Ariel Szarfsztejn: Scott, Ariel here. So ads continue to grow well. We grew above 70% in revenue this quarter for the sixth consecutive quarter. with no major changes in strategy. We continue improving our product with feedback from advertising and promoting our solutions to different segments of sellers and brands. Product ads continues to be the main driver of growth, specifically the self-service sellers, but we are seeing more and more traction from other segments as well. . Overall, we had a quarter with 1.7% of penetration of ads as a percentage of GMV, but I think it’s worth highlighting the case of Argentina. So structurally, given market dynamics, Argentina has a lower penetration. And if you were to factor in there the fact that inflation makes it even harder for advertisers to follow up our GMV growth, and also the effect of having a bit lower demand from advertising in Argentina because of structural context, more out of talks and some other effects, it’s worth saying that if you were to take out Argentina of the equation, penetration advertising in our GMV, would be roughly close to 2%.
Scott Devitt: Thank you, both. Great.
Operator: Our next question comes from Melissa Byun with Bank of America. Melissa, your line is open. Please go ahead.
Melissa Byun: It may actually be Bob Ford. Congratulations on the quarter. How much of the Brazilian GMV growth is coming from markets where you now have a distribution center and faster shipping within Brazil or before you were sending that from Sao Paulo or a more distant location? And then what percent of GMV is now being delivered on a MELI delivery day? And where do you expect that to stabilize as we move forward? And then lastly, can you discuss your use of AI in search product recommendations and risk plays? Thank you.
Ariel Szarfsztejn: Hi, Bob, this is Ariel. Thanks for your questions. I think we don’t typically disclose demand data based on geographic segmentations or even logistics methods. But I would say more and more we are trying to grow on both of the segments that you have highlighted in your first two questions. So we are being proactive in trying to gain traction and market share in some of the regions where our market share today is underrepresented. That means that we do see increased demand coming from areas that are more far away from our fulfillment center. Still the main capitals and cities of Brazil do concentrate a big share of our demand. Kind of same thing happens with MELI Delivery Day. It’s still super early days. So not many data or not much data to be shared on that regard.
But I do I want say that it’s slowly gaining traction, of course, aided by the launch of Melimise in Brazil and in Mexico. So more and more, we are seeing consumers actively choosing the MELI Delivery Day as a way to receive the packages. Last question in terms of AI and search, we are working on that. I mean we are putting a lot of effort into building solutions around AI. I think we don’t have much to disclose as of now, but search, reviews, questions and answers, buy box and products, as Marcos was saying, copilot for our developer. We’re looking at the broad range of AI uses for MercadoLibre to boost consumer demand and efficiency. And we’re happy with the progress that we have so far, but not much to be said yet.
Osvaldo Gimenez: And building on that, we have been using AI for a long time now for many, many years, both in terms of fraud prevention and credit scoring. Both two instances, they are pretty much use cases which are ideal for AI, because we have, in the case of fraud prevention, millions of transactions every day and with a clear outcome, either fraud or not fraud. So with the right variables, we can build a very strong model that has predicted and have really best-in-class fraud prevention. And with that knowledge and given the experience we have been building on credits, we have also been — built our credit scoring models leveraging the AI.
Melissa Byun: Makes a lot of sense, Osvaldo. It seems like with the larger data lakes, faster processing speeds, more sophisticated LLMs, it just gets better. And then, Ariel, just to follow up, can you comment a little bit in terms of where you do have consumers choosing a delivery day, are you seeing materially improvements — or improved densities and improvements in terms of average shipping costs? Or is it still a little bit too early to discuss?
Ariel Szarfsztejn: Yes. So I think it is early to discuss. We are seeing some efficiencies in our operations driven by the fact that we can consolidate shipment and take advantage of some of our idleness when we operate, I think or density in distribution, believe it’s too early. So again, I’m sorry for this, but not many details to be shared. I would say the variables are moving in the direction that we expect, but too early to share numbers behind that.
Melissa Byun: Understood. Thank you very much.
Operator: Thank you. And our next question comes from Marvin Fong with BTIG. Marvin, your line is open. Please go ahead.
Marvin Fong: Good evening. Thanks for taking my questions, and congratulations on the great quarter. I’d like to ask maybe a two-part question on cross-border. So in Mexico, I think your shareholder letter cited you grew very strongly there, which is interesting because I think Temu only recently entered the country, is also seeing some strong adoption. So could you just discuss how you see the cross-border market in Mexico evolving? Is it that Temu’s entry is actually growing the pie for everybody? And the second part of the question is, how might this inform your strategy in Brazil, as I understand your cross-border penetrate – or the mix relative to your GMV is very low, but that presents an opportunity for you? And then I have one other question.
Ariel Szarfsztejn: Thanks, Marvin. So I’d say before going into the details first and foremost. Over the last 24 years, we’ve been always competing with players from all over the world. So in a sense, we are used to having new entrants trying to get a pie of Latin America. We’ve seen Temu get into Mexico, in particular, in May, more or less. We’ve seen them making progress in app downloads and monthly active users. They seem to be spending a lot of money on marketing on social media, directed consumers, has been trying to download their app. We are, obviously, monitoring that closely. But our data suggests that there is a bigger overlap between that business and the one with other cross-border platforms. Our business in the meantime continues to perform really well, as shown by the acceleration of items sold to 38%.
Unit growth has been strong across the board, including categories where some of those players are focusing on, and all ASP ranges. And our competitive advantages remain untouched, I would say, particularly logistics, which enables us to deliver fast shipping and payments, which allow us to provide attractive financing to our users. So in the end, our playbook remains the same. We continue strengthening our business with more sellers, more brands, more assortment, more financing, faster delivery, while we also continue investing in improving our own cross-border trade capabilities. And also through MELI Mas, we think we are also now offering free shipping on lower ticket items, which was not the case in MercadoLibre up until two months ago.
Moving into the second part of the question, which is Brazil. I think [Remesas Conformes] is still too new. So it’s hard to say. We have applied the program. We got accepted just a few weeks back. So not so much to share. But we remain confident, as I was saying, for Mexico, that the combination of fast deliveries, local payments and financing, a strong brand, buyer trust will continue to differentiate MercadoLibre versus our other companies. And simultaneously, if the new regulation allows so, we will continue building capabilities as to be able to compete in cross-border in Brazil as we are doing it today in Mexico, in Chile and Colombia.
