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Motley Fool Global Gains / GGS: MercadoLibre


Subject:  Re: My Quick and Dirty DCF Date:  2/24/2010  6:49 PM
Author:  TMFMmbop Number:  94 of 145

Here are a couple of figures you can use to build a top down model, which will sanity check your growth assumptions.

The total population they cover is 488mm, and it's growing about 1% per year.

The Internet penetration rate in these places nets out to about 33.6%, or 164mm Internet users.

For the Marketplace segment:
The total number of buyers and sellers using Meli is 12mm, so they have about 7% share of that market (9mm buyers; 3mm sellers).

The average buyer purchases about three things online per year.

The average selling price of those items is $93, which is about twice that of EBAY or AMZN by my estimates (which makes sense given that the people online in LatAm would be among the wealthiest and that shipping is likely a bigger hassle than it is here).

For the payment segments:
They did 3.1mm payments in 2009, or about 10.5% of all purchases.

The average payments transaction was $123, so these are even bigger spenders using Mercado Pago.

Now, we'd expect internet penetration and MELI's share to increase, but as that happens, the average size of a transaction should come down.

If you play those facts out against each other, you may find that 30% growth for the next 10 years (the $50 scenario) is quite aggressive because according to my estimates, that would mean they have almost 100% ecommerce share of a LatAm that is now 80% penetrated by the Internet.

But see if you can work with those figures to determine some revenue estimates. I'm not saying you're all that far off, but I do think you'll find the modeling exercise interesting and rewarding.

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