Much like eBay, MercadoLibre charges a commission of 5 percent to the seller on each successful transaction (for sales over $200, the commission is 2.5 percent). The site also charges special posting fees of between 50 cents and $3 (a plain vanilla posting is free). Another source of revenue: licensing MercadoLibre's homegrown auction platform for companies that sell to the Latino market. Vidaguren knows of no other auction platform that is written in native Spanish and Portuguese. Translating an English site can be a huge task. Although officials decline to disclose financial details, MercadoLibre has licensed its auction technology to several sites targeting South and Latin American consumers, including UOL (another South American portal), StarMedia (a South American Internet portal) and Viajo.com (a South American travel site).
MercadoLibre's customized Oracle 8i platform has certain features that make it inherently more desirable to Latin American users, according to Vidaguren. For example, most auction sites (including eBay) won't allow users to enter a bid lower than the minimum bid. Through a feature called Contra-Oferta (counteroffer), sellers can choose to accept bids lower than the minimum starting bid. So if the auction is about to close without any bid, it might make sense for the seller to entertain a lower offer. This appeals to Latin Americans' love of haggling, says Vidaguren.
MercadoLibre seems secure for the moment. To date, it has hosted 200,000 transactions with a total value of $55 million. The average price of an item listed on the site is an impressive $300 compared to eBay's $50. Electronics and signed soccer jerseys are top sellers. In the depressing days after the Nasdaq correction, the company manageed to raise an additional $47 million from several U.S. companies including Chase Capital Partners, Flatiron Partners, GE Capital Group, Goldman Sachs and Ventech International. Galperin says the company should be able to conserve its funding until 2003, in part because it does not have to pay for a delivery and logistics infrastructure (since consumers send the goods to each other). He expects MercadoLibre to break even by December 2002.
The cash infusion gave MercadoLibre the necessary credibility to hire more people, some of whom were nervous about going to a dotcom. Today, the company employs 12 in Miami and 180 worldwide. Speaking Spanish is a job requirement, but company e-mails are in English so that they don't offend Brazilian workers, who are Portuguese speakers and sometimes resent the predominance of Spanish.