How Gojek is riding Indonesia's digital wave towards IPO

To calculate the ride-hailing startup’s valuation, investors will have to offset the cost of its fight with Grab against the hidden value in its payments app and huge capacity to hoover up data.

Gojek’s hipster headquarters in Jakarta are gradually taking over a non-descript shopping mall, floor by floor. Graffiti adorns the walls and huddles of casually dressed young people animatedly point at screens. The company’s founder, Nadiem Makarim, is rushing into a room to film a podcast on diversity.

The youthful energy of a startup is palpable, illustrated by zealous talk of disruption, mission statements and social reformation. The average age in the office at the end of 2018 was just 25 years old and an affirmational message in the office exclaims: “Do you realise that person you see in the mirror has a job that contributes to social changes? #impactatscale”.

But whilst most startups employ a small staff and are valued in the millions of dollars, Gojek is a $10 billion leviathan gearing up for the largest initial public offering of shares that Indonesia has seen in at least a decade, maybe ever. Now a household name, the firm has grown into the country’s largest private-sector employer and government officials consider it something of a national champion.

“What we’ve done, it’s an exercise in nation building, especially on the digital side,” Andre Soelistyo, Gojek’s president, said in an interview with FinanceAsia. Gojek said it contributes $658 million to the Indonesian economy annually but, more than that, it is a poster child for a legion of small startups keen to take part in the digital revolution sweeping through Indonesia.

Indonesia’s population of 260 million ranks fourth globally after China, India and US, but only a third of its citizens have hooked up to the internet as yet. However, the country’s expanding middle class is moving online en masse; analysts estimate that digital penetration will rise to over 60% over the next four to five years.

“Big successes show that if you have the right product [and] the right service the consumer will shift and move to you,” Nathanael Faibis, founder of Indonesian healthcare app Alodokter, said. “Gojek has also shown that they can monetise, at a high level, their user base.”

Launched in 2011, Gojek is an Uber, PayPal, Ticketmaster, Homejoy and Instacart all rolled into one. It has ridden the wave of digitisation that is spreading across the archipelago by enabling motorbike drivers, known locally as ojek, to fill orders placed on smartphones for services ranging from food delivery, parcel couriers, cleaners, massages and pharmacy deliveries.

“We think about the driver, the supply side, more like a concierge,” Soelistyo said during the interview at Gojek’s Jakarta headquarters. 

Globally, ride-hailing is already big business. Subsidies have led to rapid growth even if none of the leading players are as yet profitable. Lyft's IPO on March 28 valued it at $24.3 billion after the San Francisco-based firm reported revenue of $2.2 billion last year and a bookings value of $8.1 billion. US juggernaut Uber is eyeing an IPO of up to $120 billion later this year. 


Gojek is tight-lipped regarding its financial statements but its closest peer, Singaporean-headquartered Grab, said it made about $1 billion in revenue last year. Grab was valued at $14 billion as of March in its latest round of fundraising.

“We are, like most private investors globally, closely watching the IPO paths of Lyft and Uber. That said, while Lyft, Uber, Grab and Gojek all look somewhat similar at first blush (they all started in ride-hailing), there are significant differences among them all,” Patrick Walujo, the co-founder of Northstar Group and a board member of Gojek, told FinanceAsia

One key consideration is that ride-sharing user penetration is about 2% to 3% in Indonesia versus 16% in the US. Average order value and revenues gleaned from ride-hailing services have also much more room to grow. Lyft converted 26.8% of its booking value into revenue in 2018, which is its so-called take-rate. Gojek's current take-rate is about 16% to 17%, Soelistyo said.

Another major difference is that Gojek offers a much wider array of services than Lyft, which focuses principally on transport. "Uber would be a better comparable because it has Uber Eats," said Soelistyo, drawing a comparison between Uber's food delivery service and Gojek's Go-Food. 

Perhaps investors should look as well to China’s digital behemoths for a measure of Gojek’s potential, given Gojek's range of services and Indonesia's economic growth trajectory. Consultants at McKinsey say Indonesia’s point in its digital development is similar to where China was in 2010.

The largest examples in China covering Gojek’s main activities are: ride-hailing firm Didi Chuxing, which was valued at $56 billion during its fund-raising round in 2017; listed food delivery service Meituan, priced at HK$287 billion ($37 billion) as of March 22; and payments giant Alipay, which was valued at $150 billion when it took in a fresh capital infusion last year. Combined, they are worth about $243 billion.

Given these yardsticks, even after taking into consideration that Indonesia’s population is roughly a fifth of China’s, its GDP per capita is about half its level and its citizens more internet savvy, Gojek’s $10 billion price tag during its latest fundraiser appears to have plenty of room to rise.

“There are many parallels between what has/is happening in China and what is happening in Southeast Asia,” said Northstar’s Walujo. The Singaporean-headquartered private equity fund was Gojek’s earliest institutional investor and still has a meaningful stake in the company.

Gojek is certainly growing fast on at least one measure. It said on February 1 that its annualised gross transaction value (GTV) – that is the sale price, booking value or transaction value multiplied by the number of items sold – hit more than $9 billion at the end of 2018, which is well over four times what it was in November 2017, according to people familiar with the matter and documentation reviewed by FinanceAsia.

Pre-IPO rounds last year valued Uber at $72 billion, or twice its trailing Gross Merchandise Volume and three times Lyft’s GMV at $15 billion, according to analysts at British bank HSBC. GMV is another key metric for e-commercial retailers and is calculated by multiplying the sale price charged to customers by the number of items sold.

As more global investors spot this growth potential and try to get to grips with the company’s size, spread and growth ahead of Gojek’s likely stock market listing in Jakarta, they should weigh up three major factors that could potentially swing the ride-hailing firm’s valuation by billions of dollars: the damage caused by its bruising battle for market share with Singapore-headquartered rival Grab, the hidden value in its payments system and its ability to monetise the trove of data it collects from users.

Gojek has no plan to IPO in the next 18 months but is bolstering its corporate governance in line with publicly traded companies in case it does choose to pursue a listing, Soelistyo said. Gojek is now audited by one of the Big Four accounting firms, he added.

Another person familiar with Gojek's plans said Gojek would prefer to see Uber and China's Didi list before it launches an offer, so that public market investors become more familiar with the sector. 

"We're still in a high-growth, high investment mode. We just started payments and international [expansion] and our ability to execute as a private company is better," Soelistyo said. He pointed to news that Meituan curtailed its ride-hailing expansion when it listed in Hong Kong.  

For fast-growing Gojek, which is still in the red, the cash coming in from investors is its lifeblood. Its success in corralling capital so far has raised the bar for future fundraising drives, as has cooling sentiment on technology stocks globally.

“People that invest in the higher valuation need to believe that the multiple of your valuation will grow even further, and it’s getting tougher,” said Soelistyo, who leads Gojek’s fundraising efforts and is a veteran investor himself, having worked with Northstar before joining Gojek in 2016.

Investors are trusting that once Gojek achieves large-enough scale it will be able to reduce subsidies and turn profitable, that is a big ask when your biggest rival is looking to lure away your customers.

In Jakarta’s narrow streets, motorbikes zip in and out between cars, their helmets and jackets emblazoned with the logos of Gojek and Grab. In the third-most congested city in the world, the legions of ojeks competing for passengers are often the only moving vehicles on the roads.

The ojeks are the most visual illustration of the bitter fight for market share between the two startups.

Gojek grew its transport operations rapidly from a GTV of $262 million in 2016 to $604 million in 2017, but the acceleration slowed somewhat in 2018 partly due to competition, according to the documentation and people familiar with the matter.  

Grab has been rapidly bulking up in Indonesia. It upped the ante in February 2015 when it signalled it would invest $700 million over the following four years for acquisitions as well as a research centre in Jakarta, adding to the cash it is already burning to build up its operations in the country.

As of March, Grab had managed to raise about $8.8 billion from investors to pursue expansion, more than double Gojek’s $3.1 billion, according to database Crunchbase. Both have high-profile, determined backers with deep pockets. Grab’s biggest shareholders are Japan’s SoftBank, Uber and Didi Chuxing. Gojek’s major shareholders include US search giant Google, China’s JD.com and Tencent.

“Winner takes all,” said Masayoshi Son, founder of SoftBank at the Milken Institute Japan Symposium on March 25. Son added that his investments in Uber, Didi, India's Ola and Grab add up to 90% market share of the worldwide ride-share industry.   

“Our group of companies are all number one company in each geography of the world," Son said, underscoring his combative optimism.

Gojek's management would rather people didn't see shared mobility as a zero-sum game.

"We hope Lyft's IPO success shows that more than one company can flourish within a market and it does not have to be a 'winner takes all' scenario," Soelistyo said. 

Both Gojek and Grab are already claiming leadership in terms of the number of bikes and cars on the streets of Indonesia – but at what cost?

Gojek has more than a million drivers of bikes and cars but earns a negative gross margin in its ride-hailing business, said analyst Paul Mckenzie at brokerage firm CLSA in a report dated August. It is one of the few brokers to write an in-depth profile of the still unlisted company.

Competition can only prolong the time it takes Indonesia’s digital champion to turn profitable as the cost of running its fleet outweighs sales.

"Because of the price war, market acquisition has been probably been 50% less efficient," said Soelistyo, meaning that with the same amount of capital Gojek could have grown the market even further. 

To lure clients away from its rival, Grab has been offering discounts of 90% on most rides for passengers that pay with its partner e-wallet OVO. To maintain its customer base and grow, Gojek will also have to burn through its venture capital before generating positive cash flow.

“It’s very easy to see that in certain types of products we are competing heavily with other players, which means that we do need to continue to invest,” said Soelistyo, one of the more seasoned employees at Gojek at a sprightly 35-years of age. “If there’s crazy competition that continues to burn money, then obviously it, [the path to profitability], becomes more questionable.”

The cutthroat nature of the competition for passengers has grown so intense that it has drawn the ire of regulators worried that over-worked taxi drivers pose a threat to passengers’ safety (and presumably that of pedestrians and other drivers too). To curb the fight, Indonesia plans to bring in standard fares.

“Grab and Gojek have told me they would prefer [it if] there was no regulation,” the Indonesian transportation ministry’s public transportation director, Ahmad Yani, told reporters in Jakarta mid-January. “Due to the competition between them ... they are scared what could happen if they don’t keep up with each other.”

If the government does pull this off then, in a sense, this is a score for Gojek. Fixed tariffs would undermine the ability of challengers to use profitable operations overseas to subsidise ride-hailing in Indonesia.

To be sure, competition does have a silver lining for both Grab and Gojek. The ubiquity of ojeks and the visibility of the Grab and Gojek brands is expediting ride-hailing’s penetration of the market as more people try it because it’s cheap and convenient.

“The competition is intense, but the opportunity in Southeast Asia for the Grab and Gojek platforms is massive. We believe the market is large enough for two players to be successful,” said Northstar’s Walujo. The private equity firm trimmed its stake in Gojek earlier this year but continues to be upbeat about the company’s prospects.

Another reason both Grab and Gojek appear to be going for broke in ride-hailing is because ojeks can deliver a variety of products ordered by customers on their smartphones. These sidelines are tapping into a burgeoning digital marketplace.

A stay-at-home mum may not need transport but Gojek’s food-delivery service Go-Food could be a godsend, as could Gojek’s bill payment service Go-Bills and courier service Go-Send. Gojek is using consumers’ interest in one service to upsell another, and then another.

“The good thing about our business, you can put “Go-” in front of pretty much anything,” Soelistyo quipped. Gojek now offers 21 services on its app. 


Indonesia’s online commerce will grow from $8 billion of spending in 2017 to between $55 billion and $65 billion by 2022, similar to the trajectory experienced in China between 2010 and 2015, according to consultants at McKinsey. The opportunity is writ large but many budding e-commerce companies struggle with reliable logistics to transport products to the consumer. Indonesia’s logistics infrastructure ranked a lowly 63rd out of 160 globally in a 2016 World Bank analysis, partly due to the challenges of delivering goods across a country with 17,508 islands.

That problem goes away if their products can catch a ride with an ojek.

So, while Gojek and Grab have become focused on efficiency improvements in transport, businesses such as food delivery are growing faster.

Go-Food now generates more revenue than transport, people familiar with the matter said.

Suddenly, diners can buy a meal on an app from a small restaurant on the other side of congested Jakarta, probably one they wouldn’t dream of spending an hour in traffic (both ways) to reach. “We democratise access for everyone to buy anything from anyone,” Soelistyo said.

Go-Food processed $2 billion of annualised GTV in 2018, making it the largest food-delivery service in Southeast Asia, Gojek said on February 1. This is up from roughly $535 million in 2017, according to the documentation reviewed by FinanceAsia.

A Google and Temasek report dated November 2018 says the food-delivery market in Southeast Asia in terms of GMV was worth $2 billion in 2018 and forecasts that it will expand to $8 billion by 2025.

But that appears somewhat conservative. Although Gojek declined to give exact figures, a spokesperson for the firm said the growth seen in Gojek’s ride-hailing and food-delivery verticals far exceeded the growth rates presumed in the Google-Temasek report. Gojek did not share data with Google and Temasek.

Go-Food has been able to charge merchants 15% to 20% in commissions in some of its latest deals. Its average margin has been about 11% to 12% and it is also billing consumers for delivery, making it the most highly monetised of Gojek’s businesses, even if it is not yet profitable. Soelistyo aspires to a similar margin as Uber Eats's 30%.

"It's a recipe for success," he said.

However, rival Grab has also spotted this opportunity and its offshoot Grab-Food is ramping up aggressively with subsidised menu prices, discount coupons on future purchases and lower commission rate charges to merchants.

While consumers in Indonesia tend to be promotion hunters, both Grab and Gojek are battling over the merchants they can attract to the platform with the data they can offer about prospective consumers.

By tracking users’ movements and preferences in the ecosystem, Gojek is able to ask merchants to pay for the ability to target specific sets of users. The marketing service is very transaction-focused as merchants only pay when they get the users, versus billboards and other forms of advertising. In one example, Gojek has partnered with medicine delivery and doctor booking appointment platform, Halodoc.

“They can tap into this massive user base that we already have, from a user-acquisition perspective,” said Soelistyo. “We become a lead-generation platform.”

To engender loyalty among merchants, Gojek is providing services to boost revenues but also keep costs under control, from supplying groceries at 5% to 10% cheaper rates to small restaurants all the way to invoice management. Gojek has about 400,000 merchants in Indonesia registered on its platform. 

Safia is taking orders in a small coffee shop selling Wahab Java coffee in a suburb of Jakarta. For four months she has been offering cashless payments to customers via Go-Pay, the payments arm of Gojek. Safia says the Go-Pay’s QR code, a scannable matrix, is particularly popular with busy office workers as it is quick to use.

Gojek and Grab are ahead of their global ride-hailing peers in terms of seizing the opportunity to expand payments widely.

“Go-Pay is doing very well in the fourth most populous country in the world – that’s part of the business that Lyft and Uber don’t capture,” Northstar's Walujo said. “That is one big difference between us and our American counterparts.” 

Go-Pay started accepting payments for services beyond Gojek’s own businesses in May last year after acquiring three payment businesses in December 2017: offline payments processing firm Kartuku, a Northstar portfolio company, community-based lender Mapan and payments gateway Midtrans.

That shift in strategy to an open-loop system gave the service a firm a real fillip. As a result, Go-Pay offline has ballooned, generating close to $1 billion in terms of GTV, from virtually zero in 2017.

More widely, Go-Pay handled almost three-quarters of all mobile payments made in Indonesia in the three months to September-end, according to a survey by FT Confidential Research. As of February 1, Go-Pay said it processes $6.3 billion of annualised GTV. This is up from $667 million as of 2017 according to a document viewed by FinanceAsia.

Investors might be underestimating this element of Gojek’s valuation, which glues the businesses within its ecosystem together, cuts down the friction in making a digital payment and gives it reach beyond its own branded services. Growth is no longer limited to that of Gojek’s platform and there are indications that its expansion was explosive in 2018.

“In the long term, we expect Go-Pay to become Gojek’s most valuable business with Indonesia near-perfect market for e-wallet proliferation,” forecast CLSA.

Payments is a lower-margin business than Gojek’s other core services but its reach combined with data analytics is increasingly attractive to other financial-service firms looking to piggyback on its network. Traditional banks are grappling with the steep costs of running bricks-and-mortar bank branches. As of January, 28 financial institutions were riding Go-Pay’s payment rails to reach consumers, including Indonesian state-run lender Bank Negara Indonesia.

“With banks, it’s like trying to have a Rolls Royce go off-road; it’s very difficult. We are off-road; literally, we are the motorcycle that can actually reach the villages,” Aldi Haryopratomo, Go-Pay’s chief executive, told FinanceAsia, straight from a meeting with the central bank governor on how to bring more Indonesian citizens into the financial system.

Gojek provides financial services to its users ranging from loans to pay for smartphones, refinancing for motorbikes, working capital financing for merchants to saving plans for a Haj Islamic pilgrimage. Gojek leans on the balance sheet of third parties to provide these products.  

One clear advantage Gojek has over Grab in Indonesia is that it has an e-money license that allows it to use its own in-house payments system rather than rely on a partner.

Indonesia’s central bank suspended Singapore’s GrabPay from operating within its jurisdiction in 2017 and capped foreign ownership in e-money firms at 49% in May last year. So, instead, Grab uses a payments platform deployed by Indonesian conglomerate Lippo Group called OVO.

Grab’s head of Indonesia, Pak Ridzki Kramadibrata, said that OVO is the right partner for Grab, not only because it has a licence, but also because of their wide acceptance in malls, which complements Grab’s transport-heavy operations.

“It’s mutually beneficial,” Kramadibrata told FinanceAsia. However, he added that respect for customer privacy limited the pools of data the partners could share. “We have a very restrictive agreement on what data can be shared and what cannot be shared.”

As Gojek and Grab expand across Southeast Asia, they are clashing in a growing number of cities. Gojek has already gained substantial market share in Singapore and Vietnam, partly because customers were already familiar with how ride-hailing works. It has captured a 35% market share in bike-hailing in Vietnam, for instance.

But the decisive battleground will be Indonesia.

Whoever wins in the region’s largest economy will be best placed to support sub-scale operations elsewhere in the long term. And the key to capturing that prize will be winning over the country’s myriad small- and medium-sized merchants.

Given its home advantage, Gojek is in pole position and analysts believe it is in a position to roll back some subsidies. “Perhaps with one eye on a possible 2020 IPO and the need to show improved profitability (i.e. reduced losses), Gojek has been adopting more rational pricing with subsidy cuts at the low end of ride-hailing pricing and with an easing of Go-Pay-related delivery subsidies for users of its food-delivery services,” CLSA said.

Back at Gojek’s headquarters, a food festival is in full swing in the basement and the only payment method is via the Go-Pay app. One of the stallholders, Nasi Goreng Apjay, says Go-Pay is useful because it rules out the possibility of fraud by employees and helps the business keep track of its cash flow and build up a credit history. On the back of improved and transparent credit history, the fried rice seller has been able to open several more outlets.

“You will start seeing a lot of the small merchants that never had an opportunity to move up,” said Go-Pay’s Haryopratomo, “presenting in the most fancy places in Indonesia, which I think is really cool because then the next KFC could be another local guy from Central Java.”

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