Emerging Markets: Latin American Online Marketplace Growing Fast

Investor: Company to Watch

MercadoLibre / Argentina

By Gordon Platt

MercadoLibre, the largest online marketplace in Latin America, has more than 43 million registered users. The Buenos Aires-based ecommerce provider has been growing so rapidly that it regularly has had to add new servers to keep up with expanding computing needs. Last year it went “virtual” with 400 of its servers and adapted a cloud computing system, which has enabled it to save on power and cooling expenses.

MercadoLibre is eBay’s exclusive partner for Latin America, and eBay holds 18.4% of its shares. MercadoLibre had an initial public offering on Nasdaq in 2007. It operates in 12 countries in the region, with a unique platform for each of the countries. More than half of its revenue comes from Brazil, where it is known as MercadoLivre.

The MercadoLibre.com site is among the top-50 globally in terms of page views, according to comScore Networks. The service started with an online auction system similar to eBay’s, but now the majority of its transactions are completed using a fixed-price format, and 80% of the articles sold on MercadoLibre are brand new.

The company also operates MercadoPago, a payments platform similar to PayPal, and it recently added free classified advertising.

MercadoLibre’s earnings rose 77% in 2009 to $33 million on a 26% increase in revenue to $173 million. Its fourthquarter 2009 results were slightly below analysts’ expectations, as the company decided to translate results from its Venezuelan operations at the parallel exchange rate of 5.67 bolivars to the dollar after Hugo Chávez devalued the Venezuelan currency by 50% for non-essential products.