GoTo Group chief Patrick Walujo said Tokopedia‘s market share has been diminishing – especially among price-conscious consumers – as the group cut down on incentives to achieve profitability. That, along with the “very intense” competition in the Indonesian e-commerce space, led to the TikTok acquisition, which was completed last month.

“Our competitors are large foreign companies with significant funding,” said Walujo at Wednesday’s (Feb 28) public expose event. “To grow and survive, Tokopedia requires a very large investment.”

According to data revealed at the event, Tokopedia has 18 million monthly active users (MAUs). That’s a far cry from the 100 million it previously said it had, though the calculation methods may be different.

Meanwhile, TikTok Shop has 125 million MAUs in Indonesia. That said, its estimated Indonesia gross merchandise value (GMV) for 2023, at US$6 billion, is still lower than Tokopedia’s US$15.6 billion. See *Amendment note

The company also disclosed that prior to the acquisition, independent assessors valued Tokopedia at US$606 million. TikTok acquired 75 per cent of Tokopedia for US$1.8 billion, in a mix of a US$1 billion promissory note and newly issued shares.

While the move lets TikTok Shop resume operations in Indonesia, GoTo Group will also receive an ongoing revenue stream – in the form of an ecommerce service fee – from Tokopedia. In the public expose document, GoTo said that it will take an agreed-upon percentage from the combined entity’s GMV.

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For now, the two platforms are focused on the integration process, which Walujo expects to be completed no later than April. To comply with government regulations, TikTok Shop’s system will handle promotional parts of the business, while the actual shopping and payment transactions will be done on Tokopedia’s back end.

Teten Masduki, Indonesia’s minister of cooperatives and SMEs, recently commented that TikTok Shop still violated regulations. However, the Ministry of Trade – which has jurisdiction for issuing e-commerce regulations in the country – will audit the integration process after four months to decide whether there are still any violations.

GoTo reported a positive adjusted earnings before interest, taxes, depreciation and amortisation in the fourth quarter of 2023, with further details to be revealed in its next earnings call in March. TECH IN ASIA

*Amendment note: An earlier version of this story inverted the 2023 gross merchandise values for TikTok Shop and Tokopedia.