From selling Tea to the British to Latin America's largest e-commerce business - Sean Summers, Mercado Libre

26:44In 2000, around 2009, 2010, already as a public company, we realized that our platform doesn't scale. It was built with the previous technology. And we took the, well, Marcos, you know, and the team, our founder and the team took the bold decision to say, look, we need to, we're going to stop innovating for two years. And that's tough. and we're going to rewrite every single line of code to make our, you know, in a new API world, to make our platform scalable. And for two years, we rewrote everything and we were competing with people, but we had to deliver our quarterly and our annual results.

27:24But we took, you know, we always take the tough and the long and the difficult sort of route and the right route. So by the time that I join, We're coming out of that process and we need to start innovating. And we, you know, a lot of the different parts of the experience, they weren't great. And we were very honest about it. You know, I remember I asked Marcos during the interview process, Marcos, I see that, you know, the company is growing nicely. But, you know, the sales and marketing budget has been fixed, you know, for the last few years. Do you really believe in investing in marketing? I said, look, Sean, I guess I'm a technology person.

28:03I believe in the power of the product. But yeah, I guess that I believe in marketing. But given that the experience is far from optimal, I don't want to spend more money to get people to get a shitty experience or a sub-up. I'd rather work and improve it. And the experience is never perfect. But at some point, I said, look, it's good enough. I can see that my retention rates are improving to a point where, OK, now let's go and spend some money. because if not, your retention rates are so low that it doesn't make any economic sense to keep investing money on marketing. People know the churn. It's infinite.

28:37That's pretty smart, isn't it? I mean, the product experience has to be where you start, right? You know, and then you build from there. You were talking earlier as well about turning the funnel on its head as well, which I thought was quite a clever way of looking at it. And, you know, so many kind of technology players particularly start with the experience, don't they, and kind of build from there. So what was your experience of kind of marketing the business? It was sort of an intuitive. So when I joined, I was running the e-commerce business. You know, for someone that wasn't coming from e-commerce, that was a massive challenge.

29:06But they were super patient with me. And, you know, we had to improve a lot of things in product management and in sales and in marketing. But in marketing, I very quickly, it was a very pragmatic approach. I forgot about all the frameworks about, you know, you first build awareness and then consideration and then trial. And you know what? Look, we're spending$20 million, and this is the business and the aspiration is that we're going to keep growing 50 % every year for the foreseeable future without more money. I need to gain scale. The only way, if I believe in Marcos, if I deliver on the marketing initiatives, he's going to be willing to invest more money.

29:40I need to deliver volume short term. At the time, we are a retailer. We had Google AdWords, Google Shopping. You know what? We're going to buy transactions. I wasn't trying to build a brand. I was shamelessly buying transactions and knowing that I had to optimize them to be economically efficient in the first transaction. No lifetime value bullshit or anything like that, because I knew that a lot of people wouldn't come back. So we started building and we started improving our efficiency of spend there. And after a few years, you know, the business keeps growing and we prove that marketing is accelerating growth.

30:16So Marcos opens the wallet and he said, well, I'm willing to invest. Perfect. But it's like a pay as you go. So then the next stage is, okay, we're going to keep optimizing sort of, you know, bottom of the funnel with Google and Facebook and everything, you know, for the foreseeable future. But we need to bring other people because there I am sort of fishing in a pond of people who are already looking for something. And I need to change behavior of people who are not considering buying online. So very basic. You know, let's go one step. We are a retailer. Promotions. We weren't playing in any promotion, you know, like everyday low price or the big, you know, Black Friday, nothing.

30:51Well, why don't we start building some capability? And our sellers weren't used to operating there. So how do we build a capability to do it? So over the years, we built a second layer. Today, you know, we are a retailer. We have 52 weeks of some kind of promotional activity, and it plays its role. I build more volume and in a profitable way. The important thing is always profitable. You know, we can show that the payback is there. Perfect. And it was only, what, seriously, five, six years ago that we started doing branding seriously. Historically, we've always done branding. But, you know, eight weeks of on air, that's not branding.

31:26You know, it's like that's an exercise, a useless exercise. We started with, OK, minimum, we need 20 weeks on air with this kind of creative. But nowadays, we are almost like a 50 week. I love this. So many people don't understand this. that when you're in a rapidly growing business, you often have to earn the money to be able to spend it, right? You can't just spend money building brand. You need to earn it first, you see. And you have to do the short-term tactics and convert and sell and so on. And then that buys you the freedom to then build the brand later, right? And the other element, super important, all of those steps were done in coordination with the improvements in the platform.

32:07because the only way in which I could prove, you know, better ROIs was if our retention rates, if our conversion rates improved and then our retention rates. So it was all about measuring conversion rates and then, you know, month one, month two retention rates. So as we saw that the product was improving and our marketing was improving, we saw that, you know, things were working out. So the confidence came, okay, we keep investing because we knew that we would keep, you know, improving the platform. And that, in turn, it would deliver better retention rates. So that was like the magical, the flywheel.

32:43Back to our language of financing. You were demonstrating ROI, which meant the business then saw it as an investment, not a cost. That's the other thing that happens. Of course, marketing is seen as a cost, isn't it? It has to be limited. Whereas if you can prove it's an investment to drive growth, suddenly you're on the right path. And at some point, when we got to the discussion of, you know, can you prove the value of branding, it was more difficult. You have built enough credibility and trust. You know, my conversation with my CFO is super logical. I've never had an argument with my CFO. First, because I consider myself to be almost like, you know, a deputy CFO in terms of, you know, when I was running the business, I never had, you know, I wasn't sandbagging.

33:17We were, as a company, we don't sandbag on our targets and, you know, on efficiency. So it's natural. But then when we had to have the conversation, look, guys, this is going to be more of an intuitive or conceptual conversation. if we really want to bring people who are outside of e-commerce, we need to build the brand this way. And I promise that we're going to be as a team as disciplined as we were doing that. Okay, great. And we did it in 20 weeks. And at the beginning, we don't have the perfect measurement, but we find the proxy KPIs that build some confidence and always talk in the language of the business.

33:53Always, let's make sure that we don't fall in the trap about talking out because our awareness, our consideration, our brand power. super useful tools, but not to talk with the CFO, you know? And eventually, look, you gain traction and people really, and nowadays, you know, I'm in a business that I always joke that even today, you know, the company doesn't really believe in marketing, you know, because we are a technology company, but they put their money. Yeah, over a billion dollars a year, right? Something like that. And, you know, it's like, you know, 50X increasing investments, you know? Yeah.

34:25So I think that... If they don't believe, that's fine. Keep not believing, it's fine. And it's fine. It's a very healthy dynamic because it doesn't allow us as marketeers to get comfortable. One of the fascinating things about your business as well is, you know, you started out, I guess, like an eBay, right, in terms of, you know, selling, selling. And then fintech in terms of financing. Logistics, presumably, you've somehow got to get a lot of products out to people. Effectively, it's like three or four different businesses, isn't it? And one that you've suddenly got your head around. How do you, you know, how do you cope with so much, you know, manage all that change?

34:58How do you implement that? Stay on top of it? I mean, that's incredibly complicated. It's hard to explain. It's too soft. You know, I've always been fascinated by the culture of this company. I felt it in the interviews. You know, they were crazy enough to give me the job. You know, I wasn't an obvious choice. And that tells you something about a company that, you know, is willing to take some risks. And I think that the mentality has always been not, you know, celebrating what we have built, but focusing on what we can build. and looking at, it always starts from, you know, problems that we see, you know, consumer or seller problems and then thinking about, look, is there a different way to solve it?

35:35Can we solve it? So many times it's a competitive dynamic. So let me give you two examples. One about looking outside and competitive dynamic. Until, you know, 2003, we said we will, we will never get involved in payments or delivery. It's, we just get, you know, sellers and consumers together. Then it's like, If you don't close that loop, it's not going to work. So 2003, we launched our online payments business to help settle the transactions. We still don't touch a package. When I joined October 2012, we were launching our shipping solution. And at the first time, you know, at the beginning, it was a dropshipping solution.

36:16We didn't know anything about logistics. We realized that we need to also, you know, bring down that barrier. And we use our technology to integrate with existing carriers. Great. That takes us all the way to 2018. Now we're competing with Amazon. I say, is this, you know, setup good enough for us to beat them? Well, actually, no. We need to take one step forward. We need to get really involved in logistics, fulfillment centers, distribution centers, you know, transportation. Oh, shit, we don't know anything about this. So what we do, we put the best people from the business side, the best people from technology.

36:48We get a little bit of capability from the outside. And we just start, you know, the hard work. You know, people would say, no, because you should take a warehouse management system off the shelf and off the shelf transportation management system. And no, you know, the team, it wasn't me. The team said, actually, this is going to be a core capability. If we're trying to reduce shipping times and shipping costs, we have to have food control. Software is our X factor. Well, we did it. And, you know, that's only five years ago. And today, we have probably the biggest and most efficient logistic network in Latin America.

37:25A different example, an opportunity from the inside, our credits business. It's like looking at China, we see that we've been in an online payments business for 14 years. And looking at China, it's something called fintech. You already have the customer relationship. And again, we know a little bit about software. We don't know about fintech. But we know about software. We know something about online payments. We have consumers. Let's understand what are the pain points that they have. And we identify all the obvious pain points, okay? Our merchants. Why aren't you growing? You know, small and medium enterprises that really started growing.

37:59I don't have working capital. A bank wouldn't give a... Well, you're selling 80 % of your business. You know, it's mercadly. I know you better than anyone. I should be giving you credit. So we launched a credit business. I started with that. And then he said, okay, what kind of needs individuals have? It was a similar process and knowing that it's going to take time and what's the right order of launching products. And you know who did it? Senior Vice President of Finance. We were looking, thinking about we need to launch a great business. Should we look at profits outside? And Martin, you know, recently said, look, I would love to be an entrepreneur here.

38:38So he left, he's very posh, you know, sort of, you know, right-hand man of the CFO. and he took his best analyst and he started this business. Two or three people and you know, try to figure out. 2016. Last year, we gave away, we gave away. We gave$10 billion in credits. Short-term credits, but that's a business that didn't exist. And it was the power of starting with the first credit and the second. And we're going to talk later about AI. And it's all about, you know, being able to manage, you know, tons of data and taking insights out. I love how you're seeing the consumer problem and then you're solving it and inventing a company off the back of it in areas you haven't got expertise in.

39:22It's amazing. But there's something about being, there's something about being ignorant that it's positive because you don't have with the, you know, being ignorant and confident in your ability to use software to create better solutions. You know, you don't have some of the preconcepts that, you know, people have. So you tackle the problem in a different way. I came across this idea of intelligent naivety that actually is the best, the most successful entrepreneurs often are when they, you know, they're smart, but they're in a category they have no experience of because they haven't got the paradigms.

39:56They haven't got the this will never work because, you know, they come at it completely fresh. And now, of course, the next evolution of your business is probably into a media owner, right? Because that's where it goes next. Well, that's what we already are in the sense that our Mercado Ads, our advertising platform, we created it in like 2007 and 2009. But for many, many years, it was like an afterthought. And suddenly, obviously, we look at the competition and say, well, these guys are very smart. We respect them. And they're doing some interesting stuff. So why aren't we doing the same? So, well, let's put our best people.

40:33So we put our best people to think about, okay, and we start with the product. There are no shortcuts. And we started with solutions for our merchants, and we improved that search kind of product. We call it product ads. And then we said, okay, that's great, but we should start developing other products. And we worked for two years to develop our demand-side platform, our data management platform, our ad server. It's a lot of hard work, and we relaunched early this year our display solution, which is super competitive. It's a really good product. and now we're launching our next quarter our video solution so we're going to be able to launch we're going to be one of the few companies that really has a full funnel solution at the beginning it's not going to be optimal all the cross funnel measurement it's not going to be perfect but yeah we have the first party data of more than 100 million customers who are transacting with us every quarter and developing the products because your customers can advertise and then they can fulfill that demand through selling on the same platform.

41:35But with the original product, the solution was just for people selling in Mercado Libre with the search. Now that we have sort of a top of the funnel, a mid-final with display and with video, actually, it's a media platform. You can, if you want, you don't have to sell in Mercado Libre and you can build your, because we measure the same way that you measure with other online players, which I'm clients of, so it's an interesting dynamic. Well, this is what's quite funny about this because you've had a career as a brand builder, obviously trained in PepsiCo. You've been advertising and doing that.

42:07And now you're sort of on the other side of the fence as you're now a media owner. What's that like? And what have you learned as somebody who's built a media kind of business? We're building that, but it's now in a high growth and significant player. It's the biggest retail media in Latin America and the third largest after Google and Meta. So it's growing nicely. I would say the learning is first, in terms of how do you manage both, we're still a very important client for all of those guys. And we are very strong partners. So, you know, we keep investing a lot. So we see it as complementary.

42:45I've learned a long time ago that this industry in general, technology, knows the concept of being a frenemy. Yes. By the same token, look, many times over the years, Google, you know, through Google Shopping, tried to integrate forward. The same with Meta. And it's fine. We never go to a family. It's fine that you go and try. We're doing it backwards. But still, I'm investing more than ever in all my sort of media partners. And at the same time, I'm trying to develop a different kind because I think that the value of first-party data in this new world and given that we are a retailer, so people who come to Mercado Libre or to Mercado Pago, they are here to transact.

43:28So I see it sort of highly complementary. Do you advertise Mercado Libre on other platforms as well? Yeah, yeah, yeah. So you're advertising on your competitors' platforms. I don't consider them a competitor. I think it could be a little bit of an overstatement to put ourselves at the same level of the big guys, Google, Meta, TikTok. They are super big partners as an advertiser. Probably we are one of the biggest partners and we're going to continue to invest. But at the same time, we see an opportunity. as the world of advertising is moving into online, I don't see it. It's not a zero-sum game.

44:07Yeah, definitely. If you're in offline advertising, probably you're going to see it. But for online, I see it quite complementary. Well, this is the interesting thing with brand building as well because take Amazon, the famous quote about advertising is the tax report products, and now Amazon is the biggest advertiser in the world, isn't it? It's incredible. So, you know, the importance of when you have an online brand to also build it offline and, you know, because that's how you're going to get people to. This whole concept, you know, I heard many times in the world of technology. If you build it, they will come.

44:39If you build the right product, people will find it. I think at some point in time, maybe it was true. I think it's been a long time since, you know, that. Why? For me, if you build it, you gain the right to talk about it. You know, consumers have choices. We have a lot of competition. For me, Brazil is the most competitive market in the world, both in e-commerce and fintech. And it's great. It makes us better and it's great for consumers. And the same in Mexico. So I think you need to do both things. Having said that, super important. Some of the mistakes that we... I don't think that marketing can compensate product shortcomings or failures.

45:15I think that we can sort of accelerate the growth of a good product. It doesn't need to be perfect. but every time that someone comes and tells you like i need you to do more push notifications or more discounts and we get to the you know the detail is like because the product is not converting well enough now you know what let's go and do the homework let's fix the product so that it's a decent product and then let's spend money because it doesn't make any sense i mean there's nothing like you know having an amazing advert for an airline and then you go online and you try and book and your booking doesn't work or the or your loyalty points haven't been added or you know they They lose your bags, you know, that kind of thing, isn't it?

45:54You have to get that right. By the same token, it's super gratifying as a marketeer to be able to talk about a product experience that you know that it's really good. And what we saw and during the pandemic we proved is that the entire shopping experience, you know, from searching and paying and delivering, you know, same day delivery, next day delivery, almost like magical. It's much easier, you know, for a marketeer. It's much easier. Pandemics seem to accelerate your business as well. But was it, I know obviously it was a tragic event and no one would want to go through that. But did that experience, has it helped you as a business get better at what you do?

46:31Having that sort of big macro time? I think so because it tested us to the limits. And look, it was a very unfortunate event and I wish it hadn't happened. But there were lots of players in online that couldn't sort of make the most out of the situation. And I think that we were ready for the challenge because we started making investments in early 2018 in logistics. Everything is related. And when you look backwards, you can join the dots. Those decisions in early 2018 allowed us to really offer a unique and incredible experience during the pandemic. And for consumers, that was like eye opening.

47:13These guys are delivering in the worst of situations. and we proved to ourselves we really tested that logistics team and they did an incredible job and they started opening delivery centers every week without any people. Before the pandemic, we would send teams into Mexico and Brazil to open every single one of these. We were opening one a week in each country, all with no presence. So I think that these things, you have to be prepared. you know and and it you know it found us in a place where we were prepared for the challenge no you're right it's a bit like the adoption of like zoom or teams or whatever your google meet you know the people that invented zoom had obviously done all the hard jobs before the pandemic now you might say they're lucky but you know they happen to have the technology ready and they proved it and then you know because experiences were really good i think that's one of the reasons why yeah people stuck with us it works yeah yeah exactly it works yeah it works really well yeah so we talked about uh binning 360 degree integrated campaigns early didn't we let's let's get on to the topic du jour um you actually can't walk down the croisette without bumping into somebody talking about ai right it seems to be the topic so where do you stand on ai is this another metaverse nft or is it here to stay look i think it's a little bit a little bit ai yeah i'm a little bit tired of the of the buzzwords and now it's uh ai and it was metaverse and it was NFTs and it was voice search.

48:39And look, in the end, I think that all these innovations are necessary for us to find those few innovations that really make the difference, okay? So for me, it's part of the process, but the same way that I discard part of the current argument, I've discarded, you know, Metaverse. And it's interesting. I'm bullish on the Metaverse five or 10 years from now. I'm not bullish, you know. Sorry, I'm going to say it. Anyone, you know, who went and hired a chief Metaverse officer, what the fuck? Come on, man. Nobody's going to beat you there. I think you're going to have the time eventually. If the metaverse explodes, okay, you're going to have the time to catch up.

49:17Anyway, on AI, AI has been around for a long time. Mercado League has been doing AI since 2013. All our marketing, our performance marketing, our integration with Google, TikTok is based on AI, not on people. All our fraud prevention for years has been there. All the logistics is run. And you can't imagine, you know, how complex that is. All our payments infrastructure, all our mercado vats, all the bidding and all that. So it's been around for us. We're talking about, you know, the AI revolution. For us, the AI revolution has been around for 10 years. It shows that it's mostly marketing, actually, doesn't it?

49:57Rather than product. Because I met Daniela Braga, who set up Defined AI. And I said, oh, it must be great. Like literally you're the right person, the right time. You just launched your business. Anyway, I said, so how long does it take you to get here? And she said 20 years. She's been working on AI for 20 years. So now let's, I think AI has been around for a long time and people confuse AI with chat GPT. I think a chat GPT has super interesting, super interesting technology, early phases. We still don't know what we don't know. So I wouldn't try to rush and try to figure it out. again, some of the use cases make sense.

50:35Others don't. I'm still trying to figure out from a, look, from a productivity and from a customer, a consumer experience point of view, we found really good use cases that we're going to develop. From a marketing point of view, I'm still trying to figure out how it's going to impact search. But depending on search on shopping, I think it's going to be less impacted if it's a, I don't know, a more of a general search, like I want to travel to Naples and bring me the whole itinerary. So depending on the category, it might affect more or less. I love being controversial. The thing that I'm not entirely sure is on search, when they tell me that chat GPT is going to be the thing that brings Bing back to life.

51:19Ah, yeah, yeah, yeah. That's a big ask, isn't it? I'm not sure. I think that Microsoft is developing some incredible products. They are brilliant. But that one, I think they are pushing the marketing. What does Google share? What, 98 %? Something like that. That's a big mountain climb. It's a tough one. And again, maybe I'm happy to be proven totally wrong. And no big deal. I've been wrong many times in my life. But that one, for the searches that you really monetize, let me put it that way, that the platforms really monetize, I'm not that sure that there's a silver bullet for Bing. But having said that, look, if Bing can go from 2 % to 5 % market share, it's a very nice business for them.

52:01But again, that's my reaction in general. There's a little bit of overhype and everyone gets outrunning. And look, if you haven't done the basics on being a data-driven company with the basics, even with the excels, what the hell are you doing talking about AI? I think I go back to this concept. There are no shortcuts in marketing or in business. So you want to talk about AI? make sure that you have a data-driven organization even with the most elemental of tools and between excel and ai there are lots of interesting things in between and i think that you really have to go through the different phases you can go faster than probably we did but you have to go through the phases because the learnings of the previous phase allow you you know to make the most of you know the next technology yeah it's not going to just jump you from a to z is it just all of a This whole thing about looking for silver bullets or shortcuts, I can give you an example with AI.

52:57I can give you an example with something totally different, brand purpose. I really believe in brand purpose. I really believe that as brands, as big brands, we operate in societies and we have an impact in communities and we have to be a shining light. But you have to do the basics first. When I see people looking for a shortcut because I don't know what's my brand position, I'm going to try to take a shortcut. It's not going to work. Mercado Libre, look, I first try to do the basics of be a decent retailer. I'm not solving your life. I'm solving this very specific pain point of your life. Very transactional driven.

53:38Then I'm going to try to sell you the unique selling proposition. What differentiates in a very functional way my platform from the platform next door. Perfect. I'm still earning your trust with very small things. And maybe if you do those things, you earn the right to talk about stuff that maybe has nothing to do with selling more boxes and have to do with issues that are important for the society. But I think that, you know, trying to jump from, you know, consumers don't know about me to suddenly I'm going to be talking about purpose. It's a disservice to the brand and to the very important, you know, concept of having a brand purpose.

54:17and brand purpose. I was talking the other day with Antonio Lucio, who's a great friend and mentor. And we were talking the difference between brand purpose and CSG. Yes. Or ESG. It's not the same. They're complementary. That's what everyone conflates, isn't it? They're complementary. And it's not the same. Yeah. Yeah, I totally agree. Good. So we've been 360 degree integrated campaigns. AI, use it if you've done the hard work, right? And trial it and be curious. I do my homework and we as a team, we do the homework on every single technology and everything that our competitors do. But then I have to apply our criteria to what's relevant, how is it relevant for my company, and if it's relevant now or in six or 12 months.

55:03Going back to the concept of trade-offs. They're always making trade-offs. And you go back to what is it you're trying to do, what are you trying to solve, and how do you do the work? Brilliant. Sean, thank you very much. It's been a brilliant conversation. It's been lovely having you on the show. Thank you for the invite. Ladies and gentlemen, thank you for listening to The Unsensit CMO. I hope you enjoyed that as much as I enjoyed doing the interview. If you'd like to never miss an episode again, please do subscribe. You can do that wherever you get your podcasts. And if you want to watch on YouTube, go and hit the subscribe button there too.

55:29You can follow me at John Evans over at Twitter or on LinkedIn where I am under John Evans. Thank you so much for listening. I'll see you next time.