and the US, the company could reach a valuation of about USD 40 million, matching Grab’s expected valuation after it merges with Altimeter’s SPAC.
Gojek’s shareholders will hold a 58% stake in GoTo, and Tokopedia’s owners will take the rest, according to people familiar with the matter who spoke to Bloomberg. GoTo will divide its operations into three business units: ride-hailing under Gojek, e-commerce under Tokopedia, and a new payment and financial division named Dompet Karya Anak Bangsa, or DKAB.
“If the two companies can show prospective investors how strong they could become and in what new segments they can compete and grow after merging, I think that will definitely be reflected in a higher valuation,” said Liew.
“Combining the two businesses will unlock many synergies for both companies, and will likely make them stronger players in their respective fields. Unlocking these synergies effectively could lead to more rapid and sustainable growth. The longer and stronger growth runway is key to the higher valuation,” Liew added.
Openspace Ventures’ Goh, who has observed Gojek since it was an emerging startup, believes that Gojek has a promising future. “We see Gojek as a generational tech company,” he said. “It has achieved a tremendous amount and still has significant room to grow. We believe this growth can be achieved with or without an IPO in the near term.”
