GoTo ad revenue soars 92% as on-demand business turns profitable

GoTo Gojek Tokopedia Tbk reported a 92% year-on-year increase in advertising revenue for 2024, according to its Q4 financial report released during the March 12 earnings call. Advertising is becoming an increasingly vital revenue stream for companies, particularly those in the on-demand services sector.

Data from the presentation showed that advertising's contribution to food gross merchandise value (GMV) rose from 1.1% to 1.6% over the past year. This coincided with the on-demand services (ODS) segment achieving an adjusted EBITDA of IDR267 billion (US$17 million) in the fourth quarter of 2024.

"By 2024, advertising revenue is up 92% year-on-year, turning what was once an early-stage offering into a significant revenue stream," said Patrick Walujo, president director and CEO of the GoTo Group, on the earnings call.

Walujo added that this momentum continued into the fourth quarter, "reflecting planned investments in ad relevance, self-service tools and merchant partnerships."

Advertising and marketing strategies

According to the financial report, GoTo implemented several key strategies to develop its advertising business:

GoTo has invested in improved ad relevance as a key driver of advertising growth. Improving ad relevance on platforms like GoTo generally involves using user behaviour data to display ads that better match consumer needs and interests.

Catherine Sutjahyo, president of on-demand services, uses data and machine-learning technology to improve advertising effectiveness. This data-driven approach enables GoTo to increase click-through and conversion rates, providing more value to advertisers and contributing more to company revenue.

Companies that successfully increase ad relevance can generally set higher prices for their ad inventory, likely contributing to GoTo's overall ad revenue increase.

Development of self-service tools

Self-service tools are becoming an essential component of GoTo's advertising strategy. In the context of digital platforms, self-service tools refer to systems that allow advertisers, especially small and medium-sized enterprises (SMEs), to create, manage and optimise their own advertising campaigns without requiring assistance from a sales team.

Developing these tools allows GoTo to expand its advertiser base to a broader segment of merchants, including MSMEs that previously may have found digital advertising too complex or expensive. By making it easier for merchants to advertise, GoTo can increase the number of active advertisers on its platform.

Self-service tools also allow merchants to measure ad effectiveness, adjust spending based on performance and optimise campaigns for better results. This creates a virtuous circle that encourages merchants to continue investing in advertising on the GoTo platform.

Merchant-funded promotion

The report emphasised merchants' increased participation in funding their own promotions. Data showed that total merchant spending on promotions increased by 190% year over year by 2024.

"We have significantly improved merchant-funded promotions through continuous product innovation, enabling more granular targeting and segmentation so merchants can reach the right customers," Walujo said in his presentation. "This creates real value for merchants while delivering more relevant offers to users, improving the overall customer experience."

Walujo also mentioned the company is "working very hard to improve return on investment for merchants, increasing their propensity to participate in promotional funding," which he said "leads to a reduction in our own incentive spend while maintaining strong returns for merchants."

Advertising development plan

GoTo stated in its financial report that it plans to "bring the [advertising] business significantly closer to global benchmarks in the next three years." However, it did not specify a figure for the global benchmark.

GoTo could adopt a similar strategy to Uber, which uses location data for audience persona development and ad bidding, complementing activation-based advertising in its food delivery app.

2025 outlook

GoTo projects the growth of the advertising segment to continue outpacing the growth rate of food GMV. For the overall business, the company provides adjusted EBITDA guidance in the range of Rp1.4 trillion to Rp1.6 trillion (US$87 million to US$99 million) for 2025.

Specifically for the ODS segment, Simon Ho, CFO of the Group, gave a target of "at least IDR1.1 trillion adjusted EBITDA by 2025."

"There is significant room for margin improvement, and we anticipate an upward trend through 2025," Walujo said on the call.

With the continued growth of the advertising business, GoTo appears to be positioning this segment as a key component in its profitability improvement strategy for the coming years.