Did Tokopedia waste its potential?

This is an opinion piece.

In December 2018, during my early days covering Indonesia’s ecommerce scene, I wrote a story about Tokopedia’s biggest funding yet – a US$1.1 billion round from SoftBank and Alibaba.

Just the year before, Alibaba had injected US$1.1 billion into the ecommerce unicorn – an unheard-of amount at the time, at least in Southeast Asia.

The 2018 deal made Tokopedia Indonesia’s most valuable startup and solidified its place atop the country’s ecommerce totem pole.

Things have changed in just five short years. In late 2023, ByteDance took a 75% stake in Tokopedia for only US$1.5 billion – which was later updated to about US$1.8 billion – and merged the marketplace with TikTok Shop.

The deal was widely described as a “merger”, including by Tech in Asia. The word choice, however, obscured the fact that Tokopedia – one of Indonesia’s biggest and most prominent homegrown tech companies – was acquired by a foreign company, at a diminished valuation compared to its heyday, in a deal that analysts agreed was favorable for TikTok Shop.

How did Indonesia’s one-time startup darling end up this way?

Victim of a price war?

Tokopedia’s US$2.5 billion valuation at acquisition was just one surprise. Perhaps the bigger one was its monthly active user count: at 18 million, it was a far cry from the 100 million it said it had in 2021.

Calculation methods for such metrics may differ. Still, GoTo CEO Patrick Walujo acknowledged Tokopedia’s diminished market share, especially among price-conscious consumers – a result of GoTo’s cutdown on incentives as it pursued profits.

That, along with increasingly tight competition with TikTok Shop in addition to existing rivals, led to the deal.

The key phrase here is “price-conscious.” Since its early days, Tokopedia was known for its relative dominance in major urban areas. But that was never going to be enough: Greater Jakarta, for instance, has more than 30 million people – roughly the same size as the entire population of Malaysia – but it only makes up just over 10% of Indonesia’s population.

Meanwhile, the billion-dollar investments and valuations that Indonesian startups enjoyed during the boom times were all predicated on a total addressable market of 280 million people.

To be fair, Tokopedia recognized this. After its IPO, GoTo’s four growth strategies included the strengthening of a “hyperlocal” shopping and transacting experience. At the time, a Tokopedia spokesperson noted that it would let the marketplace “maximize” the country’s domestic potential.

A lack of focus?

A win for Indonesia?