MercadoLibre presentation; Stanford Graduate School of Business. March 2011

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MercadoLibre: the leading e-commerce ecosystem in Latin America

M E R C A D O L I B R E2

First Steps

Spring of 1999: idea to build an online marketplace for Latin America, while doing my Stanford MBA

Spring of 1999: drove visiting venture capitalist John Muse back to the airport, and pitched idea along the way.

June 1999: MercadoLibre is founded.

August 1999: first of our online auction services is launched in Argentina

MELI’s origins are tied to Stanford GSBM

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Early Challenges

Additional financing

Finding the right people : GSB provides the network

Quickly evolving competition

De Remate going head to head with MercadoLibre in 3 markets.

Local players such as Lokau in Brazil quickly expanding.

Imminent entrance of U.S.-based Yahoo! and eBay?

M E R C A D O L I B R E

MercadoLibre’s history

Source: Company

1999 2000 2001 2002 2004 2005 20062003

eBay acquired19.5% of MLfor iBazar Brazil

227% netrevenues growth—regional leadership

Break even. AcquiredDeRemate subs

Launched IPOUS$333mm

2007

Acquired LokauExpandedbusiness model

Acquired Tucarro.com and Tuinmueble.com

2008

What has happened since

Acquired the operations of DeRemate that it didn’t own

2009

Launched search advertising and web stores

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GDP US$bn Pop mm GDP per

capita US$

Western Europe 16,452.1 500.1 $32,896.5

USA 15,157.3 313.2 $48,387.3

Japan 5,683.3 127.2 $44,682.3

Asia ex Japan ex China 5,478.2 2,310.2 $2,371.3

Latin America and Caribbean 5,014.5 572.2 $8,763.6

Middle East and Africa 3,522.4 1,223.7 $2,878.4

Central and Eastern Europe 3,513.2 317.1 $11,080.5

China 6,422.3 4,763.9 $1,348.1

0%

2%

4%

6%

8%

10%

(1,0)% 0,0% 1,0% 2,0% 3,0%

Population CAGR 2009–2012

GD

P C

AG

R 2

00

9-2

01

2

Latin America has one of the best combinations of actual GDP and population

size with expected growth rates

GDP and Population

Source: IDM

Population, 2011E

USWestern Europe

Central and Eastern Europe

Japan

Asia ex Japan and

China

Latin America

Middle East and Africa

China

GDP and Population

Source: IMF. Figures in table are 2011 estimates

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Wirelines Wireless PCs Broadband Internet users

Regions Number CAGR % Pop Number CAGR % Pop Number CAGR % Pop Number CAGR % Pop Number CAGR % Pop

Latin America 87.6 (0.5)% 16.1% 393.5 6.1% 72.2% 150 11.2% 27.6% 33.3 20.1% 6.1% 158.9 20.3% 29.1%

Asia Pacific ex China ex Japan 184.6 3.2% 8.7% 1,073.5 12.1% 50.7% 229 13.6% 10.8% 46.5 17.3% 2.2% 297.1 15.0% 14.0%

China 239.9 (2.4)% 18.2% 769.4 8.9% 58.5% 265 10.8% 20.2% 104.4 15.4% 7.9% 344.5 11.8% 26.2%

Eastern and Central Europe 22.2 (4.2)% 23.9% 114.6 3.1% 123.3% 41 7.9% 43.7% 12.9 11.6% 13.9% 46.3 10.5% 49.8%

Western Europe 148.6 (5.9)% 31.5% 514.1 3.4% 108.8% 320 5.2% 67.7% 116.1 6.6% 24.6% 280.7 3.9% 59.4%

Japan 44.0 (9.9)% 34.5% 115.1 3.5% 90.3% 123 5.5% 96.6% 37.9 10.6% 29.7% 93.4 1.6% 73.2%

North America 137.5 (14.5)% 41.5% 301.5 5.3% 91.1% 325 2.6% 98.2% 96.2 2.9% 29.1% 250.1 1.2% 75.5%

Latin America is expected to post the highest internet users growth due to

improving infrastructure and low penetration base

Source: ITU, ICT Statistics

Global internet penetration per inhabitant %, 2009

Source: EIU databases, al numbers in millions, CAGR for estimates 2009-2012

Selected infrastructure statistics by region (sorted by internet users growth rates)

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Source: ITU, ICT Statistics

Global broadband penetration per inhabitant %, 2009

6%9% 9% 10% 11%

17%21% 22%

25% 26%30% 31% 32%

28% 34% 39% 41%49%

63%72%

78% 78% 80% 84%


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35%

0% 5% 10% 15% 20% 25%

Internet buyers CAGR 2009–2012

Ret

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e-c

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GR

20

09-

20

12

…outpacing all other regions…

E-commerce growth

Current internet buyers, 2009E

Central and EasternEurope

Japan

LatinAmerica

US

USA

Asia Pacific ex-Japan

Source: IDM. Figures in table are 2009 estimates

WesternEurope

Asia Pacific ex Japan

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Mexico

Colombia

Venezuela

Chile

Brazil

Ecuador

Peru

Uruguay

Panamá

Costa Rica

Dominican Republic

Argentina

Main Meli StatsMain Meli Stats

MercadoLibre covers almost all of Latin America

1ITU for countries where MercadoLibre has operations, as of 20092IDC, for all Latin American countries, 2009 estimates³Comscore, November 20104Comscore, One year average (Nov. 2009 – Nov. 2010)

Countries of operationCountries of operation

31.8 million unique visitors in Latin America³

1.7bn pages viewed per month on average4

11th largest global retail site, 1st Retail in LatAm

#1 Retail site in each of the markets

~50mm search page views /weekday

Main Region StatsMain Region Stats

Population covered: 499mm1

GDP covered: US$ 4,179bn1

Total retail market: US$477bn2

Total ecommerce retail market: US$16.3bn2

Total advertising market: US$33.4bn2

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Main Internet IndicatorsMain Internet Indicators

178 million internet users

Internet Penetration: 36%

Broadband subscriptions: 32 million

e-commerce over GDP: 0.39%


Total unique visitors (000s) Reach

Total Internet audience 44,457 100.0% 1 Mercadolibre 12,914 29.0% 2 Lojas Americanas 10,415 23.4% 3 BuscaPe.com Inc 8,779 19.7% 4 UOL Shopping 6,808 15.3% 5 Netshoes.com.br 3,929 8.8% 6 Pontofrio 2,956 6.6% 7 Magazineluiza.com.br 2,795 6.3% 8 Extra.com.br 2,660 6.0% 9 Casasbahia.com.br 2,535 5.7% 10 Comprafacil.com.br 2,438 5.5%


Total Internet audience 109,998 100.0% 1 MercadoLibre 31,760 28.9% 2 BuscaPe.com Inc. 10,756 9.8% 3 Lojas Americanas 10,237 9.3% 4 Amazon Sites 9,054 8.2% 5 Apple.com Worldwide Sites 6,963 6.3% 6 UOL Shopping 6,684 6.1% 7 Netshoes.com.br 3,860 3.5% 8 Wal-Mart 3,371 3.1% 9 Pontofrio.com.br 2,910 2.6% 10 MagazineLuiza.com.br 2,746 2.5%


Total Internet audience 1,237,448 100.0% 1 eBay 259,866 21.0% 2 Amazon Sites 244,658 19.8% 3 Apple.com 119,801 9.7% 4 Alibaba.com Corporation 99,928 8.1% 5 Yahoo! Shopping 53,861 4.4% 6 Wal-Mart 43,788 3.5% 7 Hewlett Packard 43,487 3.5% 8 RAKUTEN.CO.JP 37,023 3.0% 9 Groupe PPR 35,315 2.9%

10 Otto Gruppe 34,833 2.8% 11 MercadoLibre 32,196 2.6%

MercadoLibre’s is the most visited e-commerce site in Latin America and #11

globally…

Global–Retail web sites audienceGlobal–Retail web sites audience

Brazil–Retail web sites audienceBrazil–Retail web sites audience

Latam–Retail web sites audienceLatam–Retail web sites audience

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Source: ComScore. All figures Q4’10 except global retail Q1’10


… and one of the top internet destinations in the region

Latam–total internet audienceLatam–total internet audience

Brazil–total internet audienceBrazil–total internet audience


Total Internet audience 109.998 100.0% 1 Microsoft Sites 105,683 96.1% 2 Google Sites 101,664 92.4% 3 Facebook.com 71,025 64.6% 4 Yahoo! Sites 58,032 52.8% 5 Terra – Telefonica 56,929 51.8% 6 Wikimedia foundation sites 46,617 42.4% 7 UOL 36,183 32.9% 8 MercadoLibre 31,760 28.9% 9 WordPress 28,372 25.8% 10 Organizacoes Globo 26,036 23.7%

Source: ComScore

Source: ComScore. All figures Q4’10.


Total Internet audience 44,457 100.0% 1 Google Sites 40,015 90.0% 2 Microsoft Sites 39,452 88.7% 3 UOL 36,956 83.1% 4 Terra - Telefonica 36,102 81.2% 5 Organizacoes Globo 26,526 59.7% 6 iG Sites 23,213 52.2% 7 Yahoo! Sites 21,835 49.1% 8 Wikimedia Foundation Sites 15,297 34.4% 9 MercadoLibre 12,914 29.0% 10 Grupo Abril 12,714 28.6%

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Four business units that create a powerful ecosystem

MercadoClics• Search

advertising• Display

advertising

MercadoShops• SaaS web

stores

MercadoLibre• Transactional

marketplace• Classifieds

marketplace• Search results

positioning

MercadoPago• Payments

processing• Consumer finance

Marketplaces

Payments

Webstores

Advertising

On

pla

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rm O

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On platform

Off platform

Both on and off platform

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Marketplace: enabling buyers and sellers to transact

Key Elements of Value

Proposition

Depth of selection available Most affordable prices Fluidity of user experience

Business Characteristics

96% fixed price (4% auction) 75% new items Strength in both B2C and C2C segments

Key Initiatives Expand into new product categories Move towards more back-ended pricing Focus on continuously improving buyer experience

Revenue Sources

Transactional platform Classifieds / Listing Search result positioning

Size and Growth 52.9mm registered users (34% 5-yr CAGR) US$3.4bn GMV (41% 5-yr CAGR) during 2010 ~50mm search page views /weekday

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3.406

2.751

2.079

1.512

55 164 299608

1.075

2002 2003 2004 2005 2006 2007 2008 2009 2010

GMVe (US$mm)

CAGR 2002 – 2010: 67,4%

29,5

21,117,5

1,43,1 5,1 8,4

13,8

39,2

2002 2003 2004 2005 2006 2007 2008 2009 2010

Successful items sold (mm)

CAGR 2002 – 2020: 52.1%

MercadoLibre’s key metrics –Marketplace

Source: company filings

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51,8

34,1

23,1

8,3 13,6 11,4 14,9 18,0

84,4

2002 2003 2004 2005 2006 2007 2008 2009 2010

New Paid Listings (mm)

CAGR 2002 – 2010: 33.6%

52,9

42,6

33,8

4,0 6,512,2

18,2

24,9

2003 2004 2005 2006 2007 2008 2009 2010

Registered Users (mm)

CAGR 2003 – 2010: 44,6%


Key Elements of Value

Proposition

Security of on-line payments

Fluidity of user experience / ease of integration

Low cost to merchants due to scale

Business Characteristics

Mainly on platform (today); recently launched off platform payments in Argentina and Brazil

55% financed payments

Average processed transaction of US$98

Key Initiatives

Increase penetration in marketplace (on platform)

Merchant services: enable third party payments (off platform)

Expand consumer credit offering

Revenue Sources

Off platform payment processing

Financing made available for both on and off platform purchases

Size and Growth

US$697.5mm TPV (20% of GMV, 79% 5yr-CAGR) in 2010

6.7mm payments processed during 2010

Over 1,200 off platform merchants

Payments: becoming an online payment standardM

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MercadoLibre’s key metrics –Payments

Source: Company filings

6,7

0,30,8 1,3

1,9

3,1

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2005 2006 2007 2008 2009 2010

0%2%4%6%8%10%12%14%16%18%

CAGR 2005-2010: 82.4%

Number of transactions/successful items sold

697,5

38,5 89,0 158,0

255,9

382,5

0

100

200

300400

500

600

700

800

2005 2006 2007 2008 2009 2010

50

70

90

110

130

150CAGR 2005-2010: 78.5%

2 TPV/Number of transactions

Average ticket paid with MP2 US$

Number of payment transactions (mm) TPV (US$bn)

# transactions (mm) TPV (US$bn)

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MercadoPago penetration (TPV/GMVe)

85%

27%

39%45%

50%

61%

2005 2006 2007 2008 2009 2010

Adoption3

3 Share of Live Listing at the end of the period in MP countries


MercadoClics Key Characteristics

CPC search platform similar to AdWords and sale of display ads

Offers buyers access to inventory from branded retailers that complement

listings on platform

Offers advertisers >32mm unique monthly visitors and their purchase intent

Marks a focus on search advertising over display while capturing share of

wallet of large retailers

Starting from a small base showing very rapid growth: > 11,000 advertisers /

month, 19% QoQ

713mm Ads / month, 11% QoQ

>30mm ad impressions / quarter, 13% QoQ

Average CPC at $0.11

MercadoClics and MercadoShops: completing the ecosystemM

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MercadoShops Key Characteristics

Most customers are SMBs looking to launch their own online sales channel

MercadoShops has fixed pricing per monthly usage that gets credited back in

marketplace fees

Monetization mainly through MercadoPago

Deeply integrated with MercadoPago, Marketplace and MercadoClics

Low cost SaaS web-stores: average cost of premium shop USD30/month

Over 5,000 active shops already after official launch in H2’10


Robust Financial Performance

56,0

2,4 1,1 9,7

18,8

33,2

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010

0%

5%

10%

15%

20%

25%

30%

Margin

Source: Company filings

Gross Profit

EBITDA Net income

Net income (US$mm)

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CAGR 2005-2010: 88.5%

170,2

22,140,0

66,2

109,8

137,2

020406080

100120140160180

2005 2006 2007 2008 2009 2010

70%

74%

78%

82%

86%

MarginGross Profit (US$mm)

CAGR 2005-2010: 50.4%

79,5

2,4 7,4

23,2

40,9

59,9

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MarginEBITDA (US$mm)

CAGR 2005-2010: 101.6%

Net Revenues

216,7

28,252,1

85,1

137,0

172,8

0

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250

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Net Revenues (US$mm)

CAGR 2005-2010: 50.3%

MercadoLibre presentation; Stanford Graduate School of Business. March 2011

Technology

Transcript of MercadoLibre presentation; Stanford Graduate School of Business. March 2011