The ridesharing business gains a lot of attention in recent years. It provides a platform that connects the consumers (passengers) and the car owners who act as the driver by themselves. It is different from traditional taxi services. Instead of the consumers should call the cars or stopped them on the street, the ridesharing platform collects the passengers who book and pay the services via their platform. Powered by online maps application embedded on the platform, it could easily find the closest drivers, and on the other side, the drivers also know where exactly the passenger wait for the ride.
Founded in the United States (U.S), Uber arguably is one of the most successful companies in the ridesharing business. Since it was operating in 2009, its valuation has reached over $72 billion in 2018. Uber is available in 65 countries and over 600 cities worldwide. It has already reached over 15 million Uber trips each day and completed over 5 billion in total. But some of the strong competitors have already challenge Uber as the leader of the ridesharing company. For example, in the United States (U.S) they have to worried about one of their competitor now: Lyft. It is another ridesharing company in the US which is growing twice as fast in 2018. In October 2018, Uber and Lyft combined had 98 percent of the U.S. consumer ridesharing market.
This phenomenon not only happens in the U.S. In Indonesia, Gojek, a local ridesharing company who run their first application on app store in 2015 succeeded to “kick out” Uber from Indonesia. Since 2018, Uber does not operate in Indonesia or more precisely in South East Asia. Uber has agreed to sell its Southeast Asian operations to Grab, left Indonesia ridesharing market share goes to between two local-grown companies in South-East Asia, Grab from Malaysia and Gojek from Indonesia. The fact that a global company like Uber did not succeed to expand in South East Asia left some interesting questions. How a local company, in this example Gojek, with quietly doing a similar business but lower initial resources could beat the global company like Uber? While in internet company history we always see that big internet company like Google, Microsoft, Facebook, etc. acquired small companies either to enrich their technology (for the small companies that have a different core but could be a complement to the big companies) or to just kill them to save their market share in the future.
This article discusses Gojek in context of how it runs as an internet platform business. In the first part will talks brief profile about Gojek and what types of Gojek based on the agents involved in its platform and how Gojek disrupted a particular existing market. Secondly, we would analyze how Gojek run, how it evolved, how it can be the winner in its home-based so far and what is the probably Gojek’s business model in the next phase. In the third part, we will analyze the social-economic impact of Gojek on their partner/agents based on the current research.
The name Go-Jek comes from “Ojek.” Ojek the term for the motorbike taxis commonly used by Indonesian. Nadiem Makarim, a native Indonesian founded Go-Jek in 2010. He started Go-Jek from a simple call center with only 20 ojek drivers. Then in January 2015, Go-Jek app was launched with only less than two years since the launch, it has been downloaded around 30 million times. After five years (2010-2015) of running the business with non-internet platform, the launch of the app was the big milestone of Gojek.
Before the Go-ojek become a dominant player in the motorbike market, ojek drivers and customer informally made a transaction in a particular spot (called pangkalan ojek). The customers usually have to make a deal with motorbike driver about how much they have to pay before the trips begin. In many times, when the customers have no idea of how far the destination they wanted to reach, the drivers could charge a very high fare to the passengers. It is rose because from the asymmetric information between the passengers and driver which makes the drivers possess the power to decide the price.
Gojek app significantly changes the traditional business process of the service. With the map app embedded on Gojek, the distances of the trip are always clear between the passengers and the drivers. It makes an exact price can afford according to the distances recorded on the app. The moral hazards of the driver could be reduced. The Gojek also run a long period of discount price in its introduction phase, make the passengers could save around 100-200% compare to traditional motorbike taxi. Furthermore, passengers also get a more convenient way to make a trip with Gojek. They do not have to walk to find a motorbike taxi spot (pangkalan); they can wait right in front of their homes or offices for drivers pick them. In simple words, Gojek can be called as “Indonesian Uber for the Motorbike” in the way of how they disrupt the existing market.
According to basic models for operating a digital platform, the initial model Gojek can be categorized as two-sided with indirect network effects (Nooren, P., van Gorp, N., van Eijk, N. and R. Fathaigh, 2018). This model says that agents benefit from increases in the number of agents on the other side of the platform. The breakdown of these sides are 1) The users-end: the passenger; 2) Platform provider: Gojek; and 3) The seller: motorbike drivers. This model was only the very beginning of Gojek Company. At the time of this article written, Gojek has been evolved to a “super-app” similarly like WeChat or Alipay.
Indirect network effects did happen for Gojek’s business model. The user or passengers have more incentive to use Gojek as their apps if there are more rider available. Gojek succeeds to break the chicken-eggs dilemma as the risk to build this model trough some strategies. First, Gojek chooses bike rider as their seller partner instead of the car (like Uber) and choose Jakarta as its first city to operate. This strategy was effective to maintain its ability to provide the seller side for the customer. Indonesia, especially in Jakarta, is abundant by large number motorbike owner. Furthermore, Jakarta also known as most-congested cities worldwide make motorbike is the most favorable alternative to make trips within the city.
Second, Gojek lured the consumer with significantly lower prices per trip by subsidized them, while maintaining the fair prices for the rider. Because of the asymmetric information problem mentions before that make the prices of traditional motorbike taxi were relatively high, people used to have an indifference preference between using taxi and motorbike. Gojek changed the game by providing more incentive to passengers with transparent and a lower price per trip. It gives an impact to the rider by providing them a broader market of passenger that could increase their daily income. The more passenger available, more rider join as the partner, then more consumers download the app.
The Evolution of Gojek
At the first time, many people doubt how Gojek could sustain their business with the subsidizing strategy for the consumers. It turns out this strategy was used to acquire as fast as possible the user-end side to open other business-line opportunities. Gojek launched Go-Food and Go-Mart in April and September 2015, respectively. Go-Food provides instant food delivery service and Go-Mart offers delivery for grocery shopping at supermarket listed. At this point, Gojek had already powered by 30.000 riders that made food and groceries shopping can be delivered faster than other existing companies. In Jakarta, the food industry dominated by informal and micro players. It makes the delivery via motorbike rider more suitable either for consumer and seller.
Furthermore, Gojek launched logistic services called Go-Send (for small parcels) and Go-Box (for large parcels) to accommodate the logistic services within the city. At the end of 2015, Gojek also launched its on-demand service business fo consumers’ daily need called Go-Life which consist of Go-Glam, Go-Clean, and Go-Massage. Even though this business line is quite different from the previous business, but still, Gojek was confident enough to launch those services since the big number of end-users it has already got at the end of 2015.
At this time, Gojek had already face many competitors, either from local or overseas (e.g., Uber and Grab). In 2016 Gojek moves forward by launched two significant services: Go-Pay and Go-Car. Go-Pay is the payment platform or e-wallet service that facilitated the payment between the user and seller within the Gojek’s ecosystem. Go-Car is exactly the same what Uber and Grab have already provided. It was the signal for other competitors that Gojek had ready for head-to-head competition with global companies in transportation services. As we have already known, Uber was out from Indonesia two years later. Not only that, almost all local companies who have similar business with Gojek shut their services while Gojek continues to grow by adding more services on its platform and have expanded to 4 countries outside Indonesia. As of May 2019, the app offers 23 services and got “decacorn” status with an estimated US$ 10 billion valuations.
Social and Economic Impacts of Gojek
In 2018, research done by Lembaga Demografi of the Faculty of Economics and Business of Universitas Indonesia (LD FEB UI) found that Go-Jek contributed IDR 44.2 trillion (around US$3 billion), in added value to the Indonesian economy. This added value comes from the additional income earned by Go-Jek’s various partners, including driver-partners and small and medium enterprise (SMEs) merchants after joining the Go-Jek platform.
The research also found that the average income of Go-Jek’s driver-partners and Go-Life talents is higher than the average minimum wage across the areas surveyed, which are nine major cities in Indonesia. The survey distinct the minimum wage between the Greater Jakarta (the Capital City of Indonesia and satellite cities around it) and outside the Greater Jakarta. The detail differences as follows:
- The average income of Go-ride and Go-Car partners in the Greater Jakarta is IDR 4.9 million and IDR 6 million. They are higher than the average minimum wage in the Greater Jakarta of IDR 3,9 million.
- The average income of Go-ride and Go-Car partners outside the Greater Jakarta is IDR 3.8 million and IDR 5.5 million respectively. They are higher than the average minimum wage in the Greater Jakarta of IDR 2,8 million.
- The average income of Go-Life partners in Greater Jakarta is IDR 4,8 million. It is higher than the average minimum wage in Greater Jakarta of IDR 3,9 million.
- The average income of Go-Life partners outside the Greater Jakarta Area is IDR 4,3 million. It is higher than the average minimum wage in non-Greater Jakarta Areas which is IDR 3,1 million.
The overall result of the perception of the Gojek’s partner from this research is positive. The majority of respondent said they obtain better prosperity after joining Gojek either in term of monetary or social security.
Lessons Learned from Gojek
The factors that bring Gojek to dominate its home-ground and evolve to become a success super-apps come from many aspects. This article shows that the Gojek strategy at the beginning of its phase, which is focused on the motorbikes instead of cars, was brilliant. It is compatible with local consumer behavior and avoids the competition with Jakarta’s existing taxi industry and bigger companies like Uber. It also gives Gojek room to develop by dodging the nation’s transport regulations, which applied only to four-wheeled vehicles. After having a big number of agents/partners within its ecosystem, Gojek harness the indirect-network effect by run other business lines. In 2008, CEO of Gojek claimed his company was close to achieving profitability in all business line, except transportation. In the end, empirical evidence shows that Gojek also has a concrete economic impact on society.
 As Go-Car being part of Go-Jek services, the motorbike taxi services itself change the name into Go-Rider.
 A terms for a start-up whose value is considered to be over $10 billion.
 The 2018 research involved surveys of 6,732 respondents as follows: 3,886 two-wheel driver partners (Go-Ride), 1,010 four-wheel driver partners (Go-Car), 1,000 SME partners of Go-Food and 836 Go-Life partners (Go-Clean and Go-Massage). Sample above represents Go-Jek’s partners population in the following cities: 9 cities for Go-Ride, Go-Car, and Go-Food (Balikpapan, Bandung, Denpasar, Greater Jakarta, Makassar, Medan, Palembang, Surabaya, Yogyakarta) adn 5 cities for Go-Life (Bandung, Denpasar, Greater Jakarta, Surabaya, Medan, Yogyakarta).
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