ETSY INC — Call Transcript 2026

Okay, thank you. Let's get started. Good afternoon, everyone. Thanks for joining here today. My name is Nikhil Devnani. I'm Bernstein's U.S. Emerging Internet Analyst. I cover a range of marketplace businesses, one of them being Etsy. It's my pleasure today to be hosting Lanny Baker, CFO of Etsy. Lanny, welcome back to the BTC. Thank you. It's good to be here. Before we get started, I want to remind everyone to please refer to the Etsy investor relations website for the Safe Harbor. If you want to submit any questions for this session, you can do so via the QR code. For those of you newer to the story, just to level set, Etsy is a global e-commerce marketplace. Last year did about 10.5 billion in gross merchandise sales, or GMS, supported about 87 million active buyers, and 5.5 million active sellers. Lanny, Etsy has been under, I'd call it new, quote-unquote, "new", leadership now. You've been the CFO for about a year and a half. Kruti took over the CEO seat earlier this year, but she's obviously been at the company for longer than that. You're on this journey of getting the business back to more durable and consistent growth. Under this newish team, right, what are the strategic priorities for you, and what are you doing differently today versus what's been done in prior years? Let me go back just one click and say that Josh Silverman, who led the organization for seven or eight years, put in place a team that really was able to rise as he moved on to be our executive chairman. We also have a new Chief Product and Technology Officer in Rafe Colburn, and a relatively new Chief Marketing Officer in Brad Minor. It is a new team of leaders coming together. James Osman, who leads our customer support and customer operations team, is relatively new to that role. It is a new team coming together. We did a deep diagnostic of everything that was going on in and around Etsy and had been taking place over the past five or six years. We did that in early 2025 as a team together, and we really focused on understanding the customer experience. I'd say the biggest change that this new leadership team is focused upon is really listening to and embracing the needs, the desires, the preferences, the interests of the Etsy customers, both our buyers and our enormous seller community, that are really fundamental to this two-sided marketplace. That diagnostic led us to a series of four main strategic priorities that we saw over and over and over again in the customer research, in the data that we analyzed, in the competitor evaluations that we did. Those four priorities are, number one, to show up where customers are and improve the discovery of Etsy as a place to start your shopping expedition or shopping mission. The second area of focus has been to improve the match that we deliver when people come onto Etsy. When we respond to their search queries, we want to respond with high-quality items that are well-tailored to their specific search query, but also to their personal characteristics, needs, traits, and profiles, as we can understand those. The third element of our strategy is to put a much stronger emphasis on customer retention and customer loyalty. What that looks like is elevating the focus that we have on trust and on safety, and on customer support and issue resolution. It's developing loyalty programs. It's a whole ecosystem of things that builds in the mind of consumers a trusting, reliable relationship with Etsy that will bring them back for a growing number of product experience or of shopping experiences. The final pillar of our strategy is we really recognize that Etsy has something that is really unique in the e-commerce world. We stand for creativity and craftsmanship and a human connection in e-commerce in a way that really nobody else does. Those core characteristics that differentiate Etsy are not legible in our product experience, in our outbound emails, in our just user experience from soup to nuts, or at least they haven't been. Those are really the four main priorities that we're focused on, and I think they map to thinking about the customer, the buyer journey from awareness and discovery and acquisition into the Etsy experience. The engagement by showing them a personalized and relevant experience, the conversion by bringing them easy ability to purchase those items from us, and then a loyalty experience on the back end that makes them come back in the future. Those are our priorities, and it's gratifying that they've started. It's just been a really initial way to produce some green shoots of improvement in the health of the overall marketplace. That's a great overview, and I want to come back to some of those strategic pillars. Maybe if we can start with the outlook you've given for this year. You've talked about the business growing each quarter this year. That's against a compare that's tougher as well as the year goes on. What's driving the confidence in the outlook, which externally feels like an improved outlook, at least, the willingness to look out over a longer duration and give guidance, right? What's driving that improved confidence? Sure. We've had a couple of years of GMS declines and then stability, and now we've moved back in the fourth quarter of last year and the first quarter of this year, to a position of GMS growth on a year-to-year basis. There's a lot of different drivers underneath that. You put your finger on something quite important, which is, for the first time in several years, we've given a full year outlook for not just the next quarter, but sort of what we expect for this year. I think our answering that question, our willingness or our confidence to look a little bit further into the future resides atop the early progress that we are making with those four priorities I talked about just a moment ago. Where those priorities are starting to show up, our business is a pretty simple one. There are three components to our top line. How many buyers do we have? How frequently do they purchase? What's the average order value? We are starting to see some signs of progress across each of those different drivers of our business. Now, we control the first two of those, the buyer count and the order frequency, a bit more than we do the average order value. Prices are set by our sellers, and we have some I'll talk about a little bit later. We have ability to influence that. Primarily, we focus on the customer experience in a way that'll grow the number of customers and keep them coming back more often. The priorities I talked about that went in place mid-year 2025 and have been gradually building some momentum, gave us a point of view that we are starting to see the initial signs of what can be durable, sustainable, long-term growth in GMS, built atop a healthier buyer base and a stabilizing and hopefully improving level of frequency amongst those buyers. There's been some changes. There are other components of it. We've been migrating more and more of our user experience to our mobile application. Our mobile application is this wonderful platform where kind of obviously people are logged in as users, and we have an ability to capture so much data about not only what they purchased, but what they looked at, what they flipped past, what they dwelled on, how we can present stuff that might spur new shopping missions for them and really begin to understand their taste. That logged in mobile experience, it's a great incubator for and a great test bed for us to apply all the things we want to do to create that real personalized experience. The mobile app grew in the first quarter. GMS through the mobile app grew 11% year-over-year. Total GMS grew 5.5%. Now, the mobile app is getting close to 50% of our business. It's 47% of GMS. A few years ago, it was in the low 40%. As we're getting more and more people onto the mobile app, we have more visibility about. We know about them. We know when they're going to come back. We know how to bring them back, and that's helped us also have a little bit more visibility. There's some other things beyond the mobile app that have been really important to us. We've developed with, alongside that, a much stronger set of push marketing channels that are company-owned channels, both our outbound emails to buyers and users, and our push notifications to the mobile app. What we love about those two channels is they're very, very personalized and very, very personalizable, and there's no third-party media company that we're paying. There's nobody standing between Etsy and that direct relationship with the customer. When we use those channels with more targeted messages, we're finding great response rates to those. All those things are kind of interconnected with everything I talked about in terms of strategic priorities. As those priorities are starting to yield real product efficacy improvements, it's giving us a bit more confidence. We're not at the level of growth that we want to be at yet, but it's giving us a little bit more confidence to look forward a little bit more, and provide investors with a little bit clearer set of expectations for the next 12 months. Does the mobile app also cultivate the opportunity to introduce customers to newer categories or newer use cases or improve their on-site experience in a way that was tougher to do before? Absolutely. Absolutely. Primarily, the fact that it's logged in usage on the mobile app is great for us understanding who it is. I think there's a demographic component, quite honestly, to the mobile app as well. It's younger users. So much of e-commerce today happens on a mobile phone rather than on a desktop. I'd say in many ways, the mobile app is just the more commonly native environment for e-commerce activity. What we're finding with the mobile app is an ability to create a landing page for you. Your home screen is custom-built for you as a user, and that personalized home page is providing increases in clicks and engagement, conversion, GMS. That's just the tip of the whole product experience. It's also in the mobile app, we've been able to launch tabs and sliders that can start to take people across the breadth of Etsy inventory. One of the things about the way that people engage with Etsy is certainly there are people who come in who have a very specific product or an item that they're looking for, and they come in through a keyword search. But often that item that they're looking for is associated not so much with just that item, but it's an occasion. I'm going to be a house guest, or I'm having a baby, or my colleague is getting married. And those occasions are wonderful opportunities when we recognize that somebody's come to Etsy for one of those occasions to market the cross-category breadth of our inventory, which is really unique amongst marketplaces like ours. The mobile app provides a great format and framework for us to begin to expand those shopping missions in an occasion-based and personalized way that is really hard to do with an unlogged in user on the desktop who just wants to close out that transaction. That's really helping us. Where are you broadly on this journey of systematically collecting data and knowing more about your customer to be able to have that more personalized shopping experience for them? I think we're pretty early. We're really excited about the progress we've made, one of the reasons why I'd say we're early is 50% of our users have the mobile app and 50% don't. We've got an opportunity to get more, which we can make steady progress on, which are making steady progress on in getting more people on the mobile app. We're getting more sophisticated about how we use the space on the mobile app to not just drive conversion, but to learn and gain valuable insights about the users. This is a place where ML and AI are helping us more quickly make inferences about the profile and the preferences of those consumers, than we would be able to without those tools at our availability. We're in early stages. I would say, we've been at it for a couple of years, maybe, getting close to a couple of years now. This is a runway that looks to us like it's really long from here. There's a lot of opportunity for us to get better in this game. We're sort of talking about different components, essentially, of order frequency or order frequency improvement potential. Kruti talked about, I think on the last earnings call, really honing in on an improved end-to-end experience. When you envision what an end-to-end experience is and what the stages are that make up that end-to-end experience, what are those key components and what are the ways are you improving upon those different components? In marketing speak, it would be consideration, engagement, conversion, and retention. Yeah. Those are the textbook dimensions of it. I think one of the things that Kruti has, and that we are really driving toward in terms of a change in the way Etsy is run, the way Etsy thinks, the way Etsy's organized, the way we operate, is that we are looking at the whole user experience as an ecosystem. It is not product does this and marketing does that, and customer support does this. It's really all of those different functions that touch the customers and how they interplay with each other. When she's talking about an end-to-end experience, I used the word legibility earlier, she wants to make it legible that whether you're just coming for a single purchase or you're coming back to just browse, or you're receiving a personalized notification from us, or you're just seeing some of our advertising out in the wild, across all of those things, there is an end-to-end experience that speaks Etsy. The products that we're showing, the way in which we're showing them, the emphasis that we place on showing the maker, the seller, the human being behind the good, all of those things sort of interplay together to really build Etsy's differentiation in a way that we really don't think anybody can match. We think we've got a strong lead there. We've got a lot of opportunity to continue to advance that. We want to have an experience that speaks Etsy from the time you see the ad all the way through the time that you're invited back because we sent you a really personalized message. We'll come back to those things I talked about in terms of the real essence of the brand. How do you highlight better listing quality on the platform? Because I think that's been one area of criticism of Etsy has been maybe the marketplace has been overrun in recent years by some inventory that isn't as unique or handmade, right? Yeah. This has been a big strategic focus to make sure that the quality of what people see is what they expect, and to be able to build that human connection, with sellers and discover differentiated inventory. Right. How do you go about creating that experience? Well, I think you put your finger on something that's really important, which is Kruti talks a lot about moving from transactions to relationships. Instead of trying to capture as many transactions as we can and get you through to the click and the buy button and done as fast as possible, but to think alongside that about building a relationship between you and Etsy. We're very focused on not just as we surface search results, not just that thing that is going to convert the fastest and the best today, which will often lead your search algorithm to optimize for what's the most popular thing we can possibly show you, and it may not be the tightest fit. It might be the highest converting, but it may not be the tightest fit to what you're really looking at. It may not be personalized to you at all. We are trying to put a little bit of the brakes on the historical emphasis on just show that which converts fastest and best, and lean a little bit more into who are you? What's the context of your occasion that you're looking for? What do we know about you? With all of that information, what's the right item? I think structurally, we looked in the past, often we surfaced listings, what did you query and what is the item? We matched the two. The big change today is what did you query, what is the item, and who are you? We match all three. That's leading to better conversion rates, better customer satisfaction, and a greater likelihood that the user comes out and says, "Hey, Etsy knows me. That was really cool what they showed me as a search result. Which you don't get when you're just optimizing for, we don't know who you are, but most people like this item. Active buyers is the other key component of GMS growth. They were down a bit in the last quarter. It seems like we've seen some stabilization, at least with regards to sequential trends in active buyers and even dynamics like gross adds are starting to look a little bit better. Are you optimistic that we are on the cusp of better active buyer growth from here? Yeah, we're encouraged about where we are on active buyers. Last quarter, I think on a year-over-year basis, in the 12 months ending March, compared to the 12 months ending March a year ago, we were down about 2% in the number of total buyers. In the 12 months ending March versus the 12 months ending December just before, we were up by 100,000 or a little bit more than that. That's the first time we've seen a sequential improvement in trailing 12-month buyers in two years plus. What's driving that is our, you put your finger on it, the gross additions have really started to increase. I think we had a 7% increase in the number of reactivated buyers, people who had bought with us a few years ago, but then lapsed and hadn't bought with us for a couple of years and were now coming back. We had our first increase in new buyers in several years. Those numbers of new buyers and reactivated buyers, the growth rates there, have been improving kind of quarter-over-quarter-over-quarter for the last three or four quarters. We're seeing the top of the funnel start to improve in both new and reactivated buyers. The bigger long-term lever is retaining and driving the frequency of the existing ongoing buyers. Can we talk to both of those pieces, new and reactivated? Yeah. With the new buyers, what went well in Q1? How do you think about the durability of that trend in new buyer growth? I think we've talked about our strategic priority on showing up where the buyers are. New buyers, we discover them more in search, paid and organic search, than anywhere else. We have had a pretty good run in paid search over many, many years and also over the last several quarters. The competitive dynamic has changed in paid search a little bit. Amazon has pulled out of Product Listing Ads. That's made Etsy gain a little bit more visibility in Product Listing Ads. Then behind that, in our paid search acquisition, we've had some martech, marketing technology advances in terms of the feed that we provide, the segmentation of the listings that we provide to Google, that are helping them surface more relevant ads in the slots that we are buying from Google in Product Listing Ads. We're doing quite well on the paid side. In the first quarter, after a period of, I'd say, moderate small declines and kind of stagnation, our organic traffic through search has started to improve. There was a little bit of improvement in year-to-year numbers in prior quarters, for the first time in a while, we've now moved back into positive territory on the organic side of search. I think that reflects work that we've done, you talked about a minute ago, working on our listings and the way the listings show up. We made some back-end changes to the site architecture that help elevate the page rank of listings on Etsy. That's helped our search engine optimization traffic as well. On the new side, I would say the biggest improvement, the biggest driver, has really been sharpening what's already been a very, very strong game at Etsy on the search, both paid and organic side. On the reactivated side, it's a little bit different story. I think some of the headline drivers of reactivation have been social media is a great channel we've found for tapping people on the shoulder and saying, "Hey, you haven't thought about Etsy in a while, and you may not be searching for a product in a keyword box right now, but remember Etsy." The advertising that we promote through that channel has helped us go and tap people on the shoulder again. When they've come in off of that, we've done our best to either land them in or to drive them to our mobile app experience. The mobile experience is one that is just more personalized. It delivers a more relevant, more 2026 product experience. The lifetime value of a user on the mobile app is about 40% higher than the lifetime value of a user who has not adopted the mobile app. As we're bringing back repeat visitors, reactivated visitors into the mobile app, the frequency that we're seeing from them and our ability to communicate with them has gotten better. Once they're on that, we've reactivated them. We use those push channels that I talked about earlier, those owned email and push notifications through the app, to remind people about occasions that they bought from Etsy in the past or new things that have come on the market that seem to resonate with who we have profiled that buyer to be. That has helped us, not only social media's helped us refine those buyers, and then the mobile app and our push notification, our own media channels have really helped us stimulate the activity of those folks. A couple quick follow-ups there. One on the point of mobile app LTV being so much higher. Is that a causal relationship you've seen over time with cohorts when you introduce so much of the mobile app that you tend to see the follow-through then in lifetime value? Yeah, I mean, for a long time we thought it was a self-selection, but it is a causal thing at this point because the experience is just so different. We've opened up this. I talked a moment ago about push and email, and they sound like, well, that doesn't sound like the biggest deal. A couple of years ago, our email and push channels did about half as much GMS, gross merchandise sales, for us, as did our Google paid advertising through PLAs. Two years ago, it was about half as big. Today, those paid search through Google PLAs has grown. The size of our owned channels in terms of their GMS that they drive is now neck and neck with the Google channel. That's part of how we have made it be a causal relationship, that once we've got you on the mobile app and we know who you are, we can deliver you a better product experience that leads to better purchase activity down the road. Has this experience and the progress that you just described, has it structurally changed your approach and philosophy around marketing, be it the mix or the strategy of how you deploy marketing dollars? It has in a way, and that is that when you have a big channel where you're not paying a third party, and it's a marketing channel that is driving GMS, it means that the overall ROI on your marketing activities has improved because a big chunk of it is now effectively media costless. Setting that aside, we continue to run the paid part of our media marketing with a ROI-based approach rather than a budgetary approach, which is to say we are constantly trying to improve and optimize the conversion that we get out of each dollar that we spend on Google, on TikTok, on Facebook, on any other outlet. When we find improvements, when we achieve improvements through those channels, that means our ROI goes up. That means our spend goes up. When we find moments in time where we're not able to improve our return on advertising through those channels, you won't see us grow our budget. Where we find moments and opportunities to improve our return, you'll see us put more money and maintain that return on investment. When you talked about mindset from a marketing, we have been, over the last 12 months, it hasn't been that hard to do, but we have really made a concerted effort to modernize our marketing portfolio. We had a lot of television advertising that we were doing 18, 24 months ago, linear cable and things like that, and that's all gone. We've moved those dollars into social media, into streaming, into podcasts, where we're finding, I think, a more responsive audience of younger people with more money to spend, more growth in their incomes. That's been pretty helpful to us as well. With respect to the operating environment, it feels like every year there's a new test for the consumer that we have to deal with, right? This was supposed to be a year of, I'd say, tax refunds and more spending, and it was lower rates, and all of that, I think, was the optimism coming into 2026. We've had to deal with higher energy prices, as well as conflict in the Middle East. Have you seen any big shift in consumer behavior on the back of these macro or exogenous factors? Has there been any difference in how the U.S. versus international buyer base of Etsy has behaved? You did something that really resonates with us, which is like, it's always next year that the consumer environment's going to be a little bit clearer, and it has been a challenging consumer environment for a long time. In the first quarter of this year, for all the press and headlines and things that were going wrong, the consumer on Etsy held up pretty well. We saw better trends among higher income households than we had seen in prior quarters. We saw better trends among lower income households than we had in recently prior quarters. Higher income households are performing a bit better than lower income households. That's a story I think a lot of people see as well. Overall, the consumer was pretty resilient in the first quarter of this year. You asked a little bit about the sort of geographic mix. The United States was our strongest market in the first quarter of this year. For the first time in a couple of years, we saw foreign currency neutral GMS growth in our international business. Inside our U.S. business, I'll give you two quick numbers. Half of our GMS is from U.S. buyers buying U.S. things, and a quarter of our GMS is from U.S. buyers buying things from outside the United States. That's kind of how our business breaks down. Last year, with the introduction of tariffs and the expiration of the de minimis, that import channel was not as strong, kind of as you would expect. One of the wonderful things about the Etsy marketplace is it's so broad and it's so diverse that there's often these self-healing offsets. We saw a little bit of pressure on the import side. We saw the domestic market get a little bit stronger. As we came into this year, the import market, the U.S. import market strengthened in the first quarter from where it had been late last year. Overall it looks to us like, at least through the first quarter of the year, our consumer was pretty healthy. How have sellers been coping with this? Because it's been an inflationary backdrop. You talked about de minimis and tariffs, energy prices. I would imagine their desire is to maybe try and pass costs on, but it's a competitive marketplace. How does all of that shake out in terms of how these sellers are running their businesses and what that means for the consumers on the other side of it? Yeah. Over the last several years, and we've had some periods through COVID and after where inflation has been pretty high, we have not seen Etsy sellers really take a lot of pricing into raising their listings prices or trying to take higher average item prices. I would say that began to change a little bit in 2025 with the introduction of tariffs, and sort of probably the compounding effect of inflation. I think that we started to see our sellers pass through increases in their raw material costs as well as some of the disruption from tariffs. It really kind of went in a couple waves. There was the initial wave around April and May when the tariffs went in place. There was a September wave of listing price increases associated with the expiration of the de minimis exception that had sort of exempted everything under $800. Early in 2026, I think kind of after the 2025 holiday season was behind sellers, people sort of reassessing things for this year, we saw another little bump in listings prices. Our sellers have an acute sense of what the clearing price is for the things that they are making. They have a really good understanding of their market. I think what we're seeing from them is they're seeing their customer is accepting the price adjustments that they're taking. I think we will see that these price increases. I don't think the rate of increase is going to be sustained. I think the increases that have been made will probably be sustained at this level for a while. Agentic commerce is clearly the biggest theme in the sector right now, I'd say, for consumer internet broadly. You've been an early partner to a lot of the major AI companies. What is the Etsy philosophy on working with these large-scale AI companies as partners? I think there's debate in the market as to whether E-commerce marketplaces or consumer internet businesses should be involved at all, or whether they should almost gatekeep some of their services to protect the risk of disintermediation longer term. What is your general philosophy of working with these new channels? I would say the number of businesses that made a strategic decision 20 years ago to not be listed in Google is not that many. There is a brand new entry point to the e-commerce world emerging through agentic chatbots and through agents. Our point of view, our philosophy, is that this is a brand new way that customers are going to come into the e-commerce shopping mall, and we very much want to embrace that and understand it and engage with it. Just like mobile and just like social and just like search, this is a new emerging consumer habit. Our view is there is so much more to be gained from getting early onto the field, into partnership, into experiment, into test, into iteration, influencing the terms that are being set around how AI advertising works or native checkout works, which we've been doing. There's so much more to be gained from being on the field than sitting on the sidelines. Our approach has been take the risk, get active, partner with anybody and everybody. I think our agenda here is learning. Learn as much as we possibly can. I don't think the ink is dry on the business models forever of AI, and we're here to learn as much as we possibly can. What we've learned is it looks to us like it's going to be an incremental discovery channel for consumers, and at least in the early days, it's consumers with really high intent and great average order value, and they come back, and they're new users to Etsy and reactivated users. All those things tell us, why would you not be involved in this game? Our philosophy is to lean in. The early learnings on traffic sound generally quite positive in terms of intent and conversion? They are for sure. Less than 1% of our GMS. It's not conclusive evidence of a whole lot yet, but we like what we're seeing so far. I think it's only going to get better because we're iterating at it all the time. If we flesh out the bear case a little bit more, I'd say the worry that, A, you might have, in the future, some risk to the take rate of business models like yours because search increasingly starts to happen off-platform, and maybe that puts some valuable monetization opportunities like advertising at risk. I'd say that's the first bucket of concern. The second bucket of concern is simply that you just reduce the barriers to switching between platforms. You make it easier for consumers to price shop across different marketplaces and retail websites. People worry that this is, in some way, shape, or form, starting a race to the bottom in retail and e-commerce at large. I guess from your standpoint, why are those fears generally misplaced? Well, let me start with the second one first, which is Etsy has never been about winning the race to the bottom. We are winning the race to special. We are winning the race to differentiated, to human connection, and that is our lane. If you look at things in that light, a new technology that is going to make it faster and clearer who is that single fastest, single cheapest seller, it's not going to be Etsy in most cases. After you have that answer, you don't need 72 other answers. What you might want as a consumer is, if I don't want fastest and cheapest, what are the other alternatives? That's going to be a differentiated item, an item perhaps with more craftsmanship or a different level of quality, more personalizable or customizable, and those are lanes that Etsy really shines in. That's how we're looking at that sort of industry shift that you talk about shifting moats. In some ways, I think the race to the bottom could actually widen the moat of Etsy because you're going to see so many other people dragged into that pit of differentiation difficulty, where we have so much to differentiate upon. I think to your former question about the advertising model and about the take rate, our take rate is really reflective of the value that our sellers recognize or are willing to bear for Etsy doing what Etsy does for them. The list of things that we do for them is so long, from payments to trust and safety to ratings and reviews to the presentment that we give them, the advice that we give them, the social media tools that we give them to market themselves, the visibility we give them on the web, the imprimatur of being listed on the Etsy marketplace relative to just having a shop randomly discovered somewhere else with no ratings, reviews, and very hard to tell whether that's a seller that I should trust or not for this very unique item. Etsy brings a lot to the table, and it's on top of all of that value that goes way beyond ads that our take rate resides. I'm really optimistic about our opportunity. The biggest opportunity for us from AI is to figure out how we use AI inside the Etsy experience on behalf of Etsy, but also fundamentally on behalf of our sellers. Give them access to being listed on OpenAI, being highly visible in Google's AI products. You get that through Etsy, I think, more easily than you get it on your own, and helping them get visibility as this new customer channel opens. I think we feel like there is more to be gained from the expansion of discovery from AI and agents than there is to be feared about pressure on our take rate, because our take rate sits on top of services that we bring and value that we deliver. Can you speak a little bit more about the onsite experiences that are changing for buyers and sellers leveraging these tools? If I go to Etsy tomorrow, a year from now, two years from now, what should I expect the experience to increasingly look like? I think I've talked a lot about personalized experience. Etsy should feel small. It should feel very local to you. It should recognize you've got a young family, you live where you live, you have your background, and it should really resonate in a very personal way to you. I think we're moving in that direction. We're not anywhere near yet the vision that we have for how different the product experience should feel for individuals and for groups of individuals. That's number one. I think separately in the product experience, we're experimenting right now with how can we bring agents into the Etsy product experience. One of the things that happens when people search in commerce with an agent is they don't type in three words. They type in a three-paragraph description of what they're looking for. That gives us a lot more context. We have a gifting agent, it was an agent that we launched that's sort of tailored for gifting occasions. You can find it if you're a logged-in user on the website. It's rolled out there pretty broadly across North America right now. It's an experience, I think you're going to see this more throughout Etsy and probably throughout a lot of e-commerce, where instead of typing in a couple key words, like I said, you describe, "I'm going to a weekend with some buddies who I haven't seen for a number of years, and one of them has a 50th birthday, and we're going to play some golf, and it's going to be in this location. I want to get a gift for all of them, but I don't want it to be XYZ." There's so much more context in that for Etsy to be able to work with, "Hey, here's a personalized solution, here's a customized solution, here's a unique and vintage solution for you." I think you're going to see us try to lean into a different mode of interaction and discovery that will bring forth the variety available on Etsy, that will showcase what's different about Etsy. There are individual sellers beyond all these things, and it'll help people understand just the breadth of missions and shopping and categories and occasions that Etsy can be really relevant for. You have a high gross margin. It's been pretty stable. It nudged down a little bit in the last quarter. I think qualitatively, one of the things called out was compute cost, and as we talk about AI-driven shopping experiences, assuming, I'm sure a lot of folks at Etsy are now using AI tools in their day-to-day workflows as well. How do you think about compute costs as AI becomes a bigger portion of this business, and how do you think about offsets to that as well? Well, I think, in the long run, the compute costs are going to reflect the prevalence of those tools in the product experience. If our customers are saying, "God, these are great experiences," we're going to deliver the great experiences with the cost of the incremental compute. There are other things in our margin in the short term. There's a little bit of cost to compute, like you talked about. There's a little bit of managing fraud and exposure to refunds and things like that in there. I'm not anticipating right now, like a step function change in the gross margin profitability of the business because those costs are being incurred to support incremental, new, higher converting, market expanding product experiences for us. Look, we're going to manage all those things really carefully and efficiently as we always do. We're coming with pretty good profitability and great cash flow. We'll mind the spending that we do there to make sure there's a return on investment for that. We're also not going to be penny-wise and pound-foolish in the short run. We want to experiment, we want to learn, we think for a couple basis points of gross margin, there's a lot to be learned that'll be very valuable to us in coming years. You've always run very lean with a pretty tight engineering team, product team. When you think about productivity enhancements on the back of these AI tools, what are you excited about? Is that freeing you up to do more with less? Any changing opinions on how to think about headcount growth for this business longer term? Well, look, I think we're poised to deliver a pretty nice improvement in revenue growth comparisons this year versus last year, an improvement in buyer trends, and a bunch of new products this year with flat headcount from where we were a year ago. Our team is already getting more gas mileage out of some of the tools. On the product side in particular, the AI tools, I'm sure you're hearing this from a lot of companies, it's changing development cycles from quarters to months or weeks. We're able to launch and iterate things so much more quickly with the advantage of AI coding agents, which we've pushed pretty hard to get our team trained and experienced and up and running on those. It is improving the efficiency of our team. Our revenue per employee is about a million and a half dollars, is pretty good relative to a lot of companies. We did not have a huge increase in our headcount during COVID, even though the size of the company doubled during that period of time. We've continued to run pretty lean, and I expect us to continue to, and these tools are only going to enable us to be more productive. When you think about broad investment buckets in the P&L of Etsy going forward, if you think about it as R&D on the product side versus sales and marketing, how do you think about the evolution of those buckets and what's required to sustain better growth for Etsy? Yeah. We'll spend this year like roughly $400 million on product and $750 million on marketing. I don't think you're going to see any big leverage or de-leverage in either of those lines this year. What I would say, if the $750 million on marketing was going to be bigger than that, it was because we found ways to hit our ROI target while spending more dollars. That would be a good story because it would be more GMS associated with that incremental spending. On the product side, we're pretty careful about the number of squads that we have and the assignments that we've given them in terms of what they're working on. For the priorities that I laid out a moment ago, there's nobody on our team who feels like with 25% more engineers, we'd be able to go faster. We think we've got the right investment there right now for the priorities that we have. I like the mix that we've got. I don't think there's any big variation you should expect there. Within it, we'll allocate the spending within that optimally, but I don't think there's any big change in the size of the envelope. To go after your global business, you've got international markets. Is there incremental headcount required to build out some of those international experiences and local experiences as well, or can a lot of that just come through the centralized team here? A lot of it comes through the centralized team. I think, there's some localized marketing that is helpful and required, but even that can be done fairly central. One of the great things about our business is it's a very capital light, very like boots on the ground light business. You said sales and marketing, and I was like, "Sales? We don't have any sales." We have marketing and customer support, that is for sure. No, from where we're looking right now, the international opportunity can be leveraged off of the core Etsy. We touched a little bit on onsite ads in an AI world, but just more broadly, when you step back, it is one of the tools for monetizing the marketplace. It is one of the key drivers, I think, of the margin expansion we've seen over the years. Where are we in building out onsite advertising for Etsy? What's the runway for continued growth and adoption here, whether you want to frame it in terms of penetration rate or product adoption or ROAS dynamics, whatever's most intuitive to you, but how do you feel about the growth runway for that advertising business? I think we're pretty early in the advertising opportunity on Etsy. The participation rate of all sellers in Etsy's marketing programs is low and has a lot of headroom that can still be tapped into. Our utilization of the budgets that they give us is lower than 100%, for sure. What they tell us they are willing to spend on incremental orders, we are not yet able to deliver. As soon as we can deliver that by doing a better job of finding customers and bringing them into Etsy, doing a better job of showcasing those advertisers' wares effectively in a way that converts, there is money that those sellers would gladly pay for that incremental order value. As we improve our ability to deliver a relevant, personalized match and improve our ability to reach out to you when you weren't even thinking about Etsy and remind you of Etsy with a matching item, those are great advertising opportunities for us to say we're driving more demand and there are a bunch of people who could service this incremental demand, and we'll give an advertiser a shot to be at the top of the pile of people who could service that incremental demand. There's optimization of our search, there is getting more people into the program, and there's doing a better job of utilizing the budgets that they are willing to spend. It gives us a belief that there's a lot of runway left in the advertising side of the business. I would say this, though. I want to make one point really clearly. Our main focus right now is driving GMS growth rather than advertising growth or take rate growth. It's GMS growth, and GMS growth coming from a growing number of buyers coming to Etsy more frequently. Half our buyers buy one time a year, the other half buy an average of five times a year. We think we can expand the total number of buyers. There are well over 100 million people who have bought on Etsy at some point in their life, who did not buy on Etsy in the last 24 months. Getting those people to come back, and then once they get them back, getting them to purchase more than one time a year is a far bigger focus for us. We're going to continue to focus on things like monetizing well through ads and using that in service of our sellers' needs. The thing that sellers really want the most is just for the market to be growing overall. You're in the process of selling Depop to eBay. Can you remind us what the next stages are in that, and also why this was the right time to do that transaction? Really quickly for those who don't know, Depop is the leading U.S. resale clothing marketplace. If you have kids on college campuses, I know that they know about Depop. It is a place to buy and sell clothes, in part of a circular economy that younger generations are totally a part of. Depop is growing in the United States at like 70% year over year, and is a super thriving, healthy business. We love it. We saw some signs of promise and potential for that business about 12 months ago, we began to invest much more aggressively in driving Depop's emerging growth lead in that category and trying to get to a market share leadership position. Those initial investments really started to pay off. We received an unsolicited offer from eBay, at a valuation that we felt was compelling enough for us to at least stop the clock and sort of step back and think it through. As we thought about it, and we looked at Depop's longer term opportunity, we love it, and we looked at Etsy's long-term opportunity, we love it even more. We think there is a really big opportunity to just focus exclusively on everything I just talked about on the Etsy marketplace, and we think eBay can be a wonderful owner for Depop. They've got inventory in the category that they can bring into what's really the best product experience in the category and continue to make a real leader out of that business. It just looked to us like, hey, it's the right time. We signed a deal to sell it to them for $1.2 billion. We've got regulatory approvals now in probably three-quarters of the places that we need it. One more jurisdiction in the U.K., where we're expecting to get approval for the transaction, then we'll close and have pretty close to the whole $1.2 billion in cash proceeds added to our balance sheet. I think our expectation right now is we'll deploy that as we've deployed a lot of excess capital over the years toward buying back stock in the company. You answered my follow-up, which is, how do we think about the proceeds? That's all I could think about. We've covered a lot of ground today, Lanny. How would you basically summarize for investors, really the core focus, the opportunity set ahead of Etsy? What message do you want to leave investors with? The focus is we have these very clear four priorities, and none of them are going to be overnight, like hockey sticks to growth tomorrow. What we are working on is building a durable, sustainable, long-term growth rate for this company, built on a great personalized, modern customer experience that can be the platform for so much growth in the categories that we operate in. We really feel like we have a business that is super differentiated already. Its awareness of Etsy is enormous. Consideration of Etsy, remembering to come back to Etsy for that experience is the opportunity ahead of us, and we think by solving that with everything I've talked about today, we can make this a much larger company than it is today. Great. With that, we'll leave it there. We are right at time. Lanny, thank you so much. Thank you, Nikhil. Thanks, everyone. Thank you.

Speaker 2: Okay, thank you. Let's get started. Good afternoon, everyone. Thanks for joining here today. My name is Nikhil Devnani. I'm Bernstein's U.S. Emerging Internet Analyst. I cover a range of marketplace businesses, one of them being Etsy. It's my pleasure today to be hosting Lanny Baker, CFO of Etsy. Lanny, welcome back to the BTC. Okay, thank you. okay thank you Let's get started. let's get started Good afternoon, everyone. good afternoon everyone Thanks for joining here today. thanks for joining here today My name is Nikhil Devnani. my name is nikhil devnani I'm Bernstein's U.S. i'm bernstein's u.s Emerging Internet Analyst. emerging internet analyst I cover a range of marketplace businesses, one of them being Etsy. i cover a range of marketplace businesses one of them being etsy It's my pleasure today to be hosting Lanny Baker, CFO of Etsy. it's my pleasure today to be hosting lanny baker cfo of etsy Lanny, welcome back to the BTC. lanny welcome back to the btc

Speaker 1: Thank you. It's good to be here. Thank you. thank you It's good to be here. it's good to be here

Speaker 2: Before we get started, I want to remind everyone to please refer to the Etsy investor relations website for the Safe Harbor. If you want to submit any questions for this session, you can do so via the QR code. For those of you newer to the story, just to level set, Etsy is a global e-commerce marketplace. Before we get started, I want to remind everyone to please refer to the Etsy investor relations website for the Safe Harbor. before we get started i want to remind everyone to please refer to the etsy investor relations website for the safe harbor If you want to submit any questions for this session, you can do so via the QR code. if you want to submit any questions for this session you can do so via the qr code For those of you newer to the story, just to level set, Etsy is a global e-commerce marketplace. for those of you newer to the story just to level set etsy is a global e-commerce marketplace Last year did about 10.5 billion in gross merchandise sales, or GMS, supported about 87 million active buyers, and 5.5 million active sellers. Lanny, Etsy has been under, I'd call it new, quote-unquote, "new", leadership now. You've been the CFO for about a year and a half. Kruti took over the CEO seat earlier this year, but she's obviously been at the company for longer than that. You're on this journey of getting the business back to more durable and consistent growth. Last year did about 10.5 billion in gross merchandise sales, or GMS, supported about 87 million active buyers, and 5.5 million active sellers. last year did about 10.5 billion in gross merchandise sales or gms supported about 87 million active buyers and 5.5 million active sellers Lanny, Etsy has been under, I'd call it new, quote-unquote, "new", leadership now. lanny etsy has been under i'd call it new quote-unquote "new" leadership now You've been the CFO for about a year and a half. you've been the cfo for about a year and a half Kruti took over the CEO seat earlier this year, but she's obviously been at the company for longer than that. kruti took over the ceo seat earlier this year but she's obviously been at the company for longer than that You're on this journey of getting the business back to more durable and consistent growth. you're on this journey of getting the business back to more durable and consistent growth Under this newish team, right, what are the strategic priorities for you, and what are you doing differently today versus what's been done in prior years? Under this newish team, right, what are the strategic priorities for you, and what are you doing differently today versus what's been done in prior years? under this newish team right what are the strategic priorities for you and what are you doing differently today versus what's been done in prior years

Speaker 1: Let me go back just one click and say that Josh Silverman, who led the organization for seven or eight years, put in place a team that really was able to rise as he moved on to be our executive chairman. We also have a new Chief Product and Technology Officer in Rafe Colburn, and a relatively new Chief Marketing Officer in Brad Minor. It is a new team of leaders coming together. Let me go back just one click and say that Josh Silverman, who led the organization for seven or eight years, put in place a team that really was able to rise as he moved on to be our executive chairman. let me go back just one click and say that josh silverman who led the organization for seven or eight years put in place a team that really was able to rise as he moved on to be our executive chairman We also have a new Chief Product and Technology Officer in Rafe Colburn, and a relatively new Chief Marketing Officer in Brad Minor. we also have a new chief product and technology officer in rafe colburn and a relatively new chief marketing officer in brad minor It is a new team of leaders coming together. it is a new team of leaders coming together James Osman, who leads our customer support and customer operations team, is relatively new to that role. It is a new team coming together. We did a deep diagnostic of everything that was going on in and around Etsy and had been taking place over the past five or six years. We did that in early 2025 as a team together, and we really focused on understanding the customer experience. James Osman, who leads our customer support and customer operations team, is relatively new to that role. james osman who leads our customer support and customer operations team is relatively new to that role It is a new team coming together. it is a new team coming together We did a deep diagnostic of everything that was going on in and around Etsy and had been taking place over the past five or six years. we did a deep diagnostic of everything that was going on in and around etsy and had been taking place over the past five or six years We did that in early 2025 as a team together, and we really focused on understanding the customer experience. we did that in early 2025 as a team together and we really focused on understanding the customer experience I'd say the biggest change that this new leadership team is focused upon is really listening to and embracing the needs, the desires, the preferences, the interests of the Etsy customers, both our buyers and our enormous seller community, that are really fundamental to this two-sided marketplace. That diagnostic led us to a series of four main strategic priorities that we saw over and over and over again in the customer research, in the data that we analyzed, in the competitor evaluations that we did. I'd say the biggest change that this new leadership team is focused upon is really listening to and embracing the needs, the desires, the preferences, the interests of the Etsy customers, both our buyers and our enormous seller community, that are really fundamental to this two-sided marketplace. i'd say the biggest change that this new leadership team is focused upon is really listening to and embracing the needs the desires the preferences the interests of the etsy customers both our buyers and our enormous seller community that are really fundamental to this two-sided marketplace That diagnostic led us to a series of four main strategic priorities that we saw over and over and over again in the customer research, in the data that we analyzed, in the competitor evaluations that we did. that diagnostic led us to a series of four main strategic priorities that we saw over and over and over again in the customer research in the data that we analyzed in the competitor evaluations that we did Those four priorities are, number one, to show up where customers are and improve the discovery of Etsy as a place to start your shopping expedition or shopping mission. The second area of focus has been to improve the match that we deliver when people come onto Etsy. Those four priorities are, number one, to show up where customers are and improve the discovery of Etsy as a place to start your shopping expedition or shopping mission. those four priorities are number one to show up where customers are and improve the discovery of etsy as a place to start your shopping expedition or shopping mission The second area of focus has been to improve the match that we deliver when people come onto Etsy. the second area of focus has been to improve the match that we deliver when people come onto etsy When we respond to their search queries, we want to respond with high-quality items that are well-tailored to their specific search query, but also to their personal characteristics, needs, traits, and profiles, as we can understand those. The third element of our strategy is to put a much stronger emphasis on customer retention and customer loyalty. What that looks like is elevating the focus that we have on trust and on safety, and on customer support and issue resolution. It's developing loyalty programs. When we respond to their search queries, we want to respond with high-quality items that are well-tailored to their specific search query, but also to their personal characteristics, needs, traits, and profiles, as we can understand those. when we respond to their search queries we want to respond with high-quality items that are well-tailored to their specific search query but also to their personal characteristics needs traits and profiles as we can understand those The third element of our strategy is to put a much stronger emphasis on customer retention and customer loyalty. the third element of our strategy is to put a much stronger emphasis on customer retention and customer loyalty What that looks like is elevating the focus that we have on trust and on safety, and on customer support and issue resolution. what that looks like is elevating the focus that we have on trust and on safety and on customer support and issue resolution It's developing loyalty programs. it's developing loyalty programs It's a whole ecosystem of things that builds in the mind of consumers a trusting, reliable relationship with Etsy that will bring them back for a growing number of product experience or of shopping experiences. The final pillar of our strategy is we really recognize that Etsy has something that is really unique in the e-commerce world. It's a whole ecosystem of things that builds in the mind of consumers a trusting, reliable relationship with Etsy that will bring them back for a growing number of product experience or of shopping experiences. it's a whole ecosystem of things that builds in the mind of consumers a trusting reliable relationship with etsy that will bring them back for a growing number of product experience or of shopping experiences The final pillar of our strategy is we really recognize that Etsy has something that is really unique in the e-commerce world. the final pillar of our strategy is we really recognize that etsy has something that is really unique in the e-commerce world We stand for creativity and craftsmanship and a human connection in e-commerce in a way that really nobody else does. Those core characteristics that differentiate Etsy are not legible in our product experience, in our outbound emails, in our just user experience from soup to nuts, or at least they haven't been. Those are really the four main priorities that we're focused on, and I think they map to thinking about the customer, the buyer journey from awareness and discovery and acquisition into the Etsy experience. We stand for creativity and craftsmanship and a human connection in e-commerce in a way that really nobody else does. we stand for creativity and craftsmanship and a human connection in e-commerce in a way that really nobody else does Those core characteristics that differentiate Etsy are not legible in our product experience, in our outbound emails, in our just user experience from soup to nuts, or at least they haven't been. those core characteristics that differentiate etsy are not legible in our product experience in our outbound emails in our just user experience from soup to nuts or at least they haven't been Those are really the four main priorities that we're focused on, and I think they map to thinking about the customer, the buyer journey from awareness and discovery and acquisition into the Etsy experience. those are really the four main priorities that we're focused on and i think they map to thinking about the customer the buyer journey from awareness and discovery and acquisition into the etsy experience The engagement by showing them a personalized and relevant experience, the conversion by bringing them easy ability to purchase those items from us, and then a loyalty experience on the back end that makes them come back in the future. Those are our priorities, and it's gratifying that they've started. The engagement by showing them a personalized and relevant experience, the conversion by bringing them easy ability to purchase those items from us, and then a loyalty experience on the back end that makes them come back in the future. the engagement by showing them a personalized and relevant experience the conversion by bringing them easy ability to purchase those items from us and then a loyalty experience on the back end that makes them come back in the future Those are our priorities, and it's gratifying that they've started. those are our priorities and it's gratifying that they've started It's just been a really initial way to produce some green shoots of improvement in the health of the overall marketplace. It's just been a really initial way to produce some green shoots of improvement in the health of the overall marketplace. it's just been a really initial way to produce some green shoots of improvement in the health of the overall marketplace

Speaker 2: That's a great overview, and I want to come back to some of those strategic pillars. Maybe if we can start with the outlook you've given for this year. You've talked about the business growing each quarter this year. That's against a compare that's tougher as well as the year goes on. What's driving the confidence in the outlook, which externally feels like an improved outlook, at least, the willingness to look out over a longer duration and give guidance, right? What's driving that improved confidence? That's a great overview, and I want to come back to some of those strategic pillars. that's a great overview and i want to come back to some of those strategic pillars Maybe if we can start with the outlook you've given for this year. maybe if we can start with the outlook you've given for this year You've talked about the business growing each quarter this year. you've talked about the business growing each quarter this year That's against a compare that's tougher as well as the year goes on. that's against a compare that's tougher as well as the year goes on What's driving the confidence in the outlook, which externally feels like an improved outlook, at least, the willingness to look out over a longer duration and give guidance, right? what's driving the confidence in the outlook which externally feels like an improved outlook at least, the willingness to look out over a longer duration and give guidance right What's driving that improved confidence? what's driving that improved confidence

Speaker 1: Sure. We've had a couple of years of GMS declines and then stability, and now we've moved back in the fourth quarter of last year and the first quarter of this year, to a position of GMS growth on a year-to-year basis. There's a lot of different drivers underneath that. You put your finger on something quite important, which is, for the first time in several years, we've given a full year outlook for not just the next quarter, but sort of what we expect for this year. Sure. sure We've had a couple of years of GMS declines and then stability, and now we've moved back in the fourth quarter of last year and the first quarter of this year, to a position of GMS growth on a year-to-year basis. we've had a couple of years of gms declines and then stability and now we've moved back in the fourth quarter of last year and the first quarter of this year to a position of gms growth on a year-to-year basis There's a lot of different drivers underneath that. there's a lot of different drivers underneath that You put your finger on something quite important, which is, for the first time in several years, we've given a full year outlook for not just the next quarter, but sort of what we expect for this year. you put your finger on something quite important which is for the first time in several years we've given a full year outlook for not just the next quarter but sort of what we expect for this year I think our answering that question, our willingness or our confidence to look a little bit further into the future resides atop the early progress that we are making with those four priorities I talked about just a moment ago. Where those priorities are starting to show up, our business is a pretty simple one. I think our answering that question, our willingness or our confidence to look a little bit further into the future resides atop the early progress that we are making with those four priorities I talked about just a moment ago. i think our answering that question our willingness or our confidence to look a little bit further into the future resides atop the early progress that we are making with those four priorities i talked about just a moment ago Where those priorities are starting to show up, our business is a pretty simple one. where those priorities are starting to show up our business is a pretty simple one There are three components to our top line. How many buyers do we have? How frequently do they purchase? What's the average order value? We are starting to see some signs of progress across each of those different drivers of our business. There are three components to our top line. there are three components to our top line How many buyers do we have? how many buyers do we have How frequently do they purchase? how frequently do they purchase What's the average order value? what's the average order value We are starting to see some signs of progress across each of those different drivers of our business. we are starting to see some signs of progress across each of those different drivers of our business Now, we control the first two of those, the buyer count and the order frequency, a bit more than we do the average order value. Prices are set by our sellers, and we have some I'll talk about a little bit later. We have ability to influence that. Primarily, we focus on the customer experience in a way that'll grow the number of customers and keep them coming back more often. Now, we control the first two of those, the buyer count and the order frequency, a bit more than we do the average order value. now we control the first two of those the buyer count and the order frequency a bit more than we do the average order value Prices are set by our sellers, and we have some I'll talk about a little bit later. prices are set by our sellers and we have some i'll talk about a little bit later We have ability to influence that. we have ability to influence that Primarily, we focus on the customer experience in a way that'll grow the number of customers and keep them coming back more often. primarily we focus on the customer experience in a way that'll grow the number of customers and keep them coming back more often The priorities I talked about that went in place mid-year 2025 and have been gradually building some momentum, gave us a point of view that we are starting to see the initial signs of what can be durable, sustainable, long-term growth in GMS, built atop a healthier buyer base and a stabilizing and hopefully improving level of frequency amongst those buyers. There's been some changes. There are other components of it. We've been migrating more and more of our user experience to our mobile application. The priorities I talked about that went in place mid-year 2025 and have been gradually building some momentum, gave us a point of view that we are starting to see the initial signs of what can be durable, sustainable, long-term growth in GMS, built atop a healthier buyer base and a stabilizing and hopefully improving level of frequency amongst those buyers. the priorities i talked about that went in place mid-year 2025 and have been gradually building some momentum gave us a point of view that we are starting to see the initial signs of what can be durable sustainable long-term growth in gms built atop a healthier buyer base and a stabilizing and hopefully improving level of frequency amongst those buyers There's been some changes. there's been some changes There are other components of it. there are other components of it We've been migrating more and more of our user experience to our mobile application. we've been migrating more and more of our user experience to our mobile application Our mobile application is this wonderful platform where kind of obviously people are logged in as users, and we have an ability to capture so much data about not only what they purchased, but what they looked at, what they flipped past, what they dwelled on, how we can present stuff that might spur new shopping missions for them and really begin to understand their taste. Our mobile application is this wonderful platform where kind of obviously people are logged in as users, and we have an ability to capture so much data about not only what they purchased, but what they looked at, what they flipped past, what they dwelled on, how we can present stuff that might spur new shopping missions for them and really begin to understand their taste. our mobile application is this wonderful platform where kind of obviously people are logged in as users and we have an ability to capture so much data about not only what they purchased but what they looked at what they flipped past what they dwelled on how we can present stuff that might spur new shopping missions for them and really begin to understand their taste That logged in mobile experience, it's a great incubator for and a great test bed for us to apply all the things we want to do to create that real personalized experience. The mobile app grew in the first quarter. GMS through the mobile app grew 11% year-over-year. Total GMS grew 5.5%. Now, the mobile app is getting close to 50% of our business. It's 47% of GMS. A few years ago, it was in the low 40%. That logged in mobile experience, it's a great incubator for and a great test bed for us to apply all the things we want to do to create that real personalized experience. that logged in mobile experience it's a great incubator for and a great test bed for us to apply all the things we want to do to create that real personalized experience The mobile app grew in the first quarter. the mobile app grew in the first quarter GMS through the mobile app grew 11% year-over-year. gms through the mobile app grew 11% year-over-year Total GMS grew 5.5%. total gms grew 5.5% Now, the mobile app is getting close to 50% of our business. now the mobile app is getting close to 50% of our business It's 47% of GMS. it's 47% of gms A few years ago, it was in the low 40%. a few years ago it was in the low 40% As we're getting more and more people onto the mobile app, we have more visibility about. We know about them. We know when they're going to come back. We know how to bring them back, and that's helped us also have a little bit more visibility. There's some other things beyond the mobile app that have been really important to us. As we're getting more and more people onto the mobile app, we have more visibility about. as we're getting more and more people onto the mobile app we have more visibility about We know about them. we know about them We know when they're going to come back. we know when they're going to come back We know how to bring them back, and that's helped us also have a little bit more visibility. we know how to bring them back and that's helped us also have a little bit more visibility There's some other things beyond the mobile app that have been really important to us. there's some other things beyond the mobile app that have been really important to us We've developed with, alongside that, a much stronger set of push marketing channels that are company-owned channels, both our outbound emails to buyers and users, and our push notifications to the mobile app. What we love about those two channels is they're very, very personalized and very, very personalizable, and there's no third-party media company that we're paying. There's nobody standing between Etsy and that direct relationship with the customer. When we use those channels with more targeted messages, we're finding great response rates to those. We've developed with, alongside that, a much stronger set of push marketing channels that are company-owned channels, both our outbound emails to buyers and users, and our push notifications to the mobile app. we've developed with alongside that a much stronger set of push marketing channels that are company-owned channels both our outbound emails to buyers and users and our push notifications to the mobile app What we love about those two channels is they're very, very personalized and very, very personalizable, and there's no third-party media company that we're paying. what we love about those two channels is they're very very personalized and very very personalizable and there's no third-party media company that we're paying There's nobody standing between Etsy and that direct relationship with the customer. there's nobody standing between etsy and that direct relationship with the customer When we use those channels with more targeted messages, we're finding great response rates to those. when we use those channels with more targeted messages we're finding great response rates to those All those things are kind of interconnected with everything I talked about in terms of strategic priorities. As those priorities are starting to yield real product efficacy improvements, it's giving us a bit more confidence. We're not at the level of growth that we want to be at yet, but it's giving us a little bit more confidence to look forward a little bit more, and provide investors with a little bit clearer set of expectations for the next 12 months. All those things are kind of interconnected with everything I talked about in terms of strategic priorities. all those things are kind of interconnected with everything i talked about in terms of strategic priorities As those priorities are starting to yield real product efficacy improvements, it's giving us a bit more confidence. as those priorities are starting to yield real product efficacy improvements it's giving us a bit more confidence We're not at the level of growth that we want to be at yet, but it's giving us a little bit more confidence to look forward a little bit more, and provide investors with a little bit clearer set of expectations for the next 12 months. we're not at the level of growth that we want to be at yet but it's giving us a little bit more confidence to look forward a little bit more and provide investors with a little bit clearer set of expectations for the next 12 months

Speaker 2: Does the mobile app also cultivate the opportunity to introduce customers to newer categories or newer use cases or improve their on-site experience in a way that was tougher to do before? Does the mobile app also cultivate the opportunity to introduce customers to newer categories or newer use cases or improve their on-site experience in a way that was tougher to do before? does the mobile app also cultivate the opportunity to introduce customers to newer categories or newer use cases or improve their on-site experience in a way that was tougher to do before

Speaker 1: Absolutely. Absolutely. Primarily, the fact that it's logged in usage on the mobile app is great for us understanding who it is. I think there's a demographic component, quite honestly, to the mobile app as well. It's younger users. So much of e-commerce today happens on a mobile phone rather than on a desktop. I'd say in many ways, the mobile app is just the more commonly native environment for e-commerce activity. Absolutely. absolutely Absolutely. absolutely Primarily, the fact that it's logged in usage on the mobile app is great for us understanding who it is. primarily the fact that it's logged in usage on the mobile app is great for us understanding who it is I think there's a demographic component, quite honestly, to the mobile app as well. i think there's a demographic component quite honestly to the mobile app as well It's younger users. it's younger users So much of e-commerce today happens on a mobile phone rather than on a desktop. so much of e-commerce today happens on a mobile phone rather than on a desktop I'd say in many ways, the mobile app is just the more commonly native environment for e-commerce activity. i'd say in many ways the mobile app is just the more commonly native environment for e-commerce activity What we're finding with the mobile app is an ability to create a landing page for you. Your home screen is custom-built for you as a user, and that personalized home page is providing increases in clicks and engagement, conversion, GMS. That's just the tip of the whole product experience. What we're finding with the mobile app is an ability to create a landing page for you. what we're finding with the mobile app is an ability to create a landing page for you Your home screen is custom-built for you as a user, and that personalized home page is providing increases in clicks and engagement, conversion, GMS. your home screen is custom-built for you as a user and that personalized home page is providing increases in clicks and engagement conversion gms That's just the tip of the whole product experience. that's just the tip of the whole product experience It's also in the mobile app, we've been able to launch tabs and sliders that can start to take people across the breadth of Etsy inventory. One of the things about the way that people engage with Etsy is certainly there are people who come in who have a very specific product or an item that they're looking for, and they come in through a keyword search. But often that item that they're looking for is associated not so much with just that item, but it's an occasion. It's also in the mobile app, we've been able to launch tabs and sliders that can start to take people across the breadth of Etsy inventory. it's also in the mobile app we've been able to launch tabs and sliders that can start to take people across the breadth of etsy inventory One of the things about the way that people engage with Etsy is certainly there are people who come in who have a very specific product or an item that they're looking for, and they come in through a keyword search. one of the things about the way that people engage with etsy is certainly there are people who come in who have a very specific product or an item that they're looking for and they come in through a keyword search But often that item that they're looking for is associated not so much with just that item, but it's an occasion. but often that item that they're looking for is associated not so much with just that item but it's an occasion I'm going to be a house guest, or I'm having a baby, or my colleague is getting married. And those occasions are wonderful opportunities when we recognize that somebody's come to Etsy for one of those occasions to market the cross-category breadth of our inventory, which is really unique amongst marketplaces like ours. I'm going to be a house guest, or I'm having a baby, or my colleague is getting married. i'm going to be a house guest or i'm having a baby or my colleague is getting married And those occasions are wonderful opportunities when we recognize that somebody's come to Etsy for one of those occasions to market the cross-category breadth of our inventory, which is really unique amongst marketplaces like ours. and those occasions are wonderful opportunities when we recognize that somebody's come to etsy for one of those occasions to market the cross-category breadth of our inventory which is really unique amongst marketplaces like ours The mobile app provides a great format and framework for us to begin to expand those shopping missions in an occasion-based and personalized way that is really hard to do with an unlogged in user on the desktop who just wants to close out that transaction. That's really helping us. The mobile app provides a great format and framework for us to begin to expand those shopping missions in an occasion-based and personalized way that is really hard to do with an unlogged in user on the desktop who just wants to close out that transaction. the mobile app provides a great format and framework for us to begin to expand those shopping missions in an occasion-based and personalized way that is really hard to do with an unlogged in user on the desktop who just wants to close out that transaction That's really helping us. that's really helping us

Speaker 2: Where are you broadly on this journey of systematically collecting data and knowing more about your customer to be able to have that more personalized shopping experience for them? Where are you broadly on this journey of systematically collecting data and knowing more about your customer to be able to have that more personalized shopping experience for them? where are you broadly on this journey of systematically collecting data and knowing more about your customer to be able to have that more personalized shopping experience for them

Speaker 1: I think we're pretty early. We're really excited about the progress we've made, one of the reasons why I'd say we're early is 50% of our users have the mobile app and 50% don't. We've got an opportunity to get more, which we can make steady progress on, which are making steady progress on in getting more people on the mobile app. I think we're pretty early. i think we're pretty early We're really excited about the progress we've made, one of the reasons why I'd say we're early is 50% of our users have the mobile app and 50% don't. we're really excited about the progress we've made one of the reasons why i'd say we're early is 50% of our users have the mobile app and 50% don't We've got an opportunity to get more, which we can make steady progress on, which are making steady progress on in getting more people on the mobile app. we've got an opportunity to get more which we can make steady progress on which are making steady progress on in getting more people on the mobile app We're getting more sophisticated about how we use the space on the mobile app to not just drive conversion, but to learn and gain valuable insights about the users. This is a place where ML and AI are helping us more quickly make inferences about the profile and the preferences of those consumers, than we would be able to without those tools at our availability. We're in early stages. We're getting more sophisticated about how we use the space on the mobile app to not just drive conversion, but to learn and gain valuable insights about the users. we're getting more sophisticated about how we use the space on the mobile app to not just drive conversion but to learn and gain valuable insights about the users This is a place where ML and AI are helping us more quickly make inferences about the profile and the preferences of those consumers, than we would be able to without those tools at our availability. this is a place where ml and ai are helping us more quickly make inferences about the profile and the preferences of those consumers than we would be able to without those tools at our availability We're in early stages. we're in early stages I would say, we've been at it for a couple of years, maybe, getting close to a couple of years now. This is a runway that looks to us like it's really long from here. There's a lot of opportunity for us to get better in this game. I would say, we've been at it for a couple of years, maybe, getting close to a couple of years now. i would say we've been at it for a couple of years maybe getting close to a couple of years now This is a runway that looks to us like it's really long from here. this is a runway that looks to us like it's really long from here There's a lot of opportunity for us to get better in this game. there's a lot of opportunity for us to get better in this game

Speaker 2: We're sort of talking about different components, essentially, of order frequency or order frequency improvement potential. Kruti talked about, I think on the last earnings call, really honing in on an improved end-to-end experience. When you envision what an end-to-end experience is and what the stages are that make up that end-to-end experience, what are those key components and what are the ways are you improving upon those different components? We're sort of talking about different components, essentially, of order frequency or order frequency improvement potential. we're sort of talking about different components essentially of order frequency or order frequency improvement potential Kruti talked about, I think on the last earnings call, really honing in on an improved end-to-end experience. kruti talked about i think on the last earnings call really honing in on an improved end-to-end experience When you envision what an end-to-end experience is and what the stages are that make up that end-to-end experience, what are those key components and what are the ways are you improving upon those different components? when you envision what an end-to-end experience is and what the stages are that make up that end-to-end experience what are those key components and what are the ways are you improving upon those different components

Speaker 1: In marketing speak, it would be consideration, engagement, conversion, and retention. In marketing speak, it would be consideration, engagement, conversion, and retention. in marketing speak it would be consideration engagement conversion and retention

Speaker 2: Yeah. Yeah. yeah

Speaker 1: Those are the textbook dimensions of it. I think one of the things that Kruti has, and that we are really driving toward in terms of a change in the way Etsy is run, the way Etsy thinks, the way Etsy's organized, the way we operate, is that we are looking at the whole user experience as an ecosystem. It is not product does this and marketing does that, and customer support does this. It's really all of those different functions that touch the customers and how they interplay with each other. Those are the textbook dimensions of it. those are the textbook dimensions of it I think one of the things that Kruti has, and that we are really driving toward in terms of a change in the way Etsy is run, the way Etsy thinks, the way Etsy's organized, the way we operate, is that we are looking at the whole user experience as an ecosystem. i think one of the things that kruti has and that we are really driving toward in terms of a change in the way etsy is run the way etsy thinks the way etsy's organized the way we operate is that we are looking at the whole user experience as an ecosystem It is not product does this and marketing does that, and customer support does this. it is not product does this and marketing does that and customer support does this It's really all of those different functions that touch the customers and how they interplay with each other. it's really all of those different functions that touch the customers and how they interplay with each other When she's talking about an end-to-end experience, I used the word legibility earlier, she wants to make it legible that whether you're just coming for a single purchase or you're coming back to just browse, or you're receiving a personalized notification from us, or you're just seeing some of our advertising out in the wild, across all of those things, there is an end-to-end experience that speaks Etsy. When she's talking about an end-to-end experience, I used the word legibility earlier, she wants to make it legible that whether you're just coming for a single purchase or you're coming back to just browse, or you're receiving a personalized notification from us, or you're just seeing some of our advertising out in the wild, across all of those things, there is an end-to-end experience that speaks Etsy. when she's talking about an end-to-end experience i used the word legibility earlier she wants to make it legible that whether you're just coming for a single purchase or you're coming back to just browse or you're receiving a personalized notification from us or you're just seeing some of our advertising out in the wild across all of those things there is an end-to-end experience that speaks etsy The products that we're showing, the way in which we're showing them, the emphasis that we place on showing the maker, the seller, the human being behind the good, all of those things sort of interplay together to really build Etsy's differentiation in a way that we really don't think anybody can match. We think we've got a strong lead there. We've got a lot of opportunity to continue to advance that. The products that we're showing, the way in which we're showing them, the emphasis that we place on showing the maker, the seller, the human being behind the good, all of those things sort of interplay together to really build Etsy's differentiation in a way that we really don't think anybody can match. the products that we're showing the way in which we're showing them the emphasis that we place on showing the maker the seller the human being behind the good all of those things sort of interplay together to really build etsy's differentiation in a way that we really don't think anybody can match We think we've got a strong lead there. we think we've got a strong lead there We've got a lot of opportunity to continue to advance that. we've got a lot of opportunity to continue to advance that We want to have an experience that speaks Etsy from the time you see the ad all the way through the time that you're invited back because we sent you a really personalized message. We'll come back to those things I talked about in terms of the real essence of the brand. We want to have an experience that speaks Etsy from the time you see the ad all the way through the time that you're invited back because we sent you a really personalized message. we want to have an experience that speaks etsy from the time you see the ad all the way through the time that you're invited back because we sent you a really personalized message We'll come back to those things I talked about in terms of the real essence of the brand. we'll come back to those things i talked about in terms of the real essence of the brand

Speaker 2: How do you highlight better listing quality on the platform? Because I think that's been one area of criticism of Etsy has been maybe the marketplace has been overrun in recent years by some inventory that isn't as unique or handmade, right? How do you highlight better listing quality on the platform? how do you highlight better listing quality on the platform Because I think that's been one area of criticism of Etsy has been maybe the marketplace has been overrun in recent years by some inventory that isn't as unique or handmade, right? because i think that's been one area of criticism of etsy has been maybe the marketplace has been overrun in recent years by some inventory that isn't as unique or handmade right

Speaker 1: Yeah. Yeah. yeah

Speaker 2: This has been a big strategic focus to make sure that the quality of what people see is what they expect, and to be able to build that human connection, with sellers and discover differentiated inventory. This has been a big strategic focus to make sure that the quality of what people see is what they expect, and to be able to build that human connection, with sellers and discover differentiated inventory. this has been a big strategic focus to make sure that the quality of what people see is what they expect and to be able to build that human connection with sellers and discover differentiated inventory

Speaker 1: Right. Right. right

Speaker 2: How do you go about creating that experience? How do you go about creating that experience? how do you go about creating that experience

Speaker 1: Well, I think you put your finger on something that's really important, which is Kruti talks a lot about moving from transactions to relationships. Instead of trying to capture as many transactions as we can and get you through to the click and the buy button and done as fast as possible, but to think alongside that about building a relationship between you and Etsy. Well, I think you put your finger on something that's really important, which is Kruti talks a lot about moving from transactions to relationships. well i think you put your finger on something that's really important which is kruti talks a lot about moving from transactions to relationships Instead of trying to capture as many transactions as we can and get you through to the click and the buy button and done as fast as possible, but to think alongside that about building a relationship between you and Etsy. instead of trying to capture as many transactions as we can and get you through to the click and the buy button and done as fast as possible but to think alongside that about building a relationship between you and etsy We're very focused on not just as we surface search results, not just that thing that is going to convert the fastest and the best today, which will often lead your search algorithm to optimize for what's the most popular thing we can possibly show you, and it may not be the tightest fit. It might be the highest converting, but it may not be the tightest fit to what you're really looking at. We're very focused on not just as we surface search results, not just that thing that is going to convert the fastest and the best today, which will often lead your search algorithm to optimize for what's the most popular thing we can possibly show you, and it may not be the tightest fit. we're very focused on not just as we surface search results not just that thing that is going to convert the fastest and the best today which will often lead your search algorithm to optimize for what's the most popular thing we can possibly show you and it may not be the tightest fit It might be the highest converting, but it may not be the tightest fit to what you're really looking at. it might be the highest converting but it may not be the tightest fit to what you're really looking at It may not be personalized to you at all. We are trying to put a little bit of the brakes on the historical emphasis on just show that which converts fastest and best, and lean a little bit more into who are you? What's the context of your occasion that you're looking for? What do we know about you? With all of that information, what's the right item? I think structurally, we looked in the past, often we surfaced listings, what did you query and what is the item? It may not be personalized to you at all. it may not be personalized to you at all We are trying to put a little bit of the brakes on the historical emphasis on just show that which converts fastest and best, and lean a little bit more into who are you? we are trying to put a little bit of the brakes on the historical emphasis on just show that which converts fastest and best and lean a little bit more into who are you What's the context of your occasion that you're looking for? what's the context of your occasion that you're looking for What do we know about you? what do we know about you With all of that information, what's the right item? with all of that information what's the right item I think structurally, we looked in the past, often we surfaced listings, what did you query and what is the item? i think structurally we looked in the past often we surfaced listings what did you query and what is the item We matched the two. The big change today is what did you query, what is the item, and who are you? We match all three. That's leading to better conversion rates, better customer satisfaction, and a greater likelihood that the user comes out and says, "Hey, Etsy knows me. We matched the two. we matched the two The big change today is what did you query, what is the item, and who are you? the big change today is what did you query what is the item and who are you We match all three. we match all three That's leading to better conversion rates, better customer satisfaction, and a greater likelihood that the user comes out and says, "Hey, Etsy knows me. that's leading to better conversion rates better customer satisfaction and a greater likelihood that the user comes out and says "hey etsy knows me That was really cool what they showed me as a search result. Which you don't get when you're just optimizing for, we don't know who you are, but most people like this item. That was really cool what they showed me as a search result. that was really cool what they showed me as a search result Which you don't get when you're just optimizing for, we don't know who you are, but most people like this item. which you don't get when you're just optimizing for we don't know who you are but most people like this item

Speaker 2: Active buyers is the other key component of GMS growth. They were down a bit in the last quarter. It seems like we've seen some stabilization, at least with regards to sequential trends in active buyers and even dynamics like gross adds are starting to look a little bit better. Are you optimistic that we are on the cusp of better active buyer growth from here? Active buyers is the other key component of GMS growth. active buyers is the other key component of gms growth They were down a bit in the last quarter. they were down a bit in the last quarter It seems like we've seen some stabilization, at least with regards to sequential trends in active buyers and even dynamics like gross adds are starting to look a little bit better. it seems like we've seen some stabilization at least with regards to sequential trends in active buyers and even dynamics like gross adds are starting to look a little bit better Are you optimistic that we are on the cusp of better active buyer growth from here? are you optimistic that we are on the cusp of better active buyer growth from here

Speaker 1: Yeah, we're encouraged about where we are on active buyers. Last quarter, I think on a year-over-year basis, in the 12 months ending March, compared to the 12 months ending March a year ago, we were down about 2% in the number of total buyers. In the 12 months ending March versus the 12 months ending December just before, we were up by 100,000 or a little bit more than that. That's the first time we've seen a sequential improvement in trailing 12-month buyers in two years plus. What's driving that is our, you put your finger on it, the gross additions have really started to increase. Yeah, we're encouraged about where we are on active buyers. yeah we're encouraged about where we are on active buyers Last quarter, I think on a year-over-year basis, in the 12 months ending March, compared to the 12 months ending March a year ago, we were down about 2% in the number of total buyers. last quarter i think on a year-over-year basis in the 12 months ending march compared to the 12 months ending march a year ago we were down about 2% in the number of total buyers In the 12 months ending March versus the 12 months ending December just before, we were up by 100,000 or a little bit more than that. in the 12 months ending march versus the 12 months ending december just before we were up by 100,000 or a little bit more than that That's the first time we've seen a sequential improvement in trailing 12-month buyers in two years plus. that's the first time we've seen a sequential improvement in trailing 12-month buyers in two years plus What's driving that is our, you put your finger on it, the gross additions have really started to increase. what's driving that is our you put your finger on it the gross additions have really started to increase I think we had a 7% increase in the number of reactivated buyers, people who had bought with us a few years ago, but then lapsed and hadn't bought with us for a couple of years and were now coming back. We had our first increase in new buyers in several years. Those numbers of new buyers and reactivated buyers, the growth rates there, have been improving kind of quarter-over-quarter-over-quarter for the last three or four quarters. We're seeing the top of the funnel start to improve in both new and reactivated buyers. The bigger long-term lever is retaining and driving the frequency of the existing ongoing buyers. I think we had a 7% increase in the number of reactivated buyers, people who had bought with us a few years ago, but then lapsed and hadn't bought with us for a couple of years and were now coming back. i think we had a 7% increase in the number of reactivated buyers people who had bought with us a few years ago but then lapsed and hadn't bought with us for a couple of years and were now coming back We had our first increase in new buyers in several years. we had our first increase in new buyers in several years Those numbers of new buyers and reactivated buyers, the growth rates there, have been improving kind of quarter-over-quarter-over-quarter for the last three or four quarters. those numbers of new buyers and reactivated buyers the growth rates there have been improving kind of quarter-over-quarter-over-quarter for the last three or four quarters We're seeing the top of the funnel start to improve in both new and reactivated buyers. we're seeing the top of the funnel start to improve in both new and reactivated buyers The bigger long-term lever is retaining and driving the frequency of the existing ongoing buyers. the bigger long-term lever is retaining and driving the frequency of the existing ongoing buyers

Speaker 2: Can we talk to both of those pieces, new and reactivated? Can we talk to both of those pieces, new and reactivated? can we talk to both of those pieces new and reactivated

Speaker 1: Yeah. Yeah. yeah

Speaker 2: With the new buyers, what went well in Q1? How do you think about the durability of that trend in new buyer growth? With the new buyers, what went well in Q1? with the new buyers what went well in q1 How do you think about the durability of that trend in new buyer growth? how do you think about the durability of that trend in new buyer growth

Speaker 1: I think we've talked about our strategic priority on showing up where the buyers are. I think we've talked about our strategic priority on showing up where the buyers are. i think we've talked about our strategic priority on showing up where the buyers are New buyers, we discover them more in search, paid and organic search, than anywhere else. We have had a pretty good run in paid search over many, many years and also over the last several quarters. The competitive dynamic has changed in paid search a little bit. Amazon has pulled out of Product Listing Ads. New buyers, we discover them more in search, paid and organic search, than anywhere else. new buyers we discover them more in search paid and organic search than anywhere else We have had a pretty good run in paid search over many, many years and also over the last several quarters. we have had a pretty good run in paid search over many many years and also over the last several quarters The competitive dynamic has changed in paid search a little bit. the competitive dynamic has changed in paid search a little bit Amazon has pulled out of Product Listing Ads. amazon has pulled out of product listing ads That's made Etsy gain a little bit more visibility in Product Listing Ads. Then behind that, in our paid search acquisition, we've had some martech, marketing technology advances in terms of the feed that we provide, the segmentation of the listings that we provide to Google, that are helping them surface more relevant ads in the slots that we are buying from Google in Product Listing Ads. We're doing quite well on the paid side. That's made Etsy gain a little bit more visibility in Product Listing Ads. that's made etsy gain a little bit more visibility in product listing ads Then behind that, in our paid search acquisition, we've had some martech, marketing technology advances in terms of the feed that we provide, the segmentation of the listings that we provide to Google, that are helping them surface more relevant ads in the slots that we are buying from Google in Product Listing Ads. then behind that in our paid search acquisition we've had some martech marketing technology advances in terms of the feed that we provide the segmentation of the listings that we provide to google that are helping them surface more relevant ads in the slots that we are buying from google in product listing ads We're doing quite well on the paid side. we're doing quite well on the paid side In the first quarter, after a period of, I'd say, moderate small declines and kind of stagnation, our organic traffic through search has started to improve. There was a little bit of improvement in year-to-year numbers in prior quarters, for the first time in a while, we've now moved back into positive territory on the organic side of search. I think that reflects work that we've done, you talked about a minute ago, working on our listings and the way the listings show up. In the first quarter, after a period of, I'd say, moderate small declines and kind of stagnation, our organic traffic through search has started to improve. in the first quarter after a period of i'd say moderate small declines and kind of stagnation our organic traffic through search has started to improve There was a little bit of improvement in year-to-year numbers in prior quarters, for the first time in a while, we've now moved back into positive territory on the organic side of search. there was a little bit of improvement in year-to-year numbers in prior quarters for the first time in a while we've now moved back into positive territory on the organic side of search I think that reflects work that we've done, you talked about a minute ago, working on our listings and the way the listings show up. i think that reflects work that we've done you talked about a minute ago working on our listings and the way the listings show up We made some back-end changes to the site architecture that help elevate the page rank of listings on Etsy. That's helped our search engine optimization traffic as well. On the new side, I would say the biggest improvement, the biggest driver, has really been sharpening what's already been a very, very strong game at Etsy on the search, both paid and organic side. We made some back-end changes to the site architecture that help elevate the page rank of listings on Etsy. we made some back-end changes to the site architecture that help elevate the page rank of listings on etsy That's helped our search engine optimization traffic as well. that's helped our search engine optimization traffic as well On the new side, I would say the biggest improvement, the biggest driver, has really been sharpening what's already been a very, very strong game at Etsy on the search, both paid and organic side. on the new side i would say the biggest improvement the biggest driver has really been sharpening what's already been a very very strong game at etsy on the search both paid and organic side On the reactivated side, it's a little bit different story. I think some of the headline drivers of reactivation have been social media is a great channel we've found for tapping people on the shoulder and saying, "Hey, you haven't thought about Etsy in a while, and you may not be searching for a product in a keyword box right now, but remember Etsy." On the reactivated side, it's a little bit different story. on the reactivated side it's a little bit different story I think some of the headline drivers of reactivation have been social media is a great channel we've found for tapping people on the shoulder and saying, "Hey, you haven't thought about Etsy in a while, and you may not be searching for a product in a keyword box right now, but remember Etsy." i think some of the headline drivers of reactivation have been social media is a great channel we've found for tapping people on the shoulder and saying "hey you haven't thought about etsy in a while and you may not be searching for a product in a keyword box right now but remember etsy." The advertising that we promote through that channel has helped us go and tap people on the shoulder again. When they've come in off of that, we've done our best to either land them in or to drive them to our mobile app experience. The mobile experience is one that is just more personalized. It delivers a more relevant, more 2026 product experience. The advertising that we promote through that channel has helped us go and tap people on the shoulder again. the advertising that we promote through that channel has helped us go and tap people on the shoulder again When they've come in off of that, we've done our best to either land them in or to drive them to our mobile app experience. when they've come in off of that we've done our best to either land them in or to drive them to our mobile app experience The mobile experience is one that is just more personalized. the mobile experience is one that is just more personalized It delivers a more relevant, more 2026 product experience. it delivers a more relevant more 2026 product experience The lifetime value of a user on the mobile app is about 40% higher than the lifetime value of a user who has not adopted the mobile app. As we're bringing back repeat visitors, reactivated visitors into the mobile app, the frequency that we're seeing from them and our ability to communicate with them has gotten better. Once they're on that, we've reactivated them. The lifetime value of a user on the mobile app is about 40% higher than the lifetime value of a user who has not adopted the mobile app. the lifetime value of a user on the mobile app is about 40% higher than the lifetime value of a user who has not adopted the mobile app As we're bringing back repeat visitors, reactivated visitors into the mobile app, the frequency that we're seeing from them and our ability to communicate with them has gotten better. as we're bringing back repeat visitors reactivated visitors into the mobile app the frequency that we're seeing from them and our ability to communicate with them has gotten better Once they're on that, we've reactivated them. once they're on that we've reactivated them We use those push channels that I talked about earlier, those owned email and push notifications through the app, to remind people about occasions that they bought from Etsy in the past or new things that have come on the market that seem to resonate with who we have profiled that buyer to be. We use those push channels that I talked about earlier, those owned email and push notifications through the app, to remind people about occasions that they bought from Etsy in the past or new things that have come on the market that seem to resonate with who we have profiled that buyer to be. we use those push channels that i talked about earlier those owned email and push notifications through the app to remind people about occasions that they bought from etsy in the past or new things that have come on the market that seem to resonate with who we have profiled that buyer to be That has helped us, not only social media's helped us refine those buyers, and then the mobile app and our push notification, our own media channels have really helped us stimulate the activity of those folks. That has helped us, not only social media's helped us refine those buyers, and then the mobile app and our push notification, our own media channels have really helped us stimulate the activity of those folks. that has helped us not only social media's helped us refine those buyers and then the mobile app and our push notification our own media channels have really helped us stimulate the activity of those folks

Speaker 2: A couple quick follow-ups there. One on the point of mobile app LTV being so much higher. Is that a causal relationship you've seen over time with cohorts when you introduce so much of the mobile app that you tend to see the follow-through then in lifetime value? A couple quick follow-ups there. a couple quick follow-ups there One on the point of mobile app LTV being so much higher. one on the point of mobile app ltv being so much higher Is that a causal relationship you've seen over time with cohorts when you introduce so much of the mobile app that you tend to see the follow-through then in lifetime value? is that a causal relationship you've seen over time with cohorts when you introduce so much of the mobile app that you tend to see the follow-through then in lifetime value

Speaker 1: Yeah, I mean, for a long time we thought it was a self-selection, but it is a causal thing at this point because the experience is just so different. We've opened up this. I talked a moment ago about push and email, and they sound like, well, that doesn't sound like the biggest deal. Yeah, I mean, for a long time we thought it was a self-selection, but it is a causal thing at this point because the experience is just so different. yeah i mean for a long time we thought it was a self-selection but it is a causal thing at this point because the experience is just so different We've opened up this. we've opened up this I talked a moment ago about push and email, and they sound like, well, that doesn't sound like the biggest deal. i talked a moment ago about push and email and they sound like well that doesn't sound like the biggest deal A couple of years ago, our email and push channels did about half as much GMS, gross merchandise sales, for us, as did our Google paid advertising through PLAs. Two years ago, it was about half as big. Today, those paid search through Google PLAs has grown. The size of our owned channels in terms of their GMS that they drive is now neck and neck with the Google channel. A couple of years ago, our email and push channels did about half as much GMS, gross merchandise sales, for us, as did our Google paid advertising through PLAs. a couple of years ago our email and push channels did about half as much gms gross merchandise sales for us as did our google paid advertising through plas Two years ago, it was about half as big. two years ago it was about half as big Today, those paid search through Google PLAs has grown. today those paid search through google plas has grown The size of our owned channels in terms of their GMS that they drive is now neck and neck with the Google channel. the size of our owned channels in terms of their gms that they drive is now neck and neck with the google channel That's part of how we have made it be a causal relationship, that once we've got you on the mobile app and we know who you are, we can deliver you a better product experience that leads to better purchase activity down the road. That's part of how we have made it be a causal relationship, that once we've got you on the mobile app and we know who you are, we can deliver you a better product experience that leads to better purchase activity down the road. that's part of how we have made it be a causal relationship that once we've got you on the mobile app and we know who you are we can deliver you a better product experience that leads to better purchase activity down the road

Speaker 2: Has this experience and the progress that you just described, has it structurally changed your approach and philosophy around marketing, be it the mix or the strategy of how you deploy marketing dollars? Has this experience and the progress that you just described, has it structurally changed your approach and philosophy around marketing, be it the mix or the strategy of how you deploy marketing dollars? has this experience and the progress that you just described has it structurally changed your approach and philosophy around marketing be it the mix or the strategy of how you deploy marketing dollars

Speaker 1: It has in a way, and that is that when you have a big channel where you're not paying a third party, and it's a marketing channel that is driving GMS, it means that the overall ROI on your marketing activities has improved because a big chunk of it is now effectively media costless. It has in a way, and that is that when you have a big channel where you're not paying a third party, and it's a marketing channel that is driving GMS, it means that the overall ROI on your marketing activities has improved because a big chunk of it is now effectively media costless. it has in a way and that is that when you have a big channel where you're not paying a third party and it's a marketing channel that is driving gms it means that the overall roi on your marketing activities has improved because a big chunk of it is now effectively media costless Setting that aside, we continue to run the paid part of our media marketing with a ROI-based approach rather than a budgetary approach, which is to say we are constantly trying to improve and optimize the conversion that we get out of each dollar that we spend on Google, on TikTok, on Facebook, on any other outlet. Setting that aside, we continue to run the paid part of our media marketing with a ROI-based approach rather than a budgetary approach, which is to say we are constantly trying to improve and optimize the conversion that we get out of each dollar that we spend on Google, on TikTok, on Facebook, on any other outlet. setting that aside we continue to run the paid part of our media marketing with a roi-based approach rather than a budgetary approach which is to say we are constantly trying to improve and optimize the conversion that we get out of each dollar that we spend on google on tiktok on facebook on any other outlet When we find improvements, when we achieve improvements through those channels, that means our ROI goes up. That means our spend goes up. When we find moments in time where we're not able to improve our return on advertising through those channels, you won't see us grow our budget. Where we find moments and opportunities to improve our return, you'll see us put more money and maintain that return on investment. When we find improvements, when we achieve improvements through those channels, that means our ROI goes up. when we find improvements when we achieve improvements through those channels that means our roi goes up That means our spend goes up. that means our spend goes up When we find moments in time where we're not able to improve our return on advertising through those channels, you won't see us grow our budget. when we find moments in time where we're not able to improve our return on advertising through those channels you won't see us grow our budget Where we find moments and opportunities to improve our return, you'll see us put more money and maintain that return on investment. where we find moments and opportunities to improve our return you'll see us put more money and maintain that return on investment When you talked about mindset from a marketing, we have been, over the last 12 months, it hasn't been that hard to do, but we have really made a concerted effort to modernize our marketing portfolio. We had a lot of television advertising that we were doing 18, 24 months ago, linear cable and things like that, and that's all gone. We've moved those dollars into social media, into streaming, into podcasts, where we're finding, I think, a more responsive audience of younger people with more money to spend, more growth in their incomes. That's been pretty helpful to us as well. When you talked about mindset from a marketing, we have been, over the last 12 months, it hasn't been that hard to do, but we have really made a concerted effort to modernize our marketing portfolio. when you talked about mindset from a marketing we have been over the last 12 months it hasn't been that hard to do but we have really made a concerted effort to modernize our marketing portfolio We had a lot of television advertising that we were doing 18, 24 months ago, linear cable and things like that, and that's all gone. we had a lot of television advertising that we were doing 18 24 months ago linear cable and things like that and that's all gone We've moved those dollars into social media, into streaming, into podcasts, where we're finding, I think, a more responsive audience of younger people with more money to spend, more growth in their incomes. we've moved those dollars into social media into streaming into podcasts where we're finding i think a more responsive audience of younger people with more money to spend more growth in their incomes That's been pretty helpful to us as well. that's been pretty helpful to us as well

Speaker 2: With respect to the operating environment, it feels like every year there's a new test for the consumer that we have to deal with, right? This was supposed to be a year of, I'd say, tax refunds and more spending, and it was lower rates, and all of that, I think, was the optimism coming into 2026. We've had to deal with higher energy prices, as well as conflict in the Middle East. Have you seen any big shift in consumer behavior on the back of these macro or exogenous factors? Has there been any difference in how the U.S. versus international buyer base of Etsy has behaved? With respect to the operating environment, it feels like every year there's a new test for the consumer that we have to deal with, right? with respect to the operating environment it feels like every year there's a new test for the consumer that we have to deal with right This was supposed to be a year of, I'd say, tax refunds and more spending, and it was lower rates, and all of that, I think, was the optimism coming into 2026. this was supposed to be a year of i'd say tax refunds and more spending and it was lower rates and all of that i think was the optimism coming into 2026 We've had to deal with higher energy prices, as well as conflict in the Middle East. we've had to deal with higher energy prices as well as conflict in the middle east Have you seen any big shift in consumer behavior on the back of these macro or exogenous factors? have you seen any big shift in consumer behavior on the back of these macro or exogenous factors Has there been any difference in how the U.S. versus international buyer base of Etsy has behaved? has there been any difference in how the u.s versus international buyer base of etsy has behaved

Speaker 1: You did something that really resonates with us, which is like, it's always next year that the consumer environment's going to be a little bit clearer, and it has been a challenging consumer environment for a long time. In the first quarter of this year, for all the press and headlines and things that were going wrong, the consumer on Etsy held up pretty well. We saw better trends among higher income households than we had seen in prior quarters. You did something that really resonates with us, which is like, it's always next year that the consumer environment's going to be a little bit clearer, and it has been a challenging consumer environment for a long time. you did something that really resonates with us which is like it's always next year that the consumer environment's going to be a little bit clearer and it has been a challenging consumer environment for a long time In the first quarter of this year, for all the press and headlines and things that were going wrong, the consumer on Etsy held up pretty well. in the first quarter of this year for all the press and headlines and things that were going wrong the consumer on etsy held up pretty well We saw better trends among higher income households than we had seen in prior quarters. we saw better trends among higher income households than we had seen in prior quarters We saw better trends among lower income households than we had in recently prior quarters. Higher income households are performing a bit better than lower income households. That's a story I think a lot of people see as well. Overall, the consumer was pretty resilient in the first quarter of this year. You asked a little bit about the sort of geographic mix. We saw better trends among lower income households than we had in recently prior quarters. we saw better trends among lower income households than we had in recently prior quarters Higher income households are performing a bit better than lower income households. higher income households are performing a bit better than lower income households That's a story I think a lot of people see as well. that's a story i think a lot of people see as well Overall, the consumer was pretty resilient in the first quarter of this year. overall the consumer was pretty resilient in the first quarter of this year You asked a little bit about the sort of geographic mix. you asked a little bit about the sort of geographic mix The United States was our strongest market in the first quarter of this year. For the first time in a couple of years, we saw foreign currency neutral GMS growth in our international business. Inside our U.S. business, I'll give you two quick numbers. Half of our GMS is from U.S. buyers buying U.S. things, and a quarter of our GMS is from U.S. buyers buying things from outside the United States. The United States was our strongest market in the first quarter of this year. the united states was our strongest market in the first quarter of this year For the first time in a couple of years, we saw foreign currency neutral GMS growth in our international business. for the first time in a couple of years we saw foreign currency neutral gms growth in our international business Inside our U.S. business, I'll give you two quick numbers. inside our u.s business i'll give you two quick numbers Half of our GMS is from U.S. buyers buying U.S. things, and a quarter of our GMS is from U.S. buyers buying things from outside the United States. half of our gms is from u.s buyers buying u.s things and a quarter of our gms is from u.s buyers buying things from outside the united states That's kind of how our business breaks down. Last year, with the introduction of tariffs and the expiration of the de minimis, that import channel was not as strong, kind of as you would expect. One of the wonderful things about the Etsy marketplace is it's so broad and it's so diverse that there's often these self-healing offsets. We saw a little bit of pressure on the import side. That's kind of how our business breaks down. that's kind of how our business breaks down Last year, with the introduction of tariffs and the expiration of the de minimis, that import channel was not as strong, kind of as you would expect. last year with the introduction of tariffs and the expiration of the de minimis that import channel was not as strong kind of as you would expect One of the wonderful things about the Etsy marketplace is it's so broad and it's so diverse that there's often these self-healing offsets. one of the wonderful things about the etsy marketplace is it's so broad and it's so diverse that there's often these self-healing offsets We saw a little bit of pressure on the import side. we saw a little bit of pressure on the import side We saw the domestic market get a little bit stronger. As we came into this year, the import market, the U.S. import market strengthened in the first quarter from where it had been late last year. Overall it looks to us like, at least through the first quarter of the year, our consumer was pretty healthy. We saw the domestic market get a little bit stronger. we saw the domestic market get a little bit stronger As we came into this year, the import market, the U.S. import market strengthened in the first quarter from where it had been late last year. as we came into this year the import market the u.s import market strengthened in the first quarter from where it had been late last year Overall it looks to us like, at least through the first quarter of the year, our consumer was pretty healthy. overall it looks to us like at least through the first quarter of the year our consumer was pretty healthy

Speaker 2: How have sellers been coping with this? Because it's been an inflationary backdrop. You talked about de minimis and tariffs, energy prices. I would imagine their desire is to maybe try and pass costs on, but it's a competitive marketplace. How does all of that shake out in terms of how these sellers are running their businesses and what that means for the consumers on the other side of it? How have sellers been coping with this? how have sellers been coping with this Because it's been an inflationary backdrop. because it's been an inflationary backdrop You talked about de minimis and tariffs, energy prices. you talked about de minimis and tariffs energy prices I would imagine their desire is to maybe try and pass costs on, but it's a competitive marketplace. i would imagine their desire is to maybe try and pass costs on but it's a competitive marketplace How does all of that shake out in terms of how these sellers are running their businesses and what that means for the consumers on the other side of it? how does all of that shake out in terms of how these sellers are running their businesses and what that means for the consumers on the other side of it

Speaker 1: Yeah. Over the last several years, and we've had some periods through COVID and after where inflation has been pretty high, we have not seen Etsy sellers really take a lot of pricing into raising their listings prices or trying to take higher average item prices. I would say that began to change a little bit in 2025 with the introduction of tariffs, and sort of probably the compounding effect of inflation. Yeah. yeah Over the last several years, and we've had some periods through COVID and after where inflation has been pretty high, we have not seen Etsy sellers really take a lot of pricing into raising their listings prices or trying to take higher average item prices. over the last several years and we've had some periods through covid and after where inflation has been pretty high we have not seen etsy sellers really take a lot of pricing into raising their listings prices or trying to take higher average item prices I would say that began to change a little bit in 2025 with the introduction of tariffs, and sort of probably the compounding effect of inflation. i would say that began to change a little bit in 2025 with the introduction of tariffs and sort of probably the compounding effect of inflation I think that we started to see our sellers pass through increases in their raw material costs as well as some of the disruption from tariffs. It really kind of went in a couple waves. There was the initial wave around April and May when the tariffs went in place. I think that we started to see our sellers pass through increases in their raw material costs as well as some of the disruption from tariffs. i think that we started to see our sellers pass through increases in their raw material costs as well as some of the disruption from tariffs It really kind of went in a couple waves. it really kind of went in a couple waves There was the initial wave around April and May when the tariffs went in place. there was the initial wave around april and may when the tariffs went in place There was a September wave of listing price increases associated with the expiration of the de minimis exception that had sort of exempted everything under $800. Early in 2026, I think kind of after the 2025 holiday season was behind sellers, people sort of reassessing things for this year, we saw another little bump in listings prices. Our sellers have an acute sense of what the clearing price is for the things that they are making. There was a September wave of listing price increases associated with the expiration of the de minimis exception that had sort of exempted everything under $800. there was a september wave of listing price increases associated with the expiration of the de minimis exception that had sort of exempted everything under $800 Early in 2026, I think kind of after the 2025 holiday season was behind sellers, people sort of reassessing things for this year, we saw another little bump in listings prices. early in 2026 i think kind of after the 2025 holiday season was behind sellers people sort of reassessing things for this year we saw another little bump in listings prices Our sellers have an acute sense of what the clearing price is for the things that they are making. our sellers have an acute sense of what the clearing price is for the things that they are making They have a really good understanding of their market. I think what we're seeing from them is they're seeing their customer is accepting the price adjustments that they're taking. I think we will see that these price increases. I don't think the rate of increase is going to be sustained. I think the increases that have been made will probably be sustained at this level for a while. They have a really good understanding of their market. they have a really good understanding of their market I think what we're seeing from them is they're seeing their customer is accepting the price adjustments that they're taking. i think what we're seeing from them is they're seeing their customer is accepting the price adjustments that they're taking I think we will see that these price increases. i think we will see that these price increases I don't think the rate of increase is going to be sustained. i don't think the rate of increase is going to be sustained I think the increases that have been made will probably be sustained at this level for a while. i think the increases that have been made will probably be sustained at this level for a while

Speaker 2: Agentic commerce is clearly the biggest theme in the sector right now, I'd say, for consumer internet broadly. You've been an early partner to a lot of the major AI companies. What is the Etsy philosophy on working with these large-scale AI companies as partners? I think there's debate in the market as to whether E-commerce marketplaces or consumer internet businesses should be involved at all, or whether they should almost gatekeep some of their services to protect the risk of disintermediation longer term. What is your general philosophy of working with these new channels? Agentic commerce is clearly the biggest theme in the sector right now, I'd say, for consumer internet broadly. agentic commerce is clearly the biggest theme in the sector right now i'd say for consumer internet broadly You've been an early partner to a lot of the major AI companies. you've been an early partner to a lot of the major ai companies What is the Etsy philosophy on working with these large-scale AI companies as partners? what is the etsy philosophy on working with these large-scale ai companies as partners I think there's debate in the market as to whether E-commerce marketplaces or consumer internet businesses should be involved at all, or whether they should almost gatekeep some of their services to protect the risk of disintermediation longer term. i think there's debate in the market as to whether e-commerce marketplaces or consumer internet businesses should be involved at all or whether they should almost gatekeep some of their services to protect the risk of disintermediation longer term What is your general philosophy of working with these new channels? what is your general philosophy of working with these new channels

Speaker 1: I would say the number of businesses that made a strategic decision 20 years ago to not be listed in Google is not that many. There is a brand new entry point to the e-commerce world emerging through agentic chatbots and through agents. Our point of view, our philosophy, is that this is a brand new way that customers are going to come into the e-commerce shopping mall, and we very much want to embrace that and understand it and engage with it. I would say the number of businesses that made a strategic decision 20 years ago to not be listed in Google is not that many. i would say the number of businesses that made a strategic decision 20 years ago to not be listed in google is not that many There is a brand new entry point to the e-commerce world emerging through agentic chatbots and through agents. there is a brand new entry point to the e-commerce world emerging through agentic chatbots and through agents Our point of view, our philosophy, is that this is a brand new way that customers are going to come into the e-commerce shopping mall, and we very much want to embrace that and understand it and engage with it. our point of view our philosophy is that this is a brand new way that customers are going to come into the e-commerce shopping mall and we very much want to embrace that and understand it and engage with it Just like mobile and just like social and just like search, this is a new emerging consumer habit. Our view is there is so much more to be gained from getting early onto the field, into partnership, into experiment, into test, into iteration, influencing the terms that are being set around how AI advertising works or native checkout works, which we've been doing. Just like mobile and just like social and just like search, this is a new emerging consumer habit. just like mobile and just like social and just like search this is a new emerging consumer habit Our view is there is so much more to be gained from getting early onto the field, into partnership, into experiment, into test, into iteration, influencing the terms that are being set around how AI advertising works or native checkout works, which we've been doing. our view is there is so much more to be gained from getting early onto the field into partnership into experiment into test into iteration influencing the terms that are being set around how ai advertising works or native checkout works which we've been doing There's so much more to be gained from being on the field than sitting on the sidelines. Our approach has been take the risk, get active, partner with anybody and everybody. I think our agenda here is learning. Learn as much as we possibly can. I don't think the ink is dry on the business models forever of AI, and we're here to learn as much as we possibly can. There's so much more to be gained from being on the field than sitting on the sidelines. there's so much more to be gained from being on the field than sitting on the sidelines Our approach has been take the risk, get active, partner with anybody and everybody. our approach has been take the risk get active partner with anybody and everybody I think our agenda here is learning. i think our agenda here is learning Learn as much as we possibly can. learn as much as we possibly can I don't think the ink is dry on the business models forever of AI, and we're here to learn as much as we possibly can. i don't think the ink is dry on the business models forever of ai and we're here to learn as much as we possibly can What we've learned is it looks to us like it's going to be an incremental discovery channel for consumers, and at least in the early days, it's consumers with really high intent and great average order value, and they come back, and they're new users to Etsy and reactivated users. All those things tell us, why would you not be involved in this game? Our philosophy is to lean in. What we've learned is it looks to us like it's going to be an incremental discovery channel for consumers, and at least in the early days, it's consumers with really high intent and great average order value, and they come back, and they're new users to Etsy and reactivated users. what we've learned is it looks to us like it's going to be an incremental discovery channel for consumers and at least in the early days it's consumers with really high intent and great average order value and they come back and they're new users to etsy and reactivated users All those things tell us, why would you not be involved in this game? all those things tell us why would you not be involved in this game Our philosophy is to lean in. our philosophy is to lean in

Speaker 2: The early learnings on traffic sound generally quite positive in terms of intent and conversion? The early learnings on traffic sound generally quite positive in terms of intent and conversion? the early learnings on traffic sound generally quite positive in terms of intent and conversion

Speaker 1: They are for sure. Less than 1% of our GMS. It's not conclusive evidence of a whole lot yet, but we like what we're seeing so far. I think it's only going to get better because we're iterating at it all the time. They are for sure. they are for sure Less than 1% of our GMS. less than 1% of our gms It's not conclusive evidence of a whole lot yet, but we like what we're seeing so far. it's not conclusive evidence of a whole lot yet but we like what we're seeing so far I think it's only going to get better because we're iterating at it all the time. i think it's only going to get better because we're iterating at it all the time

Speaker 2: If we flesh out the bear case a little bit more, I'd say the worry that, A, you might have, in the future, some risk to the take rate of business models like yours because search increasingly starts to happen off-platform, and maybe that puts some valuable monetization opportunities like advertising at risk. I'd say that's the first bucket of concern. If we flesh out the bear case a little bit more, I'd say the worry that, A, you might have, in the future, some risk to the take rate of business models like yours because search increasingly starts to happen off-platform, and maybe that puts some valuable monetization opportunities like advertising at risk. if we flesh out the bear case a little bit more i'd say the worry that a you might have in the future some risk to the take rate of business models like yours because search increasingly starts to happen off-platform and maybe that puts some valuable monetization opportunities like advertising at risk I'd say that's the first bucket of concern. i'd say that's the first bucket of concern The second bucket of concern is simply that you just reduce the barriers to switching between platforms. You make it easier for consumers to price shop across different marketplaces and retail websites. People worry that this is, in some way, shape, or form, starting a race to the bottom in retail and e-commerce at large. I guess from your standpoint, why are those fears generally misplaced? The second bucket of concern is simply that you just reduce the barriers to switching between platforms. the second bucket of concern is simply that you just reduce the barriers to switching between platforms You make it easier for consumers to price shop across different marketplaces and retail websites. you make it easier for consumers to price shop across different marketplaces and retail websites People worry that this is, in some way, shape, or form, starting a race to the bottom in retail and e-commerce at large. people worry that this is in some way shape or form starting a race to the bottom in retail and e-commerce at large I guess from your standpoint, why are those fears generally misplaced? i guess from your standpoint why are those fears generally misplaced

Speaker 1: Well, let me start with the second one first, which is Etsy has never been about winning the race to the bottom. We are winning the race to special. We are winning the race to differentiated, to human connection, and that is our lane. If you look at things in that light, a new technology that is going to make it faster and clearer who is that single fastest, single cheapest seller, it's not going to be Etsy in most cases. Well, let me start with the second one first, which is Etsy has never been about winning the race to the bottom. well let me start with the second one first which is etsy has never been about winning the race to the bottom We are winning the race to special. we are winning the race to special We are winning the race to differentiated, to human connection, and that is our lane. we are winning the race to differentiated to human connection and that is our lane If you look at things in that light, a new technology that is going to make it faster and clearer who is that single fastest, single cheapest seller, it's not going to be Etsy in most cases. if you look at things in that light a new technology that is going to make it faster and clearer who is that single fastest single cheapest seller it's not going to be etsy in most cases After you have that answer, you don't need 72 other answers. What you might want as a consumer is, if I don't want fastest and cheapest, what are the other alternatives? That's going to be a differentiated item, an item perhaps with more craftsmanship or a different level of quality, more personalizable or customizable, and those are lanes that Etsy really shines in. After you have that answer, you don't need 72 other answers. after you have that answer you don't need 72 other answers What you might want as a consumer is, if I don't want fastest and cheapest, what are the other alternatives? what you might want as a consumer is if i don't want fastest and cheapest what are the other alternatives That's going to be a differentiated item, an item perhaps with more craftsmanship or a different level of quality, more personalizable or customizable, and those are lanes that Etsy really shines in. that's going to be a differentiated item an item perhaps with more craftsmanship or a different level of quality more personalizable or customizable and those are lanes that etsy really shines in That's how we're looking at that sort of industry shift that you talk about shifting moats. In some ways, I think the race to the bottom could actually widen the moat of Etsy because you're going to see so many other people dragged into that pit of differentiation difficulty, where we have so much to differentiate upon. I think to your former question about the advertising model and about the take rate, our take rate is really reflective of the value that our sellers recognize or are willing to bear for Etsy doing what Etsy does for them. That's how we're looking at that sort of industry shift that you talk about shifting moats. that's how we're looking at that sort of industry shift that you talk about shifting moats In some ways, I think the race to the bottom could actually widen the moat of Etsy because you're going to see so many other people dragged into that pit of differentiation difficulty, where we have so much to differentiate upon. in some ways i think the race to the bottom could actually widen the moat of etsy because you're going to see so many other people dragged into that pit of differentiation difficulty where we have so much to differentiate upon I think to your former question about the advertising model and about the take rate, our take rate is really reflective of the value that our sellers recognize or are willing to bear for Etsy doing what Etsy does for them. i think to your former question about the advertising model and about the take rate our take rate is really reflective of the value that our sellers recognize or are willing to bear for etsy doing what etsy does for them The list of things that we do for them is so long, from payments to trust and safety to ratings and reviews to the presentment that we give them, the advice that we give them, the social media tools that we give them to market themselves, the visibility we give them on the web, the imprimatur of being listed on the Etsy marketplace relative to just having a shop randomly discovered somewhere else with no ratings, reviews, and very hard to tell whether that's a seller that I should trust or not for this very unique item. Etsy brings a lot to the table, and it's on top of all of that value that goes way beyond ads that our take rate resides. The list of things that we do for them is so long, from payments to trust and safety to ratings and reviews to the presentment that we give them, the advice that we give them, the social media tools that we give them to market themselves, the visibility we give them on the web, the imprimatur of being listed on the Etsy marketplace relative to just having a shop randomly discovered somewhere else with no ratings, reviews, and very hard to tell whether that's a seller that I should trust or not for this very unique item. the list of things that we do for them is so long from payments to trust and safety to ratings and reviews to the presentment that we give them the advice that we give them the social media tools that we give them to market themselves the visibility we give them on the web the imprimatur of being listed on the etsy marketplace relative to just having a shop randomly discovered somewhere else with no ratings reviews and very hard to tell whether that's a seller that i should trust or not for this very unique item Etsy brings a lot to the table, and it's on top of all of that value that goes way beyond ads that our take rate resides. etsy brings a lot to the table and it's on top of all of that value that goes way beyond ads that our take rate resides I'm really optimistic about our opportunity. The biggest opportunity for us from AI is to figure out how we use AI inside the Etsy experience on behalf of Etsy, but also fundamentally on behalf of our sellers. Give them access to being listed on OpenAI, being highly visible in Google's AI products. I'm really optimistic about our opportunity. i'm really optimistic about our opportunity The biggest opportunity for us from AI is to figure out how we use AI inside the Etsy experience on behalf of Etsy, but also fundamentally on behalf of our sellers. the biggest opportunity for us from ai is to figure out how we use ai inside the etsy experience on behalf of etsy but also fundamentally on behalf of our sellers Give them access to being listed on OpenAI, being highly visible in Google's AI products. give them access to being listed on openai being highly visible in google's ai products You get that through Etsy, I think, more easily than you get it on your own, and helping them get visibility as this new customer channel opens. I think we feel like there is more to be gained from the expansion of discovery from AI and agents than there is to be feared about pressure on our take rate, because our take rate sits on top of services that we bring and value that we deliver. You get that through Etsy, I think, more easily than you get it on your own, and helping them get visibility as this new customer channel opens. you get that through etsy i think more easily than you get it on your own and helping them get visibility as this new customer channel opens I think we feel like there is more to be gained from the expansion of discovery from AI and agents than there is to be feared about pressure on our take rate, because our take rate sits on top of services that we bring and value that we deliver. i think we feel like there is more to be gained from the expansion of discovery from ai and agents than there is to be feared about pressure on our take rate because our take rate sits on top of services that we bring and value that we deliver

Speaker 2: Can you speak a little bit more about the onsite experiences that are changing for buyers and sellers leveraging these tools? If I go to Etsy tomorrow, a year from now, two years from now, what should I expect the experience to increasingly look like? Can you speak a little bit more about the onsite experiences that are changing for buyers and sellers leveraging these tools? can you speak a little bit more about the onsite experiences that are changing for buyers and sellers leveraging these tools If I go to Etsy tomorrow, a year from now, two years from now, what should I expect the experience to increasingly look like? if i go to etsy tomorrow a year from now two years from now what should i expect the experience to increasingly look like

Speaker 1: I think I've talked a lot about personalized experience. Etsy should feel small. It should feel very local to you. It should recognize you've got a young family, you live where you live, you have your background, and it should really resonate in a very personal way to you. I think we're moving in that direction. We're not anywhere near yet the vision that we have for how different the product experience should feel for individuals and for groups of individuals. I think I've talked a lot about personalized experience. i think i've talked a lot about personalized experience Etsy should feel small. etsy should feel small It should feel very local to you. it should feel very local to you It should recognize you've got a young family, you live where you live, you have your background, and it should really resonate in a very personal way to you. it should recognize you've got a young family you live where you live you have your background and it should really resonate in a very personal way to you I think we're moving in that direction. i think we're moving in that direction We're not anywhere near yet the vision that we have for how different the product experience should feel for individuals and for groups of individuals. we're not anywhere near yet the vision that we have for how different the product experience should feel for individuals and for groups of individuals That's number one. I think separately in the product experience, we're experimenting right now with how can we bring agents into the Etsy product experience. One of the things that happens when people search in commerce with an agent is they don't type in three words. They type in a three-paragraph description of what they're looking for. That's number one. that's number one I think separately in the product experience, we're experimenting right now with how can we bring agents into the Etsy product experience. i think separately in the product experience we're experimenting right now with how can we bring agents into the etsy product experience One of the things that happens when people search in commerce with an agent is they don't type in three words. one of the things that happens when people search in commerce with an agent is they don't type in three words They type in a three-paragraph description of what they're looking for. they type in a three-paragraph description of what they're looking for That gives us a lot more context. We have a gifting agent, it was an agent that we launched that's sort of tailored for gifting occasions. You can find it if you're a logged-in user on the website. It's rolled out there pretty broadly across North America right now. That gives us a lot more context. that gives us a lot more context We have a gifting agent, it was an agent that we launched that's sort of tailored for gifting occasions. we have a gifting agent it was an agent that we launched that's sort of tailored for gifting occasions You can find it if you're a logged-in user on the website. you can find it if you're a logged-in user on the website It's rolled out there pretty broadly across North America right now. it's rolled out there pretty broadly across north america right now It's an experience, I think you're going to see this more throughout Etsy and probably throughout a lot of e-commerce, where instead of typing in a couple key words, like I said, you describe, "I'm going to a weekend with some buddies who I haven't seen for a number of years, and one of them has a 50th birthday, and we're going to play some golf, and it's going to be in this location. It's an experience, I think you're going to see this more throughout Etsy and probably throughout a lot of e-commerce, where instead of typing in a couple key words, like I said, you describe, "I'm going to a weekend with some buddies who I haven't seen for a number of years, and one of them has a 50th birthday, and we're going to play some golf, and it's going to be in this location. it's an experience i think you're going to see this more throughout etsy and probably throughout a lot of e-commerce where instead of typing in a couple key words like i said you describe "i'm going to a weekend with some buddies who i haven't seen for a number of years and one of them has a 50th birthday and we're going to play some golf and it's going to be in this location I want to get a gift for all of them, but I don't want it to be XYZ." There's so much more context in that for Etsy to be able to work with, "Hey, here's a personalized solution, here's a customized solution, here's a unique and vintage solution for you." I think you're going to see us try to lean into a different mode of interaction and discovery that will bring forth the variety available on Etsy, that will showcase what's different about Etsy. There are individual sellers beyond all these things, and it'll help people understand just the breadth of missions and shopping and categories and occasions that Etsy can be really relevant for. I want to get a gift for all of them, but I don't want it to be XYZ." There's so much more context in that for Etsy to be able to work with, "Hey, here's a personalized solution, here's a customized solution, here's a unique and vintage solution for you." I think you're going to see us try to lean into a different mode of interaction and discovery that will bring forth the variety available on Etsy, that will showcase what's different about Etsy. i want to get a gift for all of them but i don't want it to be xyz." there's so much more context in that for etsy to be able to work with "hey here's a personalized solution here's a customized solution here's a unique and vintage solution for you." i think you're going to see us try to lean into a different mode of interaction and discovery that will bring forth the variety available on etsy that will showcase what's different about etsy There are individual sellers beyond all these things, and it'll help people understand just the breadth of missions and shopping and categories and occasions that Etsy can be really relevant for. there are individual sellers beyond all these things and it'll help people understand just the breadth of missions and shopping and categories and occasions that etsy can be really relevant for

Speaker 2: You have a high gross margin. It's been pretty stable. It nudged down a little bit in the last quarter. I think qualitatively, one of the things called out was compute cost, and as we talk about AI-driven shopping experiences, assuming, I'm sure a lot of folks at Etsy are now using AI tools in their day-to-day workflows as well. How do you think about compute costs as AI becomes a bigger portion of this business, and how do you think about offsets to that as well? You have a high gross margin. you have a high gross margin It's been pretty stable. it's been pretty stable It nudged down a little bit in the last quarter. it nudged down a little bit in the last quarter I think qualitatively, one of the things called out was compute cost, and as we talk about AI-driven shopping experiences, assuming, I'm sure a lot of folks at Etsy are now using AI tools in their day-to-day workflows as well. i think qualitatively one of the things called out was compute cost and as we talk about ai-driven shopping experiences assuming i'm sure a lot of folks at etsy are now using ai tools in their day-to-day workflows as well How do you think about compute costs as AI becomes a bigger portion of this business, and how do you think about offsets to that as well? how do you think about compute costs as ai becomes a bigger portion of this business and how do you think about offsets to that as well

Speaker 1: Well, I think, in the long run, the compute costs are going to reflect the prevalence of those tools in the product experience. If our customers are saying, "God, these are great experiences," we're going to deliver the great experiences with the cost of the incremental compute. There are other things in our margin in the short term. There's a little bit of cost to compute, like you talked about. Well, I think, in the long run, the compute costs are going to reflect the prevalence of those tools in the product experience. well i think in the long run the compute costs are going to reflect the prevalence of those tools in the product experience If our customers are saying, "God, these are great experiences," we're going to deliver the great experiences with the cost of the incremental compute. if our customers are saying "god these are great experiences," we're going to deliver the great experiences with the cost of the incremental compute There are other things in our margin in the short term. there are other things in our margin in the short term There's a little bit of cost to compute, like you talked about. there's a little bit of cost to compute like you talked about There's a little bit of managing fraud and exposure to refunds and things like that in there. I'm not anticipating right now, like a step function change in the gross margin profitability of the business because those costs are being incurred to support incremental, new, higher converting, market expanding product experiences for us. Look, we're going to manage all those things really carefully and efficiently as we always do. There's a little bit of managing fraud and exposure to refunds and things like that in there. there's a little bit of managing fraud and exposure to refunds and things like that in there I'm not anticipating right now, like a step function change in the gross margin profitability of the business because those costs are being incurred to support incremental, new, higher converting, market expanding product experiences for us. i'm not anticipating right now like a step function change in the gross margin profitability of the business because those costs are being incurred to support incremental new higher converting market expanding product experiences for us Look, we're going to manage all those things really carefully and efficiently as we always do. look we're going to manage all those things really carefully and efficiently as we always do We're coming with pretty good profitability and great cash flow. We'll mind the spending that we do there to make sure there's a return on investment for that. We're also not going to be penny-wise and pound-foolish in the short run. We want to experiment, we want to learn, we think for a couple basis points of gross margin, there's a lot to be learned that'll be very valuable to us in coming years. We're coming with pretty good profitability and great cash flow. we're coming with pretty good profitability and great cash flow We'll mind the spending that we do there to make sure there's a return on investment for that. we'll mind the spending that we do there to make sure there's a return on investment for that We're also not going to be penny-wise and pound-foolish in the short run. we're also not going to be penny-wise and pound-foolish in the short run We want to experiment, we want to learn, we think for a couple basis points of gross margin, there's a lot to be learned that'll be very valuable to us in coming years. we want to experiment we want to learn we think for a couple basis points of gross margin there's a lot to be learned that'll be very valuable to us in coming years

Speaker 2: You've always run very lean with a pretty tight engineering team, product team. When you think about productivity enhancements on the back of these AI tools, what are you excited about? Is that freeing you up to do more with less? Any changing opinions on how to think about headcount growth for this business longer term? You've always run very lean with a pretty tight engineering team, product team. you've always run very lean with a pretty tight engineering team product team When you think about productivity enhancements on the back of these AI tools, what are you excited about? when you think about productivity enhancements on the back of these ai tools what are you excited about Is that freeing you up to do more with less? is that freeing you up to do more with less Any changing opinions on how to think about headcount growth for this business longer term? any changing opinions on how to think about headcount growth for this business longer term

Speaker 1: Well, look, I think we're poised to deliver a pretty nice improvement in revenue growth comparisons this year versus last year, an improvement in buyer trends, and a bunch of new products this year with flat headcount from where we were a year ago. Our team is already getting more gas mileage out of some of the tools. Well, look, I think we're poised to deliver a pretty nice improvement in revenue growth comparisons this year versus last year, an improvement in buyer trends, and a bunch of new products this year with flat headcount from where we were a year ago. well look i think we're poised to deliver a pretty nice improvement in revenue growth comparisons this year versus last year an improvement in buyer trends and a bunch of new products this year with flat headcount from where we were a year ago Our team is already getting more gas mileage out of some of the tools. our team is already getting more gas mileage out of some of the tools On the product side in particular, the AI tools, I'm sure you're hearing this from a lot of companies, it's changing development cycles from quarters to months or weeks. We're able to launch and iterate things so much more quickly with the advantage of AI coding agents, which we've pushed pretty hard to get our team trained and experienced and up and running on those. It is improving the efficiency of our team. On the product side in particular, the AI tools, I'm sure you're hearing this from a lot of companies, it's changing development cycles from quarters to months or weeks. on the product side in particular the ai tools i'm sure you're hearing this from a lot of companies it's changing development cycles from quarters to months or weeks We're able to launch and iterate things so much more quickly with the advantage of AI coding agents, which we've pushed pretty hard to get our team trained and experienced and up and running on those. we're able to launch and iterate things so much more quickly with the advantage of ai coding agents which we've pushed pretty hard to get our team trained and experienced and up and running on those It is improving the efficiency of our team. it is improving the efficiency of our team Our revenue per employee is about a million and a half dollars, is pretty good relative to a lot of companies. We did not have a huge increase in our headcount during COVID, even though the size of the company doubled during that period of time. We've continued to run pretty lean, and I expect us to continue to, and these tools are only going to enable us to be more productive. Our revenue per employee is about a million and a half dollars, is pretty good relative to a lot of companies. our revenue per employee is about a million and a half dollars is pretty good relative to a lot of companies We did not have a huge increase in our headcount during COVID, even though the size of the company doubled during that period of time. we did not have a huge increase in our headcount during covid even though the size of the company doubled during that period of time We've continued to run pretty lean, and I expect us to continue to, and these tools are only going to enable us to be more productive. we've continued to run pretty lean and i expect us to continue to and these tools are only going to enable us to be more productive

Speaker 2: When you think about broad investment buckets in the P&L of Etsy going forward, if you think about it as R&D on the product side versus sales and marketing, how do you think about the evolution of those buckets and what's required to sustain better growth for Etsy? When you think about broad investment buckets in the P&L of Etsy going forward, if you think about it as R&D on the product side versus sales and marketing, how do you think about the evolution of those buckets and what's required to sustain better growth for Etsy? when you think about broad investment buckets in the p&l of etsy going forward if you think about it as r&d on the product side versus sales and marketing, how do you think about the evolution of those buckets and what's required to sustain better growth for etsy

Speaker 1: Yeah. We'll spend this year like roughly $400 million on product and $750 million on marketing. I don't think you're going to see any big leverage or de-leverage in either of those lines this year. What I would say, if the $750 million on marketing was going to be bigger than that, it was because we found ways to hit our ROI target while spending more dollars. Yeah. yeah We'll spend this year like roughly $400 million on product and $750 million on marketing. we'll spend this year like roughly $400 million on product and $750 million on marketing I don't think you're going to see any big leverage or de-leverage in either of those lines this year. i don't think you're going to see any big leverage or de-leverage in either of those lines this year What I would say, if the $750 million on marketing was going to be bigger than that, it was because we found ways to hit our ROI target while spending more dollars. what i would say if the $750 million on marketing was going to be bigger than that it was because we found ways to hit our roi target while spending more dollars That would be a good story because it would be more GMS associated with that incremental spending. On the product side, we're pretty careful about the number of squads that we have and the assignments that we've given them in terms of what they're working on. For the priorities that I laid out a moment ago, there's nobody on our team who feels like with 25% more engineers, we'd be able to go faster. That would be a good story because it would be more GMS associated with that incremental spending. that would be a good story because it would be more gms associated with that incremental spending On the product side, we're pretty careful about the number of squads that we have and the assignments that we've given them in terms of what they're working on. on the product side we're pretty careful about the number of squads that we have and the assignments that we've given them in terms of what they're working on For the priorities that I laid out a moment ago, there's nobody on our team who feels like with 25% more engineers, we'd be able to go faster. for the priorities that i laid out a moment ago there's nobody on our team who feels like with 25% more engineers we'd be able to go faster We think we've got the right investment there right now for the priorities that we have. I like the mix that we've got. I don't think there's any big variation you should expect there. Within it, we'll allocate the spending within that optimally, but I don't think there's any big change in the size of the envelope. We think we've got the right investment there right now for the priorities that we have. we think we've got the right investment there right now for the priorities that we have I like the mix that we've got. i like the mix that we've got I don't think there's any big variation you should expect there. i don't think there's any big variation you should expect there Within it, we'll allocate the spending within that optimally, but I don't think there's any big change in the size of the envelope. within it we'll allocate the spending within that optimally but i don't think there's any big change in the size of the envelope

Speaker 2: To go after your global business, you've got international markets. Is there incremental headcount required to build out some of those international experiences and local experiences as well, or can a lot of that just come through the centralized team here? To go after your global business, you've got international markets. to go after your global business you've got international markets Is there incremental headcount required to build out some of those international experiences and local experiences as well, or can a lot of that just come through the centralized team here? is there incremental headcount required to build out some of those international experiences and local experiences as well or can a lot of that just come through the centralized team here

Speaker 1: A lot of it comes through the centralized team. I think, there's some localized marketing that is helpful and required, but even that can be done fairly central. One of the great things about our business is it's a very capital light, very like boots on the ground light business. You said sales and marketing, and I was like, "Sales? We don't have any sales." We have marketing and customer support, that is for sure. No, from where we're looking right now, the international opportunity can be leveraged off of the core Etsy. A lot of it comes through the centralized team. a lot of it comes through the centralized team I think, there's some localized marketing that is helpful and required, but even that can be done fairly central. i think there's some localized marketing that is helpful and required but even that can be done fairly central One of the great things about our business is it's a very capital light, very like boots on the ground light business. one of the great things about our business is it's a very capital light very like boots on the ground light business You said sales and marketing, and I was like, "Sales? you said sales and marketing and i was like "sales We don't have any sales." We have marketing and customer support, that is for sure. we don't have any sales." we have marketing and customer support that is for sure No, from where we're looking right now, the international opportunity can be leveraged off of the core Etsy. no from where we're looking right now the international opportunity can be leveraged off of the core etsy

Speaker 2: We touched a little bit on onsite ads in an AI world, but just more broadly, when you step back, it is one of the tools for monetizing the marketplace. It is one of the key drivers, I think, of the margin expansion we've seen over the years. Where are we in building out onsite advertising for Etsy? What's the runway for continued growth and adoption here, whether you want to frame it in terms of penetration rate or product adoption or ROAS dynamics, whatever's most intuitive to you, but how do you feel about the growth runway for that advertising business? We touched a little bit on onsite ads in an AI world, but just more broadly, when you step back, it is one of the tools for monetizing the marketplace. we touched a little bit on onsite ads in an ai world but just more broadly when you step back it is one of the tools for monetizing the marketplace It is one of the key drivers, I think, of the margin expansion we've seen over the years. it is one of the key drivers i think of the margin expansion we've seen over the years Where are we in building out onsite advertising for Etsy? where are we in building out onsite advertising for etsy What's the runway for continued growth and adoption here, whether you want to frame it in terms of penetration rate or product adoption or ROAS dynamics, whatever's most intuitive to you, but how do you feel about the growth runway for that advertising business? what's the runway for continued growth and adoption here whether you want to frame it in terms of penetration rate or product adoption or roas dynamics whatever's most intuitive to you but how do you feel about the growth runway for that advertising business

Speaker 1: I think we're pretty early in the advertising opportunity on Etsy. The participation rate of all sellers in Etsy's marketing programs is low and has a lot of headroom that can still be tapped into. Our utilization of the budgets that they give us is lower than 100%, for sure. What they tell us they are willing to spend on incremental orders, we are not yet able to deliver. As soon as we can deliver that by doing a better job of finding customers and bringing them into Etsy, doing a better job of showcasing those advertisers' wares effectively in a way that converts, there is money that those sellers would gladly pay for that incremental order value. I think we're pretty early in the advertising opportunity on Etsy. i think we're pretty early in the advertising opportunity on etsy The participation rate of all sellers in Etsy's marketing programs is low and has a lot of headroom that can still be tapped into. the participation rate of all sellers in etsy's marketing programs is low and has a lot of headroom that can still be tapped into Our utilization of the budgets that they give us is lower than 100%, for sure. our utilization of the budgets that they give us is lower than 100% for sure What they tell us they are willing to spend on incremental orders, we are not yet able to deliver. what they tell us they are willing to spend on incremental orders we are not yet able to deliver As soon as we can deliver that by doing a better job of finding customers and bringing them into Etsy, doing a better job of showcasing those advertisers' wares effectively in a way that converts, there is money that those sellers would gladly pay for that incremental order value. as soon as we can deliver that by doing a better job of finding customers and bringing them into etsy doing a better job of showcasing those advertisers' wares effectively in a way that converts there is money that those sellers would gladly pay for that incremental order value As we improve our ability to deliver a relevant, personalized match and improve our ability to reach out to you when you weren't even thinking about Etsy and remind you of Etsy with a matching item, those are great advertising opportunities for us to say we're driving more demand and there are a bunch of people who could service this incremental demand, and we'll give an advertiser a shot to be at the top of the pile of people who could service that incremental demand. As we improve our ability to deliver a relevant, personalized match and improve our ability to reach out to you when you weren't even thinking about Etsy and remind you of Etsy with a matching item, those are great advertising opportunities for us to say we're driving more demand and there are a bunch of people who could service this incremental demand, and we'll give an advertiser a shot to be at the top of the pile of people who could service that incremental demand. as we improve our ability to deliver a relevant personalized match and improve our ability to reach out to you when you weren't even thinking about etsy and remind you of etsy with a matching item those are great advertising opportunities for us to say we're driving more demand and there are a bunch of people who could service this incremental demand and we'll give an advertiser a shot to be at the top of the pile of people who could service that incremental demand There's optimization of our search, there is getting more people into the program, and there's doing a better job of utilizing the budgets that they are willing to spend. It gives us a belief that there's a lot of runway left in the advertising side of the business. I would say this, though. I want to make one point really clearly. There's optimization of our search, there is getting more people into the program, and there's doing a better job of utilizing the budgets that they are willing to spend. there's optimization of our search there is getting more people into the program and there's doing a better job of utilizing the budgets that they are willing to spend It gives us a belief that there's a lot of runway left in the advertising side of the business. it gives us a belief that there's a lot of runway left in the advertising side of the business I would say this, though. i would say this though I want to make one point really clearly. i want to make one point really clearly Our main focus right now is driving GMS growth rather than advertising growth or take rate growth. It's GMS growth, and GMS growth coming from a growing number of buyers coming to Etsy more frequently. Half our buyers buy one time a year, the other half buy an average of five times a year. We think we can expand the total number of buyers. Our main focus right now is driving GMS growth rather than advertising growth or take rate growth. our main focus right now is driving gms growth rather than advertising growth or take rate growth It's GMS growth, and GMS growth coming from a growing number of buyers coming to Etsy more frequently. it's gms growth and gms growth coming from a growing number of buyers coming to etsy more frequently Half our buyers buy one time a year, the other half buy an average of five times a year. half our buyers buy one time a year the other half buy an average of five times a year We think we can expand the total number of buyers. we think we can expand the total number of buyers There are well over 100 million people who have bought on Etsy at some point in their life, who did not buy on Etsy in the last 24 months. Getting those people to come back, and then once they get them back, getting them to purchase more than one time a year is a far bigger focus for us. We're going to continue to focus on things like monetizing well through ads and using that in service of our sellers' needs. There are well over 100 million people who have bought on Etsy at some point in their life, who did not buy on Etsy in the last 24 months. there are well over 100 million people who have bought on etsy at some point in their life who did not buy on etsy in the last 24 months Getting those people to come back, and then once they get them back, getting them to purchase more than one time a year is a far bigger focus for us. getting those people to come back and then once they get them back getting them to purchase more than one time a year is a far bigger focus for us We're going to continue to focus on things like monetizing well through ads and using that in service of our sellers' needs. we're going to continue to focus on things like monetizing well through ads and using that in service of our sellers' needs The thing that sellers really want the most is just for the market to be growing overall. The thing that sellers really want the most is just for the market to be growing overall. the thing that sellers really want the most is just for the market to be growing overall

Speaker 2: You're in the process of selling Depop to eBay. Can you remind us what the next stages are in that, and also why this was the right time to do that transaction? You're in the process of selling Depop to eBay. you're in the process of selling depop to ebay Can you remind us what the next stages are in that, and also why this was the right time to do that transaction? can you remind us what the next stages are in that and also why this was the right time to do that transaction

Speaker 1: Really quickly for those who don't know, Depop is the leading U.S. resale clothing marketplace. If you have kids on college campuses, I know that they know about Depop. It is a place to buy and sell clothes, in part of a circular economy that younger generations are totally a part of. Depop is growing in the United States at like 70% year over year, and is a super thriving, healthy business. We love it. We saw some signs of promise and potential for that business about 12 months ago, we began to invest much more aggressively in driving Depop's emerging growth lead in that category and trying to get to a market share leadership position. Really quickly for those who don't know, Depop is the leading U.S. resale clothing marketplace. really quickly for those who don't know depop is the leading u.s resale clothing marketplace If you have kids on college campuses, I know that they know about Depop. if you have kids on college campuses i know that they know about depop It is a place to buy and sell clothes, in part of a circular economy that younger generations are totally a part of. it is a place to buy and sell clothes in part of a circular economy that younger generations are totally a part of Depop is growing in the United States at like 70% year over year, and is a super thriving, healthy business. depop is growing in the united states at like 70% year over year and is a super thriving healthy business We love it. we love it We saw some signs of promise and potential for that business about 12 months ago, we began to invest much more aggressively in driving Depop's emerging growth lead in that category and trying to get to a market share leadership position. we saw some signs of promise and potential for that business about 12 months ago we began to invest much more aggressively in driving depop's emerging growth lead in that category and trying to get to a market share leadership position Those initial investments really started to pay off. We received an unsolicited offer from eBay, at a valuation that we felt was compelling enough for us to at least stop the clock and sort of step back and think it through. As we thought about it, and we looked at Depop's longer term opportunity, we love it, and we looked at Etsy's long-term opportunity, we love it even more. Those initial investments really started to pay off. those initial investments really started to pay off We received an unsolicited offer from eBay, at a valuation that we felt was compelling enough for us to at least stop the clock and sort of step back and think it through. we received an unsolicited offer from ebay at a valuation that we felt was compelling enough for us to at least stop the clock and sort of step back and think it through As we thought about it, and we looked at Depop's longer term opportunity, we love it, and we looked at Etsy's long-term opportunity, we love it even more. as we thought about it and we looked at depop's longer term opportunity we love it and we looked at etsy's long-term opportunity we love it even more We think there is a really big opportunity to just focus exclusively on everything I just talked about on the Etsy marketplace, and we think eBay can be a wonderful owner for Depop. They've got inventory in the category that they can bring into what's really the best product experience in the category and continue to make a real leader out of that business. It just looked to us like, hey, it's the right time. We think there is a really big opportunity to just focus exclusively on everything I just talked about on the Etsy marketplace, and we think eBay can be a wonderful owner for Depop. we think there is a really big opportunity to just focus exclusively on everything i just talked about on the etsy marketplace and we think ebay can be a wonderful owner for depop They've got inventory in the category that they can bring into what's really the best product experience in the category and continue to make a real leader out of that business. they've got inventory in the category that they can bring into what's really the best product experience in the category and continue to make a real leader out of that business It just looked to us like, hey, it's the right time. it just looked to us like hey it's the right time We signed a deal to sell it to them for $1.2 billion. We've got regulatory approvals now in probably three-quarters of the places that we need it. One more jurisdiction in the U.K., where we're expecting to get approval for the transaction, then we'll close and have pretty close to the whole $1.2 billion in cash proceeds added to our balance sheet. I think our expectation right now is we'll deploy that as we've deployed a lot of excess capital over the years toward buying back stock in the company. We signed a deal to sell it to them for $1.2 billion. we signed a deal to sell it to them for $1.2 billion We've got regulatory approvals now in probably three-quarters of the places that we need it. we've got regulatory approvals now in probably three-quarters of the places that we need it One more jurisdiction in the U.K., where we're expecting to get approval for the transaction, then we'll close and have pretty close to the whole $1.2 billion in cash proceeds added to our balance sheet. one more jurisdiction in the u.k where we're expecting to get approval for the transaction then we'll close and have pretty close to the whole $1.2 billion in cash proceeds added to our balance sheet I think our expectation right now is we'll deploy that as we've deployed a lot of excess capital over the years toward buying back stock in the company. i think our expectation right now is we'll deploy that as we've deployed a lot of excess capital over the years toward buying back stock in the company

Speaker 2: You answered my follow-up, which is, how do we think about the proceeds? You answered my follow-up, which is, how do we think about the proceeds? you answered my follow-up which is how do we think about the proceeds

Speaker 1: That's all I could think about. That's all I could think about. that's all i could think about

Speaker 2: We've covered a lot of ground today, Lanny. How would you basically summarize for investors, really the core focus, the opportunity set ahead of Etsy? What message do you want to leave investors with? We've covered a lot of ground today, Lanny. we've covered a lot of ground today lanny How would you basically summarize for investors, really the core focus, the opportunity set ahead of Etsy? how would you basically summarize for investors really the core focus the opportunity set ahead of etsy What message do you want to leave investors with? what message do you want to leave investors with

Speaker 1: The focus is we have these very clear four priorities, and none of them are going to be overnight, like hockey sticks to growth tomorrow. What we are working on is building a durable, sustainable, long-term growth rate for this company, built on a great personalized, modern customer experience that can be the platform for so much growth in the categories that we operate in. The focus is we have these very clear four priorities, and none of them are going to be overnight, like hockey sticks to growth tomorrow. the focus is we have these very clear four priorities and none of them are going to be overnight like hockey sticks to growth tomorrow What we are working on is building a durable, sustainable, long-term growth rate for this company, built on a great personalized, modern customer experience that can be the platform for so much growth in the categories that we operate in. what we are working on is building a durable sustainable long-term growth rate for this company built on a great personalized modern customer experience that can be the platform for so much growth in the categories that we operate in We really feel like we have a business that is super differentiated already. Its awareness of Etsy is enormous. Consideration of Etsy, remembering to come back to Etsy for that experience is the opportunity ahead of us, and we think by solving that with everything I've talked about today, we can make this a much larger company than it is today. We really feel like we have a business that is super differentiated already. we really feel like we have a business that is super differentiated already Its awareness of Etsy is enormous. its awareness of etsy is enormous Consideration of Etsy, remembering to come back to Etsy for that experience is the opportunity ahead of us, and we think by solving that with everything I've talked about today, we can make this a much larger company than it is today. consideration of etsy remembering to come back to etsy for that experience is the opportunity ahead of us and we think by solving that with everything i've talked about today we can make this a much larger company than it is today

Speaker 2: Great. With that, we'll leave it there. We are right at time. Lanny, thank you so much. Great. great With that, we'll leave it there. with that we'll leave it there We are right at time. we are right at time Lanny, thank you so much. lanny thank you so much

Speaker 1: Thank you, Nikhil. Thank you, Nikhil. thank you nikhil

Speaker 2: Thanks, everyone. Thanks, everyone. thanks everyone

Speaker 1: Thank you. Thank you. thank you