This article is a transcript from Momentum Works video “Gojek in Talks With Tokopedia for $18 Billion Merger – [Does it make sense?]” published on Jan 6, 2021 on Momentum Works YouTube channel.

You can watch the full video here:

Video Transcript

Nanette  0:00  

Hello, Jianggan, can I ask you a question?

Jianggan  0:05  

You always asked me a question.

Nanette  0:07  

Yeah, so I heard that GoJek and Tokopedia are in a discussion now where both sides want to collaborate as they see potential synergies and they are keen to close this deal as soon as possible. So my question is why are they talking for collaboration now? And how will their business make sense?

Jianggan  0:29  

Yep, of course, it’s interesting that this question is coming from you, Nanette, because you’re in Indonesia, and you’re a user of both services. You probably have some feeling about how things are, but everything came this morning – Tuesday, 5th of January. So, news came out of Bloomberg saying that GoJek is in talks with tokopedia for $18 billion merger, according to sources. 

Apparently, they are at a fairly advanced stage and term sheet has been signed. They’re starting to do due diligence. And this sort of shocked the market because just a few days ago, the attention was on the potential Grab and Go-jek merger.  I mean, these two green companies, with the same initial so lots of synergy for overlapping business – Grab the original player and Gojek that is still largely Indonesia. 

However, I think that there were a couple of reports saying that the Grab-Gojek negotiation was not going very well. They couldn’t agree on how much control that the shareholders and team of each company would get in a combined company. So then this news about Gojek- Tokopedia came about. Funny enough, right? 

So Gojek- Tokopedia, both are tech champions of Indonesia, and are the biggest unicorns of the country. Although we shouldn’t forget Traveloka is also very solid business. 

So both companies, Go-jek and Tokopedia, have green as they color as well. And both have been around for a fairly long time. I have read lots of commentaries today (about the merger) , and it seems that most people are quite bullish about this. I hear comments that “ Okay, this is a brilliant move. And so a bit risky, but it created lots of synergy”. I think somebody even said “These (Gojek and Tokopedia) will become something like Amazon” – which I find a bit amusing.

I think there’s a clear, clear misunderstanding between on demand logistics versus sort of e-commerce fulfillment. 

From what I see, I think both companies are in a precarious situation. Both are tech champions for Indonesia, and both are actually losing market share, and to a regional competitor headquartered in Singapore. 

Tokopedia used to be number one in Indonesia in terms of Gmv. But over the last few years, it’s been losing very, very quickly to Shopee. 

In the case of Gojek -they had 90% market share of the food delivery market Indonesia a few years ago. However, recently, when our (MW) team did an assessment about sort of market of food delivery in Indonesia, we believe that Grabs now slightly ahead of Gojek. That’s a fairly significant reversal of fortunes of the very few quick years.  

Both companies have created lots of a big ecosystem with lots of lots of stakeholders, and lots of investors as well. But, I kind of struggled to understand the synergy that it can potentially build. 

Of course, these two companies with different businesses come together will form a bigger picture. From a story point of view, it makes sense. And I think both are trying to sort of combine make the combined entity to go for IPO. And I think the timing is right. And if they want to do it, they should do it fast, because the second half of 2020 is when people are really, really bullish about tech companies in Southeast Asia – especially on SEA (that owns Shopee). 

But the fact is that both Gojek and Tokopedia are losing market share, and they’re trying to combine they’re trying to create an IPO story. 

But the question is – how will they compete after the merger? How will the compete meaningfully against Shopee, and also against Grab?  The fact is that the merger doesn’t really change the competitive dynamic, right? 

I mean, having heavy commerce from Tokopedia doesn’t help the ride hailing part of Gojek to become more competitive. Maybe there will be a little bit of sort of cross reference of like customers, and sort of lower the equation cost and payment adoption, but for example, payment, a key component in itself,  is quite messy with the cross holdings of many payment companies, mobile payment companies in Indonesia. So this is something that, that is a bit hard to understand. 

Business operation’s of the merged company is another question mark. We’ll see how, how the conversation goes, and, and maybe they have a better plan in mind that that we just don’t know yet. 


Nanette  6:53  

Awesome. So on this point, I just wanted to know, if GoJek and Tokopedia merge, do you think they will be more successful towards their IPO? Or is it better if they just do it by themselves? What is your sense on that?

Jianggan  7:25  

I think if they’re merged, it will become the easiest story to tell to investors. From a common-sense perspective –  synergies make sense, and some investors in the secondary market might buy it. 

And if you look back at history, when you look at the days when SEA group (that has synergy with Garena and Shopee)  went for IPO in 2017, they were telling the story that they were growing, but they were burning lots of money. And now, look at their valuation. They have become a $100bil company.  Perhaps Gojek and Tokopedia want to repeat the same thing. 

However, there are a few things which are, which are quite different between these two companies versus SEA. 

SEA has a very, very lucrative and profitable gaming business. And whilst some people are arguing that the SEA gaming business was subsidizing the main losing ecommerce part, I think the strategy make sense. For Gojek and Tokopedia – these two companies that don’t have a profitable business, which can subsidize a growth business.

Also, SEA’s gaming business grew significantly last year, thanks to the pandemic and the geopolitic tensions. The lockdown forced people spend more time at home, so they played more games. SEA is also in different regions. In Brazil, they are quite big now, which also led shop to be building the e commerce business in Brazil, and India. And after India ban on chinese apps – including their games apps, Garena Games came in to fill in some of the void, India is a massive market!  

So back to Gojek- Tokopedia – the synergy story make sense for IPO, but the competitive dynamics probably hasn’t changed. And at this juncture, we’re also not sure  whether the two companies to have to worry about integration – which could be another headache.

Nanette  10:09  

Cool. So thank you, Jianggan, for answering the questions.

Jianggan  10:14  

Thank you, Nanette. Yeah. So to keep keep using apps, and maybe maybe that’d be more virtuous. And so no, certainly shopee has been given lots of coins and vouchers.

Nanette  10:24  

Definitely, definitely. I will check out like, I’m very interested to find out what will happen with the discussion they have today. And yeah, we hope to see better things soon.

Nanette  13:40  

Perfect. So thank you. Thank you Jianggan on. And thank you again everyone for watching this. Don’t forget to like us share comments, and then subscribe. And also, if you have any other questions, please do drop us some questions that you have. And then we can help to answer your questions. And then also Jianggan will also probably replies to some of your comments. So yeah, thank you, guys. Bye bye.

Jianggan  14:07  

Thank you. Bye bye.


The transcript has been edited by Momentum Works for clarity. To listen to the full original conversation, check out the Youtube Video.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].