MercadoLibre's money goes further than many startups, because U.S. dollars buy a lot of labor in Latin America (the company's technical staff of about 25 is in Argentina). "In Latin America there are very good resources in terms of people. The levels of unemployment are much higher than in the United States, and the degree of development of the Internet is lower. More people are interested in working with Internet startups," says Vidaguren. Salaries are much lower in Latin America than they are in the United States, and the Argentine technical team is able to maintain the site much more cost-effectively than a U.S.-based team could.
Although the Galperins and Vidaguren swear they're trying to build a sustainable company, not just to get rich quick, going public -- whether in the United States or abroad -- is never far from their minds. Another possible endgame: acquisition by the big kahuna, eBay. "We could be acquired by eBay -- it's up to them, not up to us. We would like to be the obvious choice," says Vidaguren.
The journey so far has not been without unwelcome surprises. For one thing, the rate of Internet adoption in the Latin American countries is still between only 3 percent and 5 percent of the population, depending on the country. Fear of online fraud has been a significant factor since consumers are not typically shielded from liability for fraud, unlike in the United States where most credit card users are liable for only up to $50 in fraudulent charges. It's not surprising, then, that Latin Americans are not big credit card users, although Galperin says this is slowly changing. Concerned by the slow acceptance of e-commerce in its target markets, MercadoLibre began a pilot study early last year, targeting the 30 million U.S.-based Hispanics. "The studies at the time were saying that there were 6 million to 9 million Hispanics online in this country," says Vidaguren. That makes for a very attractive segment -- a higher number of online consumers than all the Latin American countries combined. Surprisingly, the U.S. pilot did not reveal much interest by U.S. Hispanics. "Many were indifferent to whether the site was in English or Spanish. We found that the people who do prefer Spanish to English in the United States are generally not as comfortable yet doing transactions on the Web. So we'll have to wait a little bit for that group to blossom," says Vidaguren.