Opinion | Why a Gojek-Tokopedia merger should be treated with caution by investors

Indonesia’s two most valuable start-ups are reportedly in talks as they lose money and market share. But will a merger make them more viable?

Tokopedia is under threat from Shopee, part of the Singapore-based Sea Group, while Gojek is facing pressure from ride-hailing rival Grab

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The Gojek sign is seen on the company's building in Jakarta, Indonesia. The ride-hailing and payments giant is reportedly in advanced discussions about merging with local e-commerce pioneer Tokopedia. Photo: Bloomberg

Published: 8:00am, 7 Jan 2021Updated: 8:03am, 7 Jan 2021

Gojek and Tokopedia – the two most valuable unicorns in Indonesia, with a combined valuation of US$18 billion – are reportedly close to a merger. Why is this happening, and how will it change the tech ecosystem in Southeast Asia?

Tokopedia is the highest-valued home-grown consumer-to-consumer e-commerce platform in Indonesia, worth US$7.5 billion. It received more than US$2 billion in its past two rounds of funding from investors led by Softbank and Alibaba Group, which owns the South China Morning Post.

Gojek might be a more familiar name, running ride-hailing, food delivery and payment services. It is valued at US$10.5 billion and counts Google, Tencent and Singapore’s GIC among its biggest shareholders. Its founder, Nadiem Makariem, became Indonesia’s education minister in 2019.

While they are hailed as champions of Indonesia’s booming tech ecosystem, they are both currently facing a tough situation.

Tokopedia’s position is under threat from Shopee, part of the Singapore-based Sea Group. According to online shopping aggregator iPrice, Shopee leads Tokopedia in all key public metrics in Indonesia, including website visits, app ranks, and social media engagement. It also employs 60 per cent more people in the country.

My young colleagues in Indonesia, who have been working from home since March and are highly dependent on deliveries, say Tokopedia’s promotions have become much more “stingy” compared with Shopee.

Gojek, meanwhile, is facing increasing pressure from its larger regional rival Grab. Its market share in the valuable food delivery segment reduced from over 90 per cent in 2017 to less than 50 per cent last year, with Grab taking 53 per cent, according to Momentum Worksin ourFood Delivery Platforms in Southeast Asia 2021 report. Gojek tried to expand outside Indonesia over the past two years, but has not reached meaningful market share in markets such as Thailand, Vietnam and Singapore.

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