Burning Money Cuts, Number Of Transactions And GOTO Customers Increases Sharply

JAKARTA - The increase in the number and transactions of PT GoTo Gojek Tokopedia Tbk (GOTO) in the fourth quarter of 2022 occurred amid a significant increase in promotion and marketing costs. It was recorded that efficiency of 34 percent at the expenditure post made the largest digital ecosystem company in Indonesia realize a quarterly loss reduction of IDR 2.8 trillion.

This savings is based on an optimization strategy for promo and marketing costs. This is possible because the Company has succeeded in increasing the number of loyal customers in the On-Demand Services and ECommerce segments through various strategic services with the growth of loyal customers by 19 percent year on Year (YoY).

As a result, GOTO's Gross Transaction Value (GTV) from quality customers grew by 33 percent compared to the previous year or equivalent to IDR 613 trillion. Meanwhile, the 2022 take rate in the On Demand Services and E-Commerce business segment grew by 234 bps and 32 bps, respectively compared to the previous year.

"In our opinion, what could sustain the growth of the GOTO ecosystem in the future depends on its loyal customers. Based on our observations in the last two years, Grab, for example, as one of its closest competitors, spent more on average promotion costs of up to 6.4 percent of its platform size (quarter I 2021 until the third quarter of 2022) while GOTO only spent 2.2 percent of its platform size for promotion in the same period," said MNC Sekuritas Research Analyst, Andrew Sebastian Susilo, in his research, quoted Monday, March 20.

From this situation, said Andrew, both GOTO and Grab have fought for the end of the era of "money burning" in the on-demand industry by rationalizing promotional costs in 2022.

"Throughout the third quarter of 2022 alone, GOTO's promotion of its platform size has decreased by -220 bps, while Grab is experiencing a sharper decline of -270 bps. Indeed, it is to provide apple-to-apple benchmarks quite complicated because we also need to consider that Grab operations rely on shipping, mobility and fintech, while GOTO has a more complete portfolio with e-commerce businesses," he continued.

Even so, given the unrivaled completeness of the GOTO ecosystem, Andrew continued, it must benefit the company to further increase monetization.

"By having a comprehensive portfolio throughout its digital ecosystem, we believe GOTO is much better at maintaining customer loyalty," he stressed.

In addition to the efficiency of promotional and marketing costs, GOTO has also realized the cost optimization of the organizational structure downsizing so that it is believed that Andrew can be more agile and productive. In November 2022, GOTO follows the optimization approach of opex (operational expenditure) costs, especially through downsizing the number of employees.

"By considering the downsizing measures for the number of employees in November 2022 and March 2023, we estimate GOTO can save IDR 91 billion/month or IDR 274 billion/quartal and IDR 1.1 trillion/year. Note that this does not include severance pay, which can lead to more conservative results, but still has a considerable impact on the company's operating cash flow," Andrew explained.

Separately, GoTo Group Finance Director, Total Lo, said efforts to save expenses and reduce costs had created improvements to profitability indicators faster than expected. According to him, GoTo is on the right track to achieve an adjusted EBITDA (Adjusted EBITDA) which was positive in the fourth quarter of 2023.

"Throughout 2022, we have continued to record consistent growth amidst macroeconomic uncertainty in line with overall load management, through the implementation of structural efficiency in all parts of the organization,"