Google has announced its investment in Indonesia's ride-hailing service leaders, Go-Jek. According to Jon Russell who reported the Go-Jek and Google’s negotiation earlier last week on TechCrunch, the investment negotiation which has stalled over 9 months also involved China's Meituan-Dianping and Sovereign Fund Temasek of Singapore.
The deal is at a final tranche of a $1.2 billion, involving the three companies while also committing the likes of China's JD.com and Tencent. Go-Jek which rivals Uber and Grab in providing ride-hailing services in Indonesia is currently valued at $4 billion resulting from the new investment by Google. That’s roughly $2 billion less than Grab’s value.
Reuters reports that “Go-Jek has become a crucial workaround in Jakarta, which has some of the worst traffic in the world.” The service’s riders help most businesses to increase their sales significantly by moving goods and people around the city faster than cars.
Go-Jek is known to be ahead of Grab and Uber in Indonesia where they are currently operating; offering on-demand taxis, motorbikes, and other local services such as mobile payments and grocery delivery. And Indonesia is known to hold the largest economy in Southeast Asia. However, Grab is leading both Uber and Go-Jek in the entire Southeast Asia region and consumers in the entire region are estimated to be around 600 million and rising.
Caesar Sengupta, the Vice President of Google’s Next Billion team focusing in emerging markets stated that “Go-Jek is led by a strong Indonesian management team and has a proven track record of using technology to make life more convenient for Indonesians across the country. This investment lets us partner with a great local champion in Indonesia’s flourishing startup ecosystem, while also deepening our commitment to Indonesia’s internet economy.”
Earlier this week during the negotiation which started since April 2017, Reuters reports that Go-Jek has been spending heavily to attract both drivers and riders by offering promotions and discounts which drained their cash. The company has also been recognized to be courting several wealthy investors for funds.
Reports from Reuters further revealed that Southeast Asia stands as the fastest growing e-commerce market globally as published by Temasek and Google during the negotiation in December 2017. It says that as at the end of 2017, there were about 330 million active internet users – a significant addition of more than 70 million new users since 2015.
Uber CEO Dara Khosrowshahi insists that Southeast Asia is unprofitable, even with the company following Grab behind with revenue from the entire market. More reports from Google predicted that in the next seven years (by 2025), ride-hailing industry in the region would be valued at $20.1 billion per year, from its current $5.1 billion per year valuation. Since Indonesia holds most of the economy, it stands to hold the majority of the revenue from the industry. Also, Google’s share of revenue from their previous affiliation in 2015 was pegged at 40 percent.
Though Go-Jek has formerly revealed their plans of expanding to other markets using its Go-Pay mobile payment service, it remains active only in Indonesia.