MercadoLibre comes to AVOD with all the attributes needed to become a major player

MercadoLibre (MELI) is one of the largest digital marketplaces in Latin America. In 2023, MELI will have more than 100 million online users. It has a strong regional presence in Brazil, Mexico, and Argentina, which together account for more than 80% of its total visits. This growing audience has also allowed it to become a relevant player in the advertising market, both in terms of volume and growth. In support of this strategy, MELI launched Mercado Pay, an ad-supported streaming service (AVOD), in August 2023. AVOD has a high potential to grow in Latam, as it is a tool used to gain a better understanding of users' habits. Since Q2 2020, MELI's operating metrics have been on an upward trajectory. Between Q2 2020 and Q2 2023, the number of unique users of MELI increased by 111%, the number of unique buyers by 51% and the number of shipped items by 108%. In this context, MELI's advertising business has taken shape. Dataxis calculated that MELI had advertising revenues of approximately $434 million in 2022, a 77.7% increase from 2021. While this figure represented 7.5% of the marketplace's 2022 revenue, there was still plenty of room for growth. In 2023, for example, advertising revenue was on its way to a new record: in just six months, it already generated 70% of the previous year's volume. Dataxis estimates that, in 2023, advertising could reach 9.4% of the marketplace revenues. Mercado Play is a key asset to consolidate this growing advertising segment. The incremental weight of AVOD in advertising As of the second quarter, Mercado Play was already available in test phase and will be at the center of several promotional actions, but the main goal is to use it as an advertising tool. In Latin America, online advertising is on the rise, holding a 50% share of total advertising revenues in 2022. Within the online segment, video shows a very rapid development. During 2022 it captured 17% of digital revenues, 6 points more than in 2019. In Latam, the AVOD market is dominated by three holdings focused on social networks - Alphabet, Bytedance, and Meta Group - which together hold 78% of the revenues. It has not been easy to compete there, even though the industry counts many players, including competitors from adjacent businesses such as TV broadcasters, SmarTV platforms, SVOD systems, etc. MELI differs from all of them because it already has a running advertising business and an audience. Another difference is that MELI will use video to leverage the purchases on its platform by means of targeted advertising for its own offer. In this regard, the strategy of Amazon with Prime Video may offer some clues. Jeff Bezos, Amazon's founder and...

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