3 Reasons Mercado Libre Has Space to Grow After 39% Revenue Jump

What is discussed, and when

1. 0:00 – 5:00: Mercado Libre, Motley Fool, Asit Sharma, British International Investment
2. 5:00 – 10:00: Mercado Libre, Mercado Pago
3. 10:00 – 15:00: Mercado Libre
4. 15:00 – 20:00: Mercado Libre
5. 20:00 – 25:00: Mercado Libre, Mercado Pago
6. 25:00 – 30:00: Mercado Libre, Mercado Pago
7. 30:00 – 35:00: Mercado Libre
8. 35:00 – 40:00: Mercado Libre
9. 40:00 – 45:00: Mercado Libre
10. 45:00 – 49:56: Mercado Libre, Leandro Cuccioli, Motley Fool

Notable quotes from "3 Reasons Mercado Libre Has Space to Grow After 39% Revenue Jump"

• Of Corporate Development Strategy, sustainability and investor relations at Latin American Ecommerce Giant Mercado Libre.

  about Mercado Libre · at 0:09

• That explains why Mercado Pago, our Fin tech side of the business continues to grow also users at a clip of around 30%, reaching 72 million monthly active users, and that's payments,.

  about Mercado Pago · at 2:28

Who and what is mentioned in this episode?

People

• Leandro Cuccioli — Person · 2 mentions · first at 0:04
  My guest today is Leandro Cuccioli.
• Asit Sharma — Person · 1 mention · first at 0:00
  Hello, Fools. I'm Asit Sharma, senior analyst and lead advisor at the Motley Fool.

Companies & orgs

• Mercado Libre — Company · 33 mentions · first at 0:13
• Motley Fool — Company · 3 mentions · first at 0:02
  Hello, Fools. I'm Asit Sharma, senior analyst and lead advisor at the Motley Fool.
• British International Investment — Company · 1 mention · first at 0:24
  Stanford University and he was previously head of consumer services and social infrastructure investments at British International Investment, the UK's Impact investor and development financed institution.

Products & tech

• Mercado Pago — Product · 5 mentions · first at 2:28

Concepts & topics

• Artificial Intelligence — Concept · 3 mentions

Full transcript with timestamps

0:00 Hello, Fools. I'm Asit Sharma, senior analyst and lead advisor at the Motley Fool. My guest today is Leandro Cuccioli. He's Senior Vice President of Corporate Development Strategy, sustainability and investor relations at Latin American Ecommerce Giant Mercado Libre. Leandro holds an MBA from Stanford University and he was previously head of consumer services and social infrastructure investments at British International Investment, the UK's Impact investor and development financed institution. Today, we're going to discuss Mercado Libre's third quarter 2025 results, as well as broader operational and strategic topics that are essential to understanding this dynamic business.

0:41 Leandro, welcome to the Motley Fool. Thank you., Asit. It's great to be here. Wonderful. I know you wanted to start off the conversation with a nod to the incredible streak of growth that Mercado Libre has thrown off. I'll let you dive right in with this 30% growth rate that we've seen for so many quarters. Yeah, you're right. We think we are the only company in the world that has sustained 27 consecutive quarters of revenue growth, about 30%, in this case, 39% for the third quarter of 2025. I think it's testament to the big opportunity that we see in the region that probably you have discussed with us in the past.

1:27 When you look at Brazil or Mexico or Argentina or three main geographies, you see GMB or the gross volume of merchandise transact in our platform growing well above 30%, ship items growing and more than 42% in Brazil. That means that a lot of people are still coming online to buy sometimes for the first time, in Brazil, we had 29% growth in unique buyers. That's at the scale of Mercado Libre with more than 100 million unique buyers in the last 12 months, it's quite unique, I think in the world, to have 29% more fox coming to buy online.

2:10 The same can be said on the Fintech side. Because it's a region that unfortunately in the past hadn't had the access to financial services that probably in developed markets, people are used to right. Here in Mexico, 15% of the people have a credit card, it's insane, only 15%. That explains why Mercado Pago, our Fin tech side of the business continues to grow also users at a clip of around 30%, reaching 72 million monthly active users, and that's payments, savings credit and everything that you need for a modern life.

2:48 We're very excited about the third quarter, but moreover, we're very excited about the opportunity ahead. I think it's interesting for those who haven't followed Mercado Libre, to see these long streaks of consecutive growth and understand that the market itself still is relatively immature. I put you on the spot right off the bat. Thinking about both the ecommerce side and the Fintech side, how long can Mercado Libre sustain this growth rate? At what point do you go to being, let's say, a 20-30% grower on that top line?

3:25 Look, I mean, time will tell. I mean, in terms, but of course, growth over time, you know, needs to converge. But in the short term, what we see Asit is that you see penetration of ecommerce in Latin America in the mid teens. I mean, compared to probably 30 in the US and Europe, 40, 50% of ecommerce penetration in China. The market can be two, three times larger. We are taking that market on a marginal basis in Latin, probably, 2/3 of market of that growth. When you see that on average, a customer in Mercado Libre shops nine times a year and in developed markets, similar platforms are around 50.

4:10 You see this huge gap still. I mean, I know we're big and people say, Well, how much bigger you can be. But we're still probably 5% of the retail market in Latin America, Mercado Libre. Imagine a retailer that has 5% of market share. There is huge potential on that side. I would say on the side of Fintech if you look at any market share of what we hold, but not only us, take the other Fintech as well. We're still a fraction of the big banks in Latin. One thing that Latin America still has is that very concentrated deposit and credit on a handful of banks.

4:51 If you take Brazil, probably ten years ago, it was 80% of the credit and loan the loans and the deposits in five banks. Now it's 60%. But if you take a developed market, it would be around 45. But if you take Mexico, you're still at 80%, in five banks. If you take us, probably you have single digit market share in credit cards, single market share in deposits, etc. There is huge room for growth. I don't see in the next quarters to come the trajectory changing dramatically. Over time, of course. I mean, you cannot grow 30% forever.

5:31 But it's amazing that we still grow at startup rates even today because the market is so huge. I think that is something that people need to realize that, it's very early. You've got the concentrated banking and deposits as targets and you also have such a large population still of unbanked customers or young customers that are coming online with their first experiences in digital payments with credit cards and the like. I wanted to shift just for a moment. I promised myself, I'm not going to make this about Argentina, but I know many of those who again, aren't familiar with Mercado Libre might not understand the experience that this business has volatility in the region, but it is a big market.

6:18 If we could take just a couple of minutes to discuss the change that's underway there, recent events and how Mercado Libre deals with volatility in these big markets that make up the brunt of net income and also revenue growth in the region. Yeah, so we were born out of volatility, I think. I mean, 1999 Argentina, August, that's when Marcos Galperin started the business, and right off the bat, the bubble burs and Argentina, that was the core market defaulted into 2001. I think that over the last 26 years, Mercado Libre Latin America, I mean, if you are going to be in Latin America over time, you need to understand that things will become volatile from time to time to put it in a nice way.

7:12 In the case of Argentina, we have an amazing business. I mean, there, you know, if you too at Mercado Pago, more than 60% of the population uses Mercado Pago in a daily basis to buy stuff. I mean, the QR code has become the pervasive method there, like in China. I'm seeing that in India too, by the way. In India too. I taped, I was just there. A lot of QR code payments with PTM, etc ATM. The same. I've been several times to India and see some the same movement of cash being replaced at a very fast speed, even disappearing.

7:54 I think Mercado Libre also from the Mercado Libre side, from the marketplace, has been the leading company in Argentina for a long time with a system that the brand equity, the perception of the consumer is so ingrained and almost it has defined the category. Just searching in Mercado Libre would be the first thing that, you tell your kids when they are looking for something, right? It becomes the destination, and the same with Mercado Pago. Now, we've seen the country going through different phases. We are coming from a period of very high inflation at the end of 2023.

8:37 Then this administration that started at the end of 2023 has brought inflation down quite significantly, and that has created a big adjustment in the economy. We navigated a difficult Q1 of 2024 in which for the first time we had negative ship items, growth in the history. There was a huge recession and adjustment in Argentina and Q1/24. But then from third Q2 and we actually published that from our Q2/24, we started to see a marked improvement. Not unheard of that when you lower inflation so much the real purchasing power of people improved.

9:19 Credit returns and all those other things. Our credit book in Argentina quadrupled over a year and from a very low base. But that means that if you have good macroeconomic stability, then it's easier to conduct business and that's what we've been seeing, we've seen Argentina performing very well for us. Now, what I always tell investors is we don't know what's going to happen, we never know. We have a very solid business and we've had a solid business in periods of high inflation, of low inflation, etc, because as long as you have great price, great convenience, the fastest shipping, people will buy from you.

10:01 Now, we're very optimistic in the short term that if things continue to be in this way, the market can be much, much bigger than what it is today, so it can be a huge market. But we don't control, so we try to play with the cards that were. Well, one thing I've noticed as you've been dealt cards over the years is that Mercado Libre is a very persistent investor from the capital side in the various economies in which it operates. I think this manifests really in an interesting way when you look at the supply chain and the emphasis on logistics as one of the levers to increase gross merchandise value, so the sales that are coming across your platform.

10:44 You wanted to talk about this reduction in Brazil's free shipping threshold, which we saw this quarter. Talk to us about the dynamics of moving that free shipping threshold from 79 reals to 19 ales. What did that do for the business? Why did you all undertake that decision? I think that's a good, that's a good example of that persistence. One thing talking about India or China, one thing that I admire of companies from that side of the world is the long term perspective that in some cases in the Western world, companies have had a hard time in keeping and that's what I love about Meli.

11:28 God, we are persistent, we're almost a stubborn, I would say, and it's a very persistent company, because we think that the only way in which you can really create value is for the long term. You need to keep investing. You need to keep going after the price. The price is so big, what we were talking before. I mean, when you have only 15% of retail, or online or 85% offline, means that there are a lot of people out there that still haven't tried the convenience of e commerce. They haven't tried it because they don't have the credit methods.

12:06 They don't it because they didn't have good delivery, or they haven't tried it because it was expensive, and probably 19 Riyal, which is 4 or $5 versus 79 Riyal for a lot of people in Latin America, make a lot of a difference. I think that answering your question, why we did this is we see that every time that we have lowered the free shipping threshold that we could do it because to do it, you need to have the network in order to support that. Because if I lower the free shipping threshold, by definition, I get more volume into the platform.

12:43 Just the numbers speak for themselves. Brazil in the third quarter, the items grew 42% after we lowered the shipping threshold at the end of Q2. Q2 was 26%. I went from 26% to 42 when you had the full quarter of the effect of the lowering of the free shipping threshold. Why is that? Because there's a lot of folks that then they can buy that they couldn't buy before. Because it was expensive and you couldn't get it. When you think about how are you going to get this market to be 30%, 40%, 50% penetration of ecommerce, you will need to bring more of those people online.

13:24 You will need to bring change behaviors. To change behaviors, you need to remove the frictions and it comes to logistics and credit. Logistics, if you don't have the network, you cannot offer to carry all those packages at the right time for all of those consumers. We thought that we were ready now to take on this step, which is it's a bold step because basically, you're bringing that assortment to many more people, but we're very happy with the results. I think, again, if you think about what we need to do in the years to come, we need to keep removing those frictions.

14:01 That's the only way in which the market will develop. I think also this action is a signal to the market that you feel that your logistics network is pretty mature because it's an expense to undergo to remove the friction, to lower that threshold is an expense on your PNL, but it also signals that you have basically that structure in place. The logistics efficiency is there for you to undertake a little bit of risk or potential margin, near term margin compression on the PNL side. I want to stay on logistics for a minute because I think that Mercado Libre discussed an interesting concept in this letter in the third quarter, can you explain to us what the slow layer of logistics is and how this contributes to lowering unit costs over the long term?

14:53 The way we have rolled down the lower shipping threshold is that the consumers that are not part of our loyalty program, for any consumer. You can buy something I'd call it 20 Riyal, one real about the free shipping threshold. Then you are given the choice to get it free in three, four days, like a logical window, or you can still pay to get it next day, and it's interesting what happens. When you give that option, a lot of people at the checkout still elected to pay to get it next day. But what drew them to the checkout is the promise also of getting it for free.

15:42 Because then maybe at the end, you say, Well, it's not that much, I can still pay for it and get it the next day. But you have that slow option that you are talking about. That slow option you need to over impose a slow layer in your network over a fast layer that we had before. But this allows you to have better planning of your roots. I mean, if you know what you need to deliver next week, instead of doing it tomorrow, you need to deliver next week. Your line haul capacity can be better used, so the big trucks that go between the distribution centers, your last mile can also be optimized in terms of, you know, probably in a building in Mexico City, you will do one stop instead of several because there are more people are buying there for next Wednesday.

16:33 At the same time, some of your distribution centers have a very different traffic instead of being concentrated in the morning and the evening when you need to get the merchandise from your suppliers in your cross staking, you can space it over the week in a different way. It brings a lot of efficiencies in terms of how you manage the network that we've seen that in some of the numbers. The way this works is that we've been achieving economies of scale and efficiencies. We have decided, of course, on purpose, to reinvest that lowering the free shift in transport because of all the benefits that I told you that we think that this brings longer term.

17:22 It's true that we are getting that, and the more that we grow and the more that you develop the network, the more efficiency that you strat. That's the way we are thinking about that trade-off. As I was listening to you, I was wondering what role is AI machine learning playing in the route optimization that you're realizing? Well, AI for us has been something that, probably for the last 10 years now, we call it AI. Before it was machine learning at the beginning, analytic AI, we're going into. The names change, and the technology evolves, but the ability that we have today to drive the network from our own transportation management system and warehouse management system is probably the competitive advantage of Mercado Libre logistics.

18:18 It's not how many warehouses. Sometimes investors come to me and say, well, how many warehouses you have, and these guys have. It's not a competition. They want to model that on a spreadsheet. Yeah, no, I understand. I've been on that side too, and the Excel can be quite unforgiving. You need to put number of boxes and productivity in those things, and I get it. But that's not the core. It's not the number of boxes. Is the brain behind the system that allows to do comingling of cargoes and just getting combinations and all of those things.

18:51 AI is at the center of that, in our own development of how that last mile is optimized, and also how the warehouses are managed. A lot goes into that. We have 16,000 developers at Mercado Libre. A huge part of that is dedicated to improving that logistics arm. Which I think I don't see that changing in the short term because there's so much efficiency that you can grab. Crazy side question. Are you all keeping an eye on the development of quantum computation as a possible solution for route optimization? Well, more than one eye, probably two.

19:35 Yes, we are, quantum computing. We spend a lot of time in China. The team just came from there, the shipping team. Quantum computing and robotics are areas in which we are extremely invested in terms of understanding, following, adopting. There is a potential in the next few years of radical changes in productivity. I think for us is, how much of that, with the realities of the region, we tropicalize in a way at the right pace. But we're very excited about those things. I think, again, I can only see that allowing players like us to have more resources to keep removing the frictions to mean more people to the markets.

20:38 I'm very optimistic on that side. Leandro, I want to move on to the second removal of friction that you mentioned. But before we do, I'm sure you're interested in user interface design and user experience. My question to you is, what's the last purchase that you made on the Mercado Libre platform? I'm doing my motorcycle license test in Mexico this week. You need to test by doing some exercises in which you need to go through cones. I bought some cones, like those cones that you see in the street, to practice. I got them this week, they were 138 pesos, which you divide by 20.

21:32 It's got it, whatever, $9. I got that. I could get them the next day for 51 pesos or wait until Tuesday. That was my free delivery day. A slow way, that's the way I chose. You see an example there of how this works in practice. It was 51 Pesos. I could have paid it, but then in three days you get it for free. I got them on Tuesday. I need to practice tomorrow morning because tomorrow is the test, so wish me luck. Well, good luck. But you're in Mexico City? I am in Mexico City. I will not tell you that I have been driving my bike.

22:09 certain streets? Yes. Instead of buying the cones? I will not tell you that I've been driving my bike without a license because that would not be right. I wouldn't want to know that. Well, let's move on to this next question, which you've already given us a good prelude to. The second point of friction which is, how do I pay? What's the easiest way to pay? I think Mercado Libre has been aggressive in this space of offering credit in Latin America. I look at your balance sheet, the accounts that are tied to loan receivable.

22:47 The loan receivable bounces on the balance sheet, always growing. This year grew from $5.3 billion at the end of December 2024 to $6.6 billion. Let's call it that as of September 30th, 2025. This is both a great opportunity and I think one that entails a little bit of risk. I was wondering if you could bring us up to date on management's thoughts on further pursuing these opportunities that really benefit the whole ecosystem. It's not just the commerce side but also the Fintech side. Yeah, I think ecosystem is probably the keyword here.

23:27 Because you could argue that parts of Mercado Libre can be replicated if you throw enough money to it. The hard thing to replicate, well, say, culture one, we can talk about it. But the ecosystem. Just how you bring all these pieces together. The payments method, which started back in the day, Paypal in Ebay. Mercado Pago was started in order to facilitate transactions inside what was an auction site at the time and people couldn't trust each other to get paid. Over time, we went to do online payments outside of Mercado Libre and then we went into offline payments, and then into credit.

24:17 Then into more credit-intensive businesses like the credit card. All of that because every time that we have deployed more of these methods, the ecosystem gets stronger. If you want to shop today in Latin America above the shipping threshold, I can see why you don't want to shop in Mercado Libre. I mean, you have the best price. You get it very, very, very fast, then you have amazing payment and credit methods. It all creates the flywheel. Now, we always said that we would be very, very cautious in rolling out credit.

24:57 You said it at the beginning. It's a volatile region. You need to be careful. Our carefulness, you can see it. Our MPLs are probably in the lowest levels, historically. We're very happy with the growth as long as it's growth that is not getting into risky waters. That's the way we manage the business. We have data because of the ecosystem that we think is quite proprietary. The issue that happens in some of these markets, I would say with the exception of Brazil, is that you don't have a credit bureau that is as developed as in the US or in Western Europe.

25:38 It's not easy to lend profitably. Well, it's easy to lend. It's difficult things to collect. The data that we have, which is quite proprietary of the transactions in the marketplace, allows us to provide credit to people that probably would not get the credit otherwise. We recently published an impact report in Mexico, and in Brazil is in our website in the investor relations website. 52% of the SMEs that get a credit or a loan when Mercado Libre is the first loan ever in their lives. That tells you something. That either we're taking an insane risk or someone was not getting the right read on these people.

26:24 That a lot of the times operate between the gray economy and the formal economy. That's the reality of our markets. The information that we have is quite a competitive advantage in order to profitably grow the credit book. That's what you've seen. When you look at that growth that you said, I mean, if you look at year on year, is even more stalking is probably 83% growth, we're 11 billion now. Probably 47% of that now is the credit card. We've been giving credit to people that didn't have access through the formal channels.

26:57 Some people that even didn't want to go into a bank, that's because we have data that no one else has. That's the way we manage the business, and we are very conscious of the region in which we operate. You need to be very careful in terms of how you extend credit. I've also seen very strong provisioning on your side, making sure that you provision for losses to be conservative on the credit side. I think that's been a powerful way for investors to feel comfortable with the overall thesis. I'm just curious, listening to you is some of this based on signal?

27:34 Example, a new merchant or let's say, just a new consumer comes to the platform, it could be either. You have so much data that, based on how they're navigating the site, the different signals you collect, maybe from a few transactions, you can extrapolate that out. It fits the profile of a certain type of merchant or certain type of customer. Therefore, you have an automatic trigger that allows you to extend that credit. Well, that's exactly how it works. I'll give you a personal example. I moved to Mexico a year and a half ago from London.

28:09 I mean, I'm from Argentina. I've been a Mercado Pago customer in Argentina for a long time. But the Mercado Pago apps they are still country-based. Your Mexico app is different, so you have different phones, etc. When I came, I didn't get the credit card at the beginning. You start building up your credit profile in the website. I started buying, then they extended me buy now pay later credit, three installments, something like that. Then they offered a personal loan. Eventually, they offered a credit card with a low limit.

28:49 Then as I paid I spent, they increased the limit. That's the way it works. What you said exactly, the data that you collect, plus the data that they have on me. I mean, I would argue that they had to give me the credit card sooner. The data must have been fantastic because then they extended a job offer. Exactly. That's what I was telling these guys. Your model is incomplete. But in general, I mean, this journey of ramp-up in terms of your activity, I think it goes to the philosophy that we were talking about. As you get to know, we have 2,500 variables in the credit scoring models.

29:31 The more you know the person, the more you know the pattern, the more you can feel confident that you are pricing risk in the right way. Because it's not about extending the credit or not extending it, it's about pricing it right. That's the issue always, with credit. It's are you pricing risk in the right way? I think that's the tool that allows you to do it. It's a progressive journey for the consumer. and the merchant. Leandro, I wanted to move to something that is of the moment, but you've already signaled some of this in some of your very first remarks.

30:08 You mentioned a parent who tells a child, hey, just search Mercado Libre, you're looking for something [OVERLAPPING]. That's what I mentioned. The youngest consumers, though, are on social platforms like TikTok and YouTube Shorts, and Instagram. They may not pause to ask mom or dad where to buy something. We have seen the penetration of some businesses, I think of TikTok itself and Shopee, have these funnels that go from content to an available purchase on site. Mercado Libre hasn't, not sat still and watched this happen.

30:50 You guys have engaged rather quickly. I wanted you to talk a little bit about social commerce. How are you guys playing in this sphere? What are your initial results? Reminds me all the conversations I have with my 12-year-old daughter. Don't believe everything that they say in TikTok or Instagram. But you're right. I mean, there is this blend of entertainment and shopping, particularly for, I will not say only the young. We are all in a way becoming more intertwined in terms of how lives develop online. For us, it's been quite a signal that we grabbed it quite quickly with a very strong affiliates program.

31:42 Because one thing acid that you see, which is amazing and probably it's a very different social movement what we had 10, 15 years ago. Is that even brands, today, if they put a very curated model in front, wearing a watch, etc, people don't believe it. They believe more someone like them talking about the brand. Probably someone will say, I can relate to that guy, looks like me. That affiliate program, that's what we call affiliates, creators, that movement is even a social movement. Which is amazing. It's like a democratization that for us we take it to finance, we take it to commerce. This is the same.

32:24 People that before didn't have a platform didn't have an audience, now they do. For us, we have invested heavily on that. It's becoming an important part of our GMB in some of the countries in which an affiliate or someone in some of these channels that you talked about, social networks, they can be talking about a product in Mercado Libre. Then they are remunerated for the traffic and for the transactions that they bring. That in some categories, particularly in apparel, fashion homeware etc it can become quite a powerful force.

33:03 The same goes in the platform with our video clips. Even inside Mercado Libre, when you go now in, if you go into several listings, there are video clips by the sellers that are done in the same fashion. Is not someone that will do an amazingly sophisticated commercial, it's someone showcasing the product. Well, guess what? The conversion goes through the roof. It's authentic, right? It's authentic, people see it. Now, what we have deployed in the last few quarters, I mean, the last quarter, a lot, is these AI tools that you bring your video, homemade, and AI makes it a beautiful commercial.

33:48 Basically combines the authenticity that you're talking about with a more curated feel, trying to strike that balance. If you go on the other side of the scape, people will not believe it. It becomes too fake, too perfect. But that is something that we have embraced because at the end of the day, it goes back to the core of our platform, always being an SME platform, A long tail, the small guy having a chance, that never had it before. This is the last iteration of it. On a related note, another place where Mercado Libre is bringing a lot of investments and participating in up to the moment revenue generation, Mercado ads.

34:33 You all have a great digital media platform. Your advertising revenue grew 63% year over year. That's forex neutral numbers and display Nvidia revenue nearly doubled. I was just curious if you could tell us a little bit about this shift into digital advertising, what are the opportunities for Mercado Libre, and what are the risks? I'm trying not to create a salad of numbers here, but if you bear with me. Let's do it. As long as you sells, let's do it. I get the salad dressing, some olive oil, and acheto. But if you look at the whole LATAM advertising market, is around $50 billion.

35:22 Half of that is online, half of that is digital. In the developed world, that 50% would be 75%. You have there something to grow 50-75. That's first. Second, in that 50%, call it 25 billion. Retail Media is still probably 8% penetration there. Of that 25 billion, it's a $2 billion market, we have probably 60% of that market, that retail media in developed markets instead of 8% penetration would be 15, 20. You have several levers, the 50-75, the 8-12, which you can compound for the market, the digital advertising market of the retail media market in LATAM, to be three, four times larger in the next three, four years.

36:23 We're seeing tremendous growth, and we are the driving seat. We are today one of the main media companies in LATAM. That's the way we think about this vision, to become a fully fledged media company. Where are we in that journey? Advertisers started to come to our platform to advertise on the platform. Basically, the banners that you see. If you search for an iPhone, the guys from another very well-known brand may decide that it's a good idea to put a banner out there because they say, well, this guy is looking for a phone, maybe I can grab him.

37:00 That's source of revenue. Then, if you have several iPhone sellers, people will pay and bid to be at the top, and there is a very difference in conversion if you are at the top and if you're not. That is the bread and butter of the advertising business of Mercado Libre, and the same goes for some of our competitors in other places in the world. That is, the search side of the business. Now, once you have that relation with advertiser, you can think that Mercado Libre and the platform, which is called DSP, the demand side platforms, you can really help the advertiser not only to advertise in Mercado Libre but outside of Mercado Libre, and that's when the display Nvidia strategies come that you mentioned.

37:50 In order to do that, you need to have advertising in real estate outside of Mercado Libre. If I'm a brand, I can come to Mercado Libre say, well, I bring you my budget, which generally is going to be more the branding budget. It's not going to be the budget for the instant conversion, but more that it goes inside Mercado Libre. But I bring in my Branden budget for awareness, but then show me what you got Nvidia, where I can advertise. That's when some of the deals that we've been making in the last few years with Disney+ and others allow us to have advertising real estate in some of these platform for our users, so the advertiser can come to us and bring more of those branding dollars to us.

38:37 The same goes with Mercado Libre, which is our free content platform same concept, it's advertising-based. We do that in order to have the media company that we want to create, that has all these different formats. We can go and talk to the big brands of the world and say, look, bring more of your budget to us. That's the play. The more that you see us executing, we just launched a pack in Brazil that $6, you get the access to Apple TV, Netflix Disney+ HBO etc. With all these guys or most of these guys, we're building these advertising deals in order to bring to our platform the ability for advertisers to advertise on them as well.

39:26 that is what is fueling this growth that you see at 63% because basically, you're not only having the real estate in Versace delivery that you could argue is finite, but you're also opening up to others. We did a deal with Google this quarter, the previous quarter to also allow our advertisers to advertise in the open Internet with them, so it's starting to give them more options. That's the play, just to become a fully fledged media company. Again, here, the investment in technology is the driving force because attribution is hard when you're investing in brand marketing.

40:08 In other words, to put that in plain English, to understand who I'm reaching, what the return on that dollar is. I'm guessing you all have some pretty good tools to show where those clicks are, how the brand advertising is faring on your partner channels. Today, I would say that we can offer probably experience second to none in terms of the data that we have, that attribution that we have from the sales in the marketplace. We have first-party data that becomes quite useful in that conversation with the advertiser to talk about return on advertising dollars.

40:50 You can have a much more defined conversation around how their advertising dollars are driving sales than guys that don't have the data that we have. I would say that if you say, well, what's the challenge, then to make this business twice the size or three times. We need to keep developing these advertising real state outside of the platform. Because the more real state that you have in terms of advertising, the more you can reach, and the cost per thousand, the CPM gets lower, you become more competitive. That's the challenge today.

41:33 Keep adding advertising real estate in order to have a conversation in which you are competitive with other formats. We were getting there. I think that you need to build your commercial teams, etc. But it's striking the right deals with the right surfaces. Leandro, as we wrap up here, I have two questions for you, one on strategy and one on culture. The first is when you think from where you sit, how the organization is going to create value over the long term, over a very long-term time horizon. I'm curious in your eyes what activity or investment is going to create the greatest yield for Mercado Libre as we look a little bit past the medium term.

42:20 Look, I think Mercado Libre will create value for its stakeholders if it continues to be at the center of the life of its users. If there is a profit pool in the industry, your claim to those profits, you will have a right to claim those profits if you continue to be at that center of being that point of search, being that point of engagement with your financial products, with your products and services. If you're that gateway in which we have fought so hard to become, I can only see a tremendous amount of value being created, because you can only see those markets developing 10 fold or 20 fold is what they are today, but you need to be at the center of it.

43:19 The moment that you lose that center, your claim to those profits diminish. It's not that they're going to disappear, but you will need probably to spend more to claim those more acquisition costs, etc, you don't have the same claim. I can't think of another thing that is not what we are doing in terms of removing those frictions in the real world, extending credit and logistics, etc. I cannot think of a better tool to continue to be in the center of that ring that continuing to do this. Of course, we couldn't finish this without throwing AI into the picture.

44:01 Because what it brings is that it speeds up the removal of the frictions. The more AI I have in my underwriting of credit, probably the better I am a judging how to price that risk. There you go. The more AI I have, I have a more efficient network, as you said. Then I can lower the cost of shipping, and I can lower the threshold. The more AI I have, I can give the customer a better experience of what he or she is searching or what he or she needs in a conversational manner, and in a way that I almost can predict what comes next, making your life even easier, I think AI needs to be factored into there as an engine of all these things, culling the front office and the back office of the business.

44:54 But at the end of the day, it ends being a means to an end to get products and services to the right folk at the right price with the right promise of delivery and giving that person the right means of payment and credit. I cannot think of something that is more inclusive than that over time. If we do that and if we continue doing that, we're going to be at the center of the ring. If we stop doing that or we don't do it that well, then we're going to lose the center of the ring. We've talked a lot in this conversation about being in touch with the customer, the customer's needs, persistence in investing, an eye towards innovation, understanding markets.

45:40 There's one thread that draws all this together, and that is Mercado Libre's culture. It's something that management has talked about continuously over the years. I was curious from your perspective, where you sit. Again, what is special about this culture? What to you stands out? What would you like to see as you move forward preserved in that culture to help Mercado Libre keep generating the success that it has enjoyed? Oh, boy, so hard to talk about culture because very quickly very. We end on the top of this question, we have to do that.

46:16 Because very quickly, you can get into a very fluffy territory, and I want to. I think the most important thing that probably Marcos Galperin created is the notion of trust in the team among themselves. The Mercado Libre culture is defined by a lot of trust. Trust in what you are doing is well-intentioned, and you have the same goals that I have. In that way, if you fail, I support you. I will not punish the failure. We will learn from it. We were going to be honest about it, but we're going to try it again and again and again.

47:06 That is so important because that persistence that you talked about, iterating until you get it right, you're going to make a lot of mistakes, and we make a lot of mistakes. But if you punish those mistakes, if there is that culture of that mistake may limit your career, etc, you start to get all these dances around things that mean that decision making becomes polluted, that decision making is not crisp, it's not clean. I think that what really stands mainly aside is that decision-making process is very clean, it's very up front.

47:48 It's very honest about the disagreements, because the disagreements are about what we're trying to do is not a judgment on you, because I trust that you believe that I'm good at what I do. You trust me. But we may be disagreeing about a particular strategy, which is every day happens. I think that trust that is so precious, it's the thing to preserve over time. That's the challenge. You bring new people how you keep that over time? I don't know. If you ask me, the main risk that any company has, that at certain point, it's not that you lose it from one day to the other.

48:32 It's like society, culture doesn't change like that, but then you look back two generations ago, and I say, well, that was very different, when that happened? I think you need to be very vigilant. The way to be very vigilant is hiring the right people, promoting the right people, firing the people that probably don't stick to the culture, and there's no silver bullet, but you need to be paranoid that that is a very fragile thing, in any relationship, and it can deviate, of course, very rapidly. I would say, people in the leadership of this company are obsessed about that because they realize that it's not the number of boxes that we have, the number of warehouses, or how many credit cards we issue.

49:16 If you don't have that ingredient, then you start making the wrong calls, particularly tough ones. That resonates with me. Our organization is also trying to move forward, move fast. We're also very AI-centric, and I think there's a lot of trust at the Motley Fool. I loved your answer. I think it was the opposite of fluff. I tried Leandro Cuccioli, thank you so much for your time. This is a fascinating conversation. I so much appreciate your thoughtful answers, and I hope you'll join us again soon for another conversation.

49:51 Anytime. Thank you very much for having me.

Questions about this episode

What is discussed in "3 Reasons Mercado Libre Has Space to Grow After 39% Revenue Jump"?

In order: 0:00 Mercado Libre, Motley Fool, Asit Sharma, British International Investment; 5:00 Mercado Libre, Mercado Pago; 10:00 Mercado Libre; 15:00 Mercado Libre; 20:00 Mercado Libre, Mercado Pago; 25:00 Mercado Libre, Mercado Pago; 30:00 Mercado Libre; 35:00 Mercado Libre; 40:00 Mercado Libre; 45:00 Mercado Libre, Leandro Cuccioli, Motley Fool.

What is mentioned in this The Motley Fool episode?

7 people, works and ideas are mentioned, including Mercado Libre, Mercado Pago, Motley Fool, Artificial Intelligence, Leandro Cuccioli, Asit Sharma. Each one on this page links to its own page with every episode that mentions it.

How long is "3 Reasons Mercado Libre Has Space to Grow After 39% Revenue Jump"?

The episode runs 50 min; the transcript is about 7,407 words in 69 timestamped sections.

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