Topic
Marketplace Businesses
Building and scaling two-sided marketplaces.
Related episodes
Liquidity
network effects
So think of, for example, the fixed cost and Uber of their modeling and all that kind of stuff, And then there's the network economy aspects of a two sided platform of people, you know, and so on. And you could have power in either one of those. But...
I'll I'll give you an example of intertwined real life, which is we all know Amazon in retail has gigantic scale advantage in the infrastructure. Right? Just all the warehouse and distribution centers they've built. But at the same time, you...
But how would you think about that margin flowing down into earnings, free cash flow, and just some of the capital allocation framework in terms of how they think about it? You mentioned the reinvestment into the business. That can happen a few...
From the consumer perspective, Mercado Pargo is a digital wallet that can be used on and off marketplace. From a merchant perspective, Pargo is a merchant acquirer that processes payments and handles installments, and we'll get to that later as...
the focus on the underlying economics and not getting caught in that cash burning cycle that can leave you exposed to things like the .com bust. But when did they truly make the transition away from being the marketplace in terms of moving more...
the New York Stock Exchange is more attractive than the London Stock Exchange because the liquidity is better. There are more buyers and sellers, and you got lower bid ask spreads. Right? But if all the parties involved had easy multi homing, that...
the business is still relatively capital light. And, again, that's because a lot of that logistics infrastructure is leased. I'd say that management's hyper focused on maximizing the efficiencies of the logistics network and expanding capacity more...
the strong form single platform network effects that that Facebook has, that LinkedIn has, that Snapchat has. And then there's the two sided network effect that marketplaces have of which we spent a lot of lot of time on this show between Amazon...
investing more into its first party sales as well, and I think that's pretty important for expanding the different categories that the marketplace is able to address, especially around the higher value consumer electronics pieces and then the much...
Commerce revenue growth has been underpinned by very healthy double digit growth in the number of items sold, the rising share of first party sales, and also the take rate expansion from advertising and NBOs net shipping fees that we talked about....
dynamics going on here. But rather than derail us, I'll try to push us forward a little bit. Just in terms of managing that risk on the books, like you mentioned, and going the wholesale route, it does feel like it would introduce risk. And then...
I don't know what that is. Is that a new power? Super scale economies. Yeah. Where does this come from? Auction based businesses. Whenever you have auctions to determine pricing, the more liquidity you have, the higher price is. And so are there...
be linear given management's preference to reinvest in the business to extend its growth runway. But structurally speaking, the penetration of advertising and logistics monetization in the commerce segment and the continued improvement of credit...
for the two years we have available. As for capital allocation, the priority is very clearly organic reinvestment, which includes funding the credit business as well. Since the 2007 IPO, there's been just over 1,000,000,000 in buybacks and just over...
So here's what I mean by that. When you have more bidders on every keyword, you have better price discovery in that little market, and the winning bid is a higher price than it would be if they had less bidders. Ah, this is another reason why you...
pretty quickly and pretty steeply, and it distorts the reported results for MELI, and you'd have to just, I guess, dig a level deeper to understand how the business is performing. Because, for example, if GMV growth is 20% in USD, but then 80% in FX...
matching a buyer and a seller. But power in these things is really different. It comes from one platform doing this materially better than another platform, and that the thing that drives that difference in performance is sustainable. Typically,...
and then Mercado Ads, which is the retail media advertising business. And then just quickly on the fintech side as well, I categorized that segment into Mercado Pargo merchant acquiring, Mercado Pargo digital wallet, and the Mercado Credit Business....
But we do believe that the company is very well aware of the size of the advertising opportunity. On their q four call earlier this year, management talked about the dense product roadmap for ads, the work that they're doing with brands and agencies...
Hugely discussed in Silicon Valley everywhere. Everybody knows what network effects are. But one of the things you talk about in the book that I think is so accurate and I've observed as an investor, you can talk about network effects till the cows...
Have a podcast?
Run your podcast through Clypt
Get ranked clips, hooks, and ready-to-post copy from your own episodes. Free to try.