Tag Archives: marketing

Mercado Libre Q2, fY2025: growth-oriented changes in Fintech, Advertising and E-commerce Logistics.

Leave a reply

August 24, 2025.

A review of the  Letter to Shareholders for Q2, FY 2025, ended June 30, 2025, tells of the energetic progress Mercado Libre is making in its businesses.

Mercado Libre is focused on strengthening its competitive advantage of switching costs (value provided to existing customers that makes a switch to another provider uneconomic) and scale (the ability to utilize already existing capital to accomplish incremental sales, requiring relatively low incremental costs).  It is doing so by continuing to advance three long term goals of the business, which mutually reinforce these competitive strengths.  These goals are to provide the best value for advertisers in branding and search, build the Ecommerce platform of choice, and to become the largest fintech provider in Latin America.

E-commerce Logistics

Value provided to customers in shipping strengthens the switching costs for Mercado Libre’s e-commerce marketplace. Mercado Libre lowered the price threshold for free shipping from Brazilian Rial (R$) R$79 to R$19 (about US$3.5)  (meaning the slower, free shipping is now available for items starting at R$19), and reduced  shipping costs for sellers for items priced between R$79 and R$200).  This lowers the friction to buyers and sellers of lower priced items.  This is showing promising results with GMV accelerating in Brazil. 

“We are committed to maintaining our competitive advantage in speed as we are convinced that fast delivery will always be in high demand. In fact, we still see solid demand for fast (paid) shipping on purchases below R$79 in Brazil despite the introduction of free (slower) shipping in this price range. “

It is harnessing it’s scale to continue reducing shipping costs and improve shipping times including for the slower free tier of shipping. 

“Those opting for free shipping below R$79 are served with a slower, lower cost layer of our network that leverages existing infrastructure. We have operated this layer with limited volume for 18 months and are now scaling rapidly. Over time, we expect unit costs to fall and slow delivery promises to improve as we innovate, deploy technology and drive more volume through the network.

Mercado Libre is strengthening its competitive advantage over potential competitors. Competitors face the initial obstacle of shipping costs.  Asian ecommerce companies like Temu, Shopee and AliExpress, already offered free shipping on the lower priced items, a segment where they have been stronger than Mercardo Libre.  But Mercado Libre Mercado Libre has built the fastest shipping Network in Latin America. Its low shipping costs are possible because of its scale. 

“Free shipping remains one of our most effective tools for bringing offline retail online and extending our position as Latin America’s largest ecommerce platform. For nearly a decade, we have offered free shipping on a large portion of our business, so we know it is a crucial driver of conversion, retention and customer satisfaction. “

Advertising

Mercado Libre’s advertising platform integrated with Google Ad Manager and AdMob.  This integration expands it reach beyond Mercado Libre’s ecosystem. Advertisers can now seamlessly manage campaigns that simultaneously target consumers both inside and outside our ecosystem.

Fintech

The number of Mercado Pago monthly active users has doubled over the last two and a half years to reach almost 68 million MAUs in Q2’25, and engagement is growing as well. The relatively high yields on funds held in Mercado Pago savings accounts  are key to attracting new users. This strategy has enabled Mercado Pago  to build the largest retail money market fund in Argentina. In Brazil, there are about $180B in popular bank savings accounts which pay approximately 65% of benchmark rate, competing with Mercado Pago accounts which pay from 100% to 120% of the benchmark.  With Mercado Pago’s competitive savings account yields, the nominal quarter over quarter increase in assets under management (AUM) in Brazil, Mexico and Chile in Q2’25 was the largest ever, with the total more than doubling YoY o $13.8B.

“Mercado Pago’s credit card performed strongly in Q2’25, with the portfolio growing 118% YoY to $4.0bn. The credit card was the primary driver of 91% YoY growth in the total credit portfolio in Q2’25. It now represents 43% of the$9.3bn book, up from 37% in Q2’24.  In Brazil, the entire 2023 cohort is now NIMAL positive (NIMAL: Net Interest Margin After Losses), which is consistent with prior cohorts that typically reached this milestone within two years. ” Overall in the various countries the credit portfolio reflects satisfactory risk management.

In the offline Acquiring business, “We continued to gain market share across all major geographies in Q2’25 with Acquiring TPV growth of 53% YoY on an FX-neutral basis. “

Consolidated Financial Results

Net income was negatively affected by a couple of factors.

There was a slight reduction in operating income margin due to added operating expenses from the extension of free shipping .  Instead of taking the relevant revenue from providing shipping, the company is applying the incremental shipping costs as an operating expense to its gross profit.   In Q2’25, income from operations grew 14% YoY to $825mn while the operating income margin contracted slightly by 2.10% yoy.  The reduction in shipping charges was initiated in June, so we might expect further effects from this in the coming quarters.

But this expense is an investment that will result in stronger competitive advantage and increased engagement. Cheaper shipping drives increased engagement with ecommerce, thereby increasing revenue from linked services, including advertising,  In the past, reduced shipping costs have been followed by gains in market share.

There was a non-operating expense, which is subtracted from operating income, which resulted in a lower net income.  This was the Foreign Exchange (FX) losses of $117mn, which doubled YoY, mainly due to the devaluation of the Argentine Peso by 12% in April. As Mercado Libre sales in Argentina have  grown, fluctuations in the Peso value will affect earnings accordingly.  In 2023, there was a much larger devaluation of the Argentine peso by 50%.  That year, FX losses for Mercado Libre were $239 million. 

The Letter to Shareholders also noted that in July, Standard and Poors (S&P) upgraded Mercado Libre to investment grade with a rating of BBB-. Fitch had upgraded it to investment grade last year.  Since its creation in 1999, Mercado Libre has been able to continue growing by successfully making investments in frontier markets, while also dealing with deterioration in the financial conditions, of one or another of the countries in which it operates. And that story of successful business decisions in the face of adversity is one of the things that makes Mercado Libre a remarkable company…

Q3 2024 Earnings: Adobe integrates AI into its Apps to strengthen its competitive advantage.  Analyst Disappointment with Guidance for Q4 as sideshow.

Leave a reply

October 26, 2024: In its 3rd Quarter of FY 2024 ending August 30th, Adobe beat earnings and revenue expectations, both those of analysts and its own.  For no rational reason, the stock price fell up to 10% after the earnings call. The media attributed this to disappointment of analysts with lower-than-expected company guidance for the Fourth Quarter of FY 2024 revenue, of $5.5 to 5.55 B. 

Did it make sense to sell the stock based on this guidance?  Should we worry that the company will miss its standing full FY 2024 guidance? At the end of FY 2023, Adobe gave FY 2024 revenue estimate of $21.3 to $21.5 Billion.   This was updated to a raised estimate, at end of Q2 2024.  The updated FY 2024 guidance is $21.4B to $21.5B (midpoint is $21.45B)

Total revenue in the first three quarters of FY 2024 is $15.899B.  So if Adobe meets the quarterly guidance for Q4 2024 of $5.5B to $5.55B, FY revenue would be anywhere from $21.399B to $21.449B, very likely enough to meet the FY 2024  guidance of $21.4B to $21.5B. Especially when we bear in mind that over 10 years from 2014 to 2023, Adobe has beat its annual revenue guidance 7 of 10 times.

Zooming to the big picture of Adobe’s business growth over time, we see quarterly yoy revenue growth consistently at 10% or better over the last 10 years. Annual revenue growth slowed to 10% in 2022, 2023 and 2023, having been over 20% from 2016 to 2019.   Annual revenue quadrupled from $4.796 Billion in 2015 to $19.409 Billion in 2023.  The years from 2012 to 2014 were marked by a transient period of slowed revenue growth because of the shift from perpetual license sales of the software, to cloud distribution of software paid by subscription.  Instead of receiving revenue for perpetual licenses as an upfront payment, revenue was now spread out over serial subscription periods.  However, the economics of software subscriptions distributed from the cloud mean lower priced software packages with a more limited app selection can be targeted at a much more diverse, larger number of more precisely defined market segments. Demand and usage can be monitored in real time and in response, software SKUs can be designed and released much more responsively than previously, when comprehensive updates of a full suite of software on CDs had to be distributed to brick and mortar stores.  This meant that revenue could ultimately reach a higher level of growth, targeted to a larger Total Addressable Market (TAM).  It is possible that Adobe’s revenue growth slowed in 2022 because once growth had accelerated to meet the new TAM demand, the growth rate slowed to reflect intrinsic market growth.  On the other hand, the slowing in revenue growth might well have been caused by the contemporaneous interest rate increases, fears of recession and consequent slowing in business spending.

I have not done the research to find the answer to this question.  It is not our job to forecast or explain changes in the economy and whether they affect the company.  Our business is to examine whether our investment of choice is maintaining and strengthening its competitive advantages, and extending them to the evolving markets in order to perpetuate its growth Ad Infinitum.

The AI revolution presents a surge in market demand. Adobe is exploiting this by integrating AI capabilities into its current applications and developing new AI-first applications.

Generative AI facilitates and accelerates content creation, its processing into final product, and its targeting to personalized market segments at scale. It makes this work more accessible to a wider range of knowledge workers. 

As described in the earnings call and recent investor conferences, Adobe is executing its strategy of Integrating AI into its flagship Apps. Multiple Adobe Firefly AI powered features have been integrated into the Creative Cloud applications. The online platform Adobe Express incorporated generative AI in 2023 to accelerate and ease content creation using the Creative Cloud apps. In the Document Cloud, the Acrobat AI Assistant enables users to quickly extract value from documents

The strategy is to use the AI features to streamline repetitive tasks and accelerate workflows within the apps, removing the pain points and some of the learning curves of content creation.  As Adobe leadership have repeatedly described over the past year at various investor presentations,  AI integration increases customer acquisition, retention and profitability.  Usage of Firefly Generative AI in the apps continues to accelerate, crossing 12 billion generations since launch. Usage of Adobe Acrobat AI Assistant grew 70% quarter over quarter.

Adobe Express is a streamlined, user-friendly, AI-first platform in which Firefly AI capabilities are made immediately available to utilize Adobe creative applications.  Adobe Express showcases the power of AI integration in the exemplary flagship creative applications, to attract and retain new, non-professional users. In the business environment, Express empowers knowledge workers who are not professional graphic design content creators, for example in marketing, sales and others, to customize branded content for the final intended business marketing application.  Adobe’s AI-powered features are designed to be commercially safe because all AI models created and used in Adobe software are guaranteed to be free of 3rd party intellectual property.

In fact, as stated by David Wadhwani, President of the Digital Media Business, With Express, “we’re on a multi-year strategic journey to dramatically expand our reach across customer segments.” As go-to-market activities are ramped up, Express is targeted to individuals, Education, Teams and Enterprises. As a result, Q3 saw 70 % yoy growth in cumulative exports. Over 1,500 businesses and millions of students were onboarded.  Exports are a relevant indicator of customer acceptance of the product, because if the user created and exported content to another application, that means that Express was used to finish the content product.

In the Adobe Experience Cloud Adobe Sensei has evolved as an AI assistant in the Adobe Experience Platform URL.  This facilitates usage by providing guidance and streamlining tasks. It is based on LLMs of Adobe product facts and best practices, as well as AI models of customer data and goals.

Firefly Services is a comprehensive set of generative AI and Creative services that automates workflows using the suite of apps in Creative Cloud and Experience Cloud.  It takes over repetitive and labor intensive tasks to accelerate production of content at scale, facilitating personalization or modification for specified target audiences.  In addition, customers using Firefly Services can order Firefly Custom Model Integration. Custom models are trained on customer’s branded assets to create campaigns that match a brand’s specific style. 

In Adobe GenStudio, AI is natively integrated with Creative Cloud  and Experience Cloud (including Adobe Experience Manager and Experience Platform) apps to empower marketers to quickly plan, create, store, deliver and measure marketing content and drive greater efficiency in their organizations.  GenStudio was released to beta testing at Adobe Max last year and was just released to general availability as GenStudio for Performance Marketing at Adobe Max 2024. 

Adobe has Competitive Advantages Particularly in the Enterprise.

The integration of the Creative Cloud and Experience Cloud apps means they mutually reinforce their competitive advantages of switching cost.  This integration serves the customer desire to streamline and simplify usage and execution.  As Anil Chakravarthy, President, Digital Experience Business, stated, “Through the integration of Experience Cloud and Creative Cloud, Adobe is uniquely positioned to combine the right content, data and journeys in real time for every customer experience.”   Enterprise customers of Creative Cloud apps are disincentivized from using alternatives to Adobe Experience Cloud software, when this is already integrated into the comprehensive suite of content creation and marketing applications.

Adobe has a large installed base in enterprises. It has high gross and operating margins, with relatively low cost of goods sold. Fixed costs such as R&D are greater than the Variable Costs of goods sold.  For instance, in 2023 R&D was $3.473 Billion, and Total Cost of Revenue was $2.354 Billion. Total Revenue was $19.409 Billion.  This means it enjoys scale advantages.  For instance, developing and integrating AI software into its market dominating Creative Cloud generates a relatively high return, expanding usage across its installed base, while attracting new users.  This would be seen as a healthy Return on Invested Capital (ROIC) in the financial accounting.  The various small younger companies which are introducing generative AI to produce raw content, are faced with the prospect of raising capital and spending heavily on development, including acquiring datacenter infrastructure and attracting software engineers, and when they have created a product, then fighting to win customers in a competitive market. While some of them may prosper in the battle for casual content creators, in the enterprise, they are limited by the switching costs, captive customers that Adobe has nurtured for decades.

Indeed, AI strengthens Adobe competitive advantages.  As described above, AI Assistant in Adobe Acrobat in the Document Cloud, the AI assistant in the Experience Cloud, and Adobe Express AI integration, make the products more accessible by more people in an enterprise or other user group.  For example, In Adobe GenStudio, content produced initially by professional marketing creators using Creative Cloud flagship apps, is subsequently modified and finalized for targeting to specific market segments using Adobe Express, by non-professional marketing or other staff in the enterprise.  This means that more people in the enterprise become habituated to the Adobe software suite, and are disincentivized from switching to alternative creative solutions.  This strengthens the network effect competitive advantage against potential competitors.

Adobe combines competitive advantages of network effects and switching costs.  With its large installed base, it commands a high return on investment of the fixed cost of development of innovation such as AI, relative to the scale of its market share.  This confers economies of scale.

As long as Adobe continues its culture of profitable innovation, which it has since 1982, It will continue to defend and extend its domination of its markets.

Mercado Libre Adapted to Market Challenges, with Fintech Revenue gradually outpacing Ecommerce. Concluding Evaluation.

Leave a reply

May 16, 2024.

Mercado Libre generates two revenue streams: Commerce Revenue and Fintech Revenue.

Commerce Revenue

A. Revenue related to Services, including fees for merchandise sold, shipping, ads, classifieds, and other services.

B. Revenue from Product sales fees, from first party Mercado Libre product sales and related shipping.

Fintech Revenue

a. commissions for transactions off Mercado Libre ecommerce platform, including digital payments, installment payments, asset trading, credit and debit cards, insurance,

b. interest on loans to consumers and sellers, and on Mercado Pago credit cards

c. Fintech Product Sales revenue from sales of MPOS devices.

Prior to 2020, Revenue was reported differently. Off-Marketplace Revenue corresponded essentially to Mercado Pago Fintech revenue plus shipping, and Ad sales.  On-Marketplace Revenue corresponded essentially to Commerce Revenue. If we can for argument’s sake accept equivalence of the historical Off-Marketplace Rev and modern Fintech Rev, and historical On-Marketplace Rev and modern Commerce Rev, then….

Business revenue has grown remarkably over time.  In 2013, Marketplace Revenue was $331.3 million. By 2023 Commerce Revenue had increased by 24.7 times  to $8.201 billion, a CAGR of 37.84%.   In 2013, Off-Marketplace Rev was $141.3 million.  By 2023, Fintech Revenue had grown by 44.4 times to $6.272 billion, a CAGR of 46.13%.

Fintech Revenue has grown at a faster rate than Commerce Revenue.  In 2013,  Off-Marketplace Revenue was 42.6% of the Marketplace Revenue. By 2023, Fintech Revenue was 76.5% of $8201 Commerce Revenue.  

Fintech Revenue growth outpaces Mercado Libre marketplace commerce revenue, likely because it is derived from a wider population of users, drawing from the wider market of financial services users, not just Mercado Libre marketplace ecommerce customers.  And yet, as previously described, robust ecommerce marketplace growth powered the expansion of Mercado Pago digital payments and fintech products. 

Concluding Evaluation

While revenue has grown consistently at a high rate, diluted EPS has grown with a bumpier course.  With a decrease in 2017, and annual earnings did not exceed the previous level of 2016, until 2022.  Over the decade, annual diluted EPS grew from 1.63 in 2014, increasing 12 times to 19.46 in 2023.

Between 2014 and 2023, top line revenue has grown at an average annual rate of increase of 42.4%. GROSS margin was 71.4% in 2014, fluctuated slightly while trending down over time, ending at 49.8% in 2023.  Outstanding for an ecommerce business. 

The more uneven progression in earnings can be traced to recurrent increases in expenses which are required to build out the business. Periodically, increases in operating expenses are generated by increases in shipping costs, marketing expenses, increased cost of goods sold related to increased sales of MPOS devices, and increasing salaries. Note that total employees grew 22.4 times, from 2,599 in 2014 to 58,313 in 2023.

As earnings grow unevenly, the ROIC is correspondingly of uneven growth.  (Remember that Return on Invested Capital has earnings in the numerator, in the form of Net Operating Profit after tax).  ROIC recovers as earnings do, in years following periods of increased operating expenses. One of the issues with Mercado Libre,  small cap company, growing rapidly in an “emerging market”, is the issue of requiring large increases in operating expenses in order to build out the business, and the lumpiness of earnings this causes. 

We can consider the uneven earnings history in the context of the demonstrated history of the company’s ability to build out the business, in spite of challenges, and successfully persist in growing revenues with a fairly consistent gross margin.  It is this history that allows us to have faith in an investment in this company. Increased operating costs were necessitated by the need to address challenges in the market: the need to create fintech services including MPOS capability and credit cards, the need to establish efficient logistics and shipping network, the need to market the company in the immature ecommerce market.  And these various novel branches of Mercado Libre reinforce the competitive advantages.  There, the historically recurrent increases in operating costs are demonstrably part of the company leadership efforts to adapt to the demands of the market in such a way that enhances the competitive ability of the various capabilities of the company. Sounds like our type of investment.

The gross margin is quite satisfactory.  This is important because this means the market opportunity is supports the business. Demand for this differentiated product and services enables pricing which supports the operating expenses needed to build out the business.

Balance sheet is adequate, showing that MELI has cash flow adequate to fund the capital expenditure required to build the company.  Debt/equity a bit higher than normal for my portfolio at 1.56 but interest coverage is satisfactory at more than 6. 

Free cash flow is very consistent, and Free Cash Flow Margin currently over 30%, confirming the ability to meet demands of Capex for the growing company.

Regarding valuation, the Free Cash Flow to Enterprise Value ratio is 15.8, which incredibly enough, is lower than it has been for the past 10 years.

Enough said for this brave little company.

Mercado Libre: Mutually Reinforcing Ecosystem Capabilities

Leave a reply

May 16, 2024.

MercadoLibre aims to widen the number of users of its off-line, digital payments as well as ecommerce services, by providing digital technology payment and wider fintech solutions. 

We will review the various segments within Mercado Libre marketplace and Mercado Pago, and describe in more detail how their functions mutually reinforce each other to  strengthen the competitive advantages of the company.  There are 6 main ecommerce and digital finance services:

1. The Mercado Libre (ML) Marketplace.

Wide, non-specialized assortment of goods, includes first party sales as well as small business vendors and large brands.

2. Mercado Libre Classifieds

Users list and purchase motor vehicles, real estate and services, for a Listings placement fee.  Classifieds are a major source of traffic to the platform, benefitting both the commerce and fintech businesses.

3. Mercado Shops online storefronts solution

Users manage and promote their own digital stores, hosted for free by ML .

4. Mercado Ads

Businesses promote their products on the ML and MP platforms.  First party data is available to create and target particularized audiences.

5. Mercado Pago (MP) Fintech Platform

Currently, MP processes and settles 100% of transactions on ML marketplace in its largest markets:  Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador, and virtually all transactions in the remainder.

MercadoLibre ecommerce development was challenged by a significant population of persons and small businesses that were underserved by the payment and financial industry and therefore could not liberally participate in ecommerce.  MP was born in 2003 as a fintech solution enabling users to send and receive payments on ML. It evolved to extend its services as an online digital payment app to third party online ecommerce sites. MP digital payments infrastructure enables other ecommerce sites, via MP branded or white label SDKs.  Thus, MP has played an important role in enabling the development of LATAM ecommerce.  It has also provided a second line of revenue, after the ML marketplace, for Mercado Libre.

MercadoLibre has developed “online-to-offline” (“O2O”) products which enable use of financial services in other than online commerce. 

The engine to extending the competitive advantage of MercadoLibre from its ecommerce platform to the brick and mortar financial services market, lies in incentivizing the use of Mercado Pago payment tools for transactions off the Mercado Libre marketplace. Key to this incentive, is the rapid expansion of ML platform users, who adopted MP in order to pay online at ML.

“Online-to-Offline” payments products include:

1. In store payments via MPOS (mobile point of sale) devices and QR  codes.

Generate revenue by sale of devices. MP acts as the merchant acquirer for debit/credit card shopping transactions, generating fees.  Off-line merchants are incentivized to use the MP MPOS device because in this way they capture the expanding number of customers for whom the Mercado Pago digital account or credit card is top of wallet, or in fact their only non-cash payment device. These customers might previously have been unbanked, and therefore limited to less convenient and less frequent cash purchase.

2. An app based digital account for personal digital payments

3. Debit cards to spend from the MP digital account

4. Credit Card, in Mexico and Brazil.

In 2023 Visa branded Mercado Pago Credit Cards launched with rapid adoption in a collaboration which added VISA tokenization among services which enhance transaction security.

5. Insurance such as warranties

6. Savings and investment products

Interest earning savings products bring unbanked persons into the financial system, and attract them to participate in the MercadoLibre network.

7. Cryptocurrency trading , in Brazil, Mexico and Chile.

Mercado Pago, includes Mercado Credito.

Created in 2016, Mercado Credito offers credit to the Mercado Libre ecosystem consumers and merchants, on the MP app and on the ML marketplace. 

Mercado Credito has competitive advantages in underwriting its credit, one which relies on consistent investments in technology to pervasively digitize and harness the data that arises from users of the Mercado Libre ecosystem.  Mercado Libre collects primary data from thousands of user touchpoints within the ecosystem. Machine learning and artificial intelligence generate a credit score based on user/seller behavior in the ecosystem.  Note that for a number of customers, these interactions may be their only salient activity in the financial system.

By leveraging digital user and seller data from the Mercado Libre ecosystem to determine credit scores in internally developed models, MP can provide credit to users and merchants in an economic landscape in which conventional financial businesses have difficulty identifying good credit risks, given the relatively underbanked status of the persons and businesses.  

Mercado Pago has a competitive advantage in distribution, in that it offers credit seamlessly at the point of online sale, priced according to the proprietary scoring system.

Mercado Credito offers credit to users, sellers, and as credit/debit cards.

Sellers Mercado credit extends credit based on sellers historic amount of sales.  Bear in mind that availability of credit to small businesses in Latin American economies is lower than in more developed economies.  Sellers are thus tied to the platform with switching cost.  Interest and principle can be pulled from seller revenue.

For purchasers, Mercado Credito offers a buy now pay later (BNPL) product which can be used on or off the ML marketplace, or at any payment transaction that involves MP.  At checkout, if the user has a credit line, it will allow them to buy on installment by paying interest. Personal loans can be accessed directly through the MP app with the funds deposited into the user’s account. Credit increases user engagement.

Credit card: Mercado Credito enables digital payments for users on and off ML platform, without a conventional bank account.  Proprietary models running in the Mercado Pago cloud control credit issuance.

6. Mercado Envios logistics services

Currently available in Argentina, Brazil, Mexico, Colombia, Chile, Uruguay, Peru and Ecuador. Enables sellers to utilize third party logistics services while providing fulfillment and warehousing services. These services reduce friction between buyers and sellers, integrate the full user experience. Moreover, sellers access shipping subsidies to offer free/discounted shipping. In 2020 Meli Air fleet of delivery aircraft began in Brazil and Mexico and are expanding. The Meli Places network of neighborhood locations to receive and store packages in transit. Buyers and sellers can pick up, send or return packages locally.

Mercado Envios logistics provides better service than national carriers, keeping customers and sellers with the platform. Warehousing enables more efficient inventory turnover, which accelerates sales for sellers. Execution of the strategy has been excellent, approximately 50% of Mercado Envios goods are shipped within 24h, and 75% within 48h. Virtually all Mercado Libre marketplace sellers ship via Mercado Envios.

The Meli+ Loyalty Program is a subscription that enables points, digital entertainment services, offers expanded free shipping.  In addition, it optimizes costs in shipping by allowing buyers to schedule a slower shipping date.  The company groups packages and otherwise uses scale to lower costs. In Q1 2024, approximately 5% of shipping was placed on these slower shipment, user scheduled dates, indicating program adoption, and likely reduced shipping costs (Q1 2024 Earnings Presentation Q/A).    The program was relaunched In Brazil and Mexico in 2023, replacing the previous loyalty program which had proved inadequate. The goal of Meli + is to increase user engagement and this in turn increases seller engagement.

In summary, the Mercado Libre ecosystem includes mutually reinforcing capabilities.  The expanding number of Mercado Libre marketplace users incentivizes brick and mortar merchants to accept Mercado Pago digital payments via credit, debit and wallet. Expanded digital finance services bring previously unbanked customers, to the Mercado Libre ecosystem.  Digital technological cloud assets enable Mercado Libre to leverage customer usage data from its ecommerce platform to sell credit to its relatively novice buyers and merchants, which also ties them to the ecosystem with switching costs.  Efficient logistics services enhance seller sales growth, and this attracts buyers. Growth in ecommerce attracts Ads sales.