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e-Commerce

TikTok-GoTo Partnership Eases Pressure on Indonesian Tech Giant But Squeezes Rival Sea

Osama Khalid
Last updated: February 12, 2024 1:46 pm
Osama Khalid
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2 Min Read
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  • TikTok and GoTo’s Tokopedia partnership squeezes rival Sea’s Shopee amid losses.
  • The deal eases GoTo’s cash burn but heightens e-commerce competition.
  • Analysts see unclear returns for Sea defending market share against TikTok.

Contents
TokoTok?Relief valve

A recently announced partnership between TikTok and Indonesian tech conglomerate GoTo is expected to relieve pressure on the latter’s cash burn woes but ramp up the heat on regional rival Sea.

Analysts said while the deal would likely hurt Sea’s profit margins further across its e-commerce unit Shopee, it reduces the cash burn burden GoTo has struggled with in its Tokopedia online marketplace.

TokoTok?

GoTo is merging Tokopedia with TikTok to form a joint venture entitled TokoTok. Financial terms were not disclosed, but TikTok will initially inject $1.5 billion into TokoTok.

DBS Group and Citi Research downgraded Shopee owner Sea’s stock amid projections that competition in Southeast Asia’s e-commerce space will remain elevated over the next two years.

Sea is already under strain to reach profitability with Shopee. Citi expects TikTok’s threat to be more severe for Sea than rival Lazada.

Relief valve

While GoTo can ease its losses, analysts say Shopee will likely have to burn more cash defending its market share against the TikTok-Tokopedia combined with unclear returns.

GoTo has faced “limited visibility” on Tokopedia’s path to profit with hefty losses, said Morningstar. The joint venture offers a relief valve on burdensome cash burn.

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