Despite E-Commerce Deconsolidation, Significant Risks and Uncertainties Remain for GoTo

GoTo operates an on-demand service as its core business while also providing e-commerce on its platform, and competes by offering subsidies to entice consumers to make purchases on its platform. After years of subsidies have helped grow the user base to 64 million users, the company is still incurring heavy losses and is now shifting its focus on profitability by reducing subsidies. However, we believe this strategy shift creates significant uncertainty relating to GoTo’s growth trajectory in the long term as gross transactional volume, or GTV, growth is likely to decelerate significantly in 2023, which is a concern. GoTo reported a 255% operating margin loss in 2023, and while margins should improve this year after the subsidy reduction, we expect the reductions to cause e-commerce GTV to post only flat growth year on year compared with an 18% increase last year. Given the rate of deceleration, we have reservations about whether GoTo can balance both growth and profitability if it returns to GTV expansion. The massive deceleration questions whether GoTo users are deeply reliant on the platform and implies a low switching cost for its business.