Newsletter: Published Tuesday, 12 June 2018

  1. Australian growth hack busted;
  2. Trade wars and markets;
  3. MercadoLibre vs Amazon.

Two nuclear-armed adversaries are due to make friends in Singapore this week.

And both President Trump and Kim Jong Un are probably relieved to know ex-NBA player Dennis Rodman has decided to travel to Singapore as well to offer “moral support".

Conveniently, Rodman is also going to draw attention to his new marijuana cryptocurrency, PotCoin!

Only if there's time amongst all the diplomacy!

🌳 TECH TREND

Australian growth hack busted.

Growth hacking is a major sport among tech companies.

It’s basically a frenzied process of rapid experimentation across the marketing funnels and product and sales segments of a business.

These growth hackers aim to identify the most efficient ways to grow a business, sometimes as creatively as possible. They can also be tricky.

Airbnb found a weakness in their main rival Craiglist's code which allowed them to cross-post their listings to Craiglist's enormous database. Quora designed their entire question-and-answer forum around Google's search crawler. PayPal gave out free money.

But Australia’s largest online GP booking business was caught over the weekend sort of, hacking themselves inside out.

HealthEngine - a platform for doctor advertisements - was found to have changed thousands of online negative patient reviews to positive ones.

Instead of the original post: "The doctor made me feel like I was talking rubbish and would not listen to my concerns about my health."

It was changed to: "I love coming to this practice as it has all the facilities required for health care.”

Also:

"All the doctors I've seen there are good apart from [doctor's name].....I've forgotten about how absolutely useless she is and that she genuinely comes across like you are wasting her time. She doesn't come anywhere near you as a patient, it's like you're diseased (when all I had was a sore neck!)."

Was changed to: "The practice is good. All the doctors I've seen there are good."

53% of 47,900 reviews were changed to reflect only positive patient responses.

In a bid to charmingly massage the English language, HealthEngine defended the practice saying it had an "aspirational review system".

🎢 TRADE WARS

Markets are just waiting around.

A trade war is when governments put barriers, like tariffs and taxes, on goods going into their countries.

The idea is to make foreign products more expensive and force companies to purchase locally manufactured goods.

The war part is when other countries react angrily to the market interference and implement tariffs and taxes of their own.

Things can get out of hand if taxes are jammed on any good or service crossing borders just to spite other nations: the price of everything goes up (inflation rises) and economic growth slows.

Over the weekend, the G7 allies wrestled with US President Trump over the sledge of tariffs the US has implemented against a host of other countries.

The United States has indicated it wants to impose a 25% tariff on steel imports and a 10% tariff on aluminium, in a bid to boost the local steel industry.

The European Union has reacted sharply, drawing up a list of US products it can put tariffs on, like Harley Davidson, Levis jeans and bourbon.

“We can also do stupid,” said European Commission President Jean-Claude Juncker, at the time of the announcement.

The Canadians have also balked at the prospect - they have a thriving steel industry - as has the United Kingdom, pointing to its failed attempt at a trade war in the 1960’s and 1970’s.

If all of these nations begin altering their border tariffs in response to the US altering theirs, it’s likely to have widespread implications for multinational companies importing and exporting across borders.

Markets are sort of hanging around waiting to see what happens. There hasn't been a sharp selloff because nothing has been fully determined yet, but the danger is lurking around the corner.

🇦🇷 EMERGING MARKETS

MercadoLibre.

You have a Latin American company in your Universe portfolio called MercadoLibre.

It’s based in Argentina and it’s one of the few firms in the world that hasn't been utterly crippled by the spread of Amazon’s tentacles.

It’s an extremely well-established payments and ecommerce business - the largest in Latin America - and, despite growing steadily since inception in 1999, it’s still enjoying an explosion of customer growth.

There are around 33 countries in Latin America today, according to the United Nations, and they are home to around 640 million people.

According to Statista, those people are flooding online in their millions. And mobile payments are ballooning out with 43% of mobile buyers confirming they were purchasing products via mobile on a monthly basis.

The opportunity for ecommerce in emerging markets - particularly Latin America - is extremely juicy. It’s set to grow 19% over the next five years, rising from $US59 billion in 2017 to $118 billion in 2021 – the biggest rise of any region.

MercadoLibre is already scooping up this market demand with six business components servicing almost every part of the ecommerce chain.

These businesses include an automated marketplace for both businesses and individuals to buy and sell things, an integrated online payments systems, a shipping platform, classified and advertising services and a platform to manage your own shop outside the MarcadoLibre marketplace.

We think of it as the Latin American Amazon (with a bit of Paypal and Ebay in there too).

MercardoLibre was actually mentored by eBay, when the company owned almost 20% of the business back in 2001, so a lot of its payment infrastructure is designed along the same lines.

Shares have slumped this month thanks to turmoil going on in the Argentinian economy. Argentina is in the middle of a painful economic reform, and the central bank has hiked interest rates to 40% in recent weeks.

What’s remarkable about the Amazon threat more broadly though, is that MercardoLibre has already sort of taken it to them. The two e-commerce giants have been battling it out in Mexico since 2015, when Amazon rolled out its full retail operation.

As it stands, 38% of online shoppers rely on MercadoLibre and 21% rely on Amazon. And products are still flying out the door, with MercadoLibre still producing triple-digit growth.

One key competitive advantage MercadoLibre has over Amazon is its existing infrastructure for payments and deliveries in a much less-developed region than in the United States.

Further, it’s online payments business has become so popular that MercadoLibre now offers it to businesses outside its own platform. That move exploded payment transaction growth and has rippled out the network effect.

An interesting competition.