Etsy just released its financial results for 2019's third quarter (July to September) - here are the highlights:
and here are the slides that go with the presentation: https://s22.q4cdn.com/941741262/files/doc_financials/2019/q3/Etsy-3Q-2019-Earnings-Presentation.pdf (I haven't looked at them yet)
The stock is down because Etsy lowered its guidance: https://www.marketwatch.com/story/etsy-stock-down-10-after-company-lowers-guidance-2019-10-30 although I am seeing the usual rise, then drop, then rise happening: https://www.google.com/search?q=Etsy+stock&pws=0&gl=us&gws_rd=cr As always, it will take a while for everyone to digest the full report and call.
The investor phone call starts at 5 pm ET; I will try to listen in & post highlights afterwards. A transcript of that call will eventually be posted here: https://seekingalpha.com/symbol/ETSY?news=transcripts and usually elsewhere, within the next 48 hours.
I will mark any key updates as "solutions" so the posts will be highlighted, and will add to this OP in the next hour for as long as I can edit it.
My previous threads on quarterly results, for comparison:
After reading the linked article, (and this is just my guess) I am thinking that linear data is equivalent to the relationship between father and son and the son's son and the son's son's son and so on down the line, kind of like how surnames are passed down. Whereas non linear takes account of the relationship of all the family members descended from a matriarchal or patriarchal parent - their child, the child's children, grandchildren, etc, but also siblings, nephews, nieces, cousins, aunts, uncles, second cousins. It can keep branching outward like a family tree instead of just in a single line.
Now if that is correct, I somewhat understand how that works for search but not sure I can explain it or how it is better for search to produce relevant results.
Anyone who knows more can correct all this!
@StinsonPaperCompany , about linear and non linear. The new tool launched aim to helps optimizing natural langage processing. The main change I see is that it try to understand the link between keywords.
One example given : Travel to USA. Traditional search algorythm would give searches related to travel, USA, even travel in the USA but the new search will focus on this little word TO. So the new search will focus on the fact that someone is travelling from another country to the USA.
This is about context. All those little words between keywords that give context will take more weight in future search. This is how I understand it only.
Here is this “dumb donkeys” thoughts. ( @cindylouwho2 , I deleted my long rant about that as this simple phrase says it all. I do wonder if Glaser has one of her fancy technical terms for herding cattle.)
@StinsonPaperCompany When you search for an item on Etsy, think about how Context Specific Results (CSR) search finds and displays the results to you. With linear data, there is no relationship between any of the items you see. It is simply delivers a “list” of items on the page.
Non linear data goes outside that “list” to develop a relationship between items ( think of Josh’s example of a couch and pillow to go with it) AND the buyer ( what has the buyer searched for, clicked on, purchased fav’d and what is their “style.”
Etsy is using AI to assign a “style” to our items. Likely, they are also assigning a style to the buyer, and who knows what else) in order to surface items that a buyer is more likely to purchase.
We input specific data into predetermined fields (structured data delivered in linear search) when we enter a listing, category, occasion, color, but there is a lot of information about an item that is left out of that (unstructured data, non linear results) such as seasonality. Etsy is using AI to learn more about the item AND about the buyer, creating a “relationship.”
This article may help to explain it a bit better and uses the grandparent, parent, child as @ZehOriginalArt mentions.
If you read this Etsy article linked below, and think of structured data (categories, attributes) vs unstructured data (things that can be learned or determined about your item through AI) and how search finds and presents results it may start to make more sense. There is another article there about assigning style which is an interesting read as well.
Thank you so much @LandandSeaGems ! This definitely helps and I've bookmarked the articles to read this evening. I had forgotten about the styles Etsy talked about grouping things into but have it written down somewhere. The Occasion and Holiday attributes don't often fit what I sell, but maybe there's some other way to get the AI to make these non-linear connections. Thanks again for all your help - I really appreciate it!
I see a lot of clumping on the first pages, too, and I that does not encourage buyers to keep clicking.
I'm one who cut my shipping in half to roll it into my item price. With the clumping and showing inexpensive styles in the first pages, I am in no position to raise my prices at all. Just losing $10 a portrait in an effort to get more from etsy this year.
Thank you so much Cindy for all you do to explain this to us. But -
I may not understand all of this but I don't see how the YOY sales for the 3rd quarter are up 30.1% I have 3 shops all have taken a nose dive since July - So many, many shops are saying their sales have also slowed or stopped. So many turned off the ads - so how are they saying that it is going well and just as expected??
@MyVintageTable there are over 1 million active shops on Etsy. Many never post in forums. Some who have posted here have said they are doing well. Some shops are spending over $1000 a day on ads & seeing a good return - that is a lot of money for Etsy. And buyers are going up every quarter, so there are definitely sales to go around.
I am very sorry to hear that you are down, & I hope things pick up soon!
Remember that only approx 3% of shops (many of them brand-new) come to the forums. That means 97% of shops aren't chiming in.
I can believe sales are up 30.1%. Even in my teeny tiny shop (which I intentionally keep manageable), my 3Q revenue and sales are far above that number. Then again, it could just mean I had a really bad 3Q last year.
P.S. thanks, as always, to Cindy for sifting through these reports so we don't have to!
To be another of the 3% of chimers, I'll just add I'm doing very well and used to post often, but one too many accusations of getting paid by Etsy. Great discussion here though, love learning all this stuff! Thanks @cindylouwho2 and everyone else.
We are a shop that is probably disappointing them in terms of revenue from the FSG. We switched to free shipping but didn't raise prices (at all, anywhere); I viewed it as an additional advertising cost for US buyers and just counted it into overhead. Etsy said my sales would go up as a result so I figured that would cover some of the cost.
Then I turned off ads, because I figured since I was using the FSG I would have more sales and wouldn't need to (overspend) on ads.
So they get less money from me than they did before, but my sales are about the same. Instead of spending that Ads money on just straight revenue to Etsy, though, it's going to customers (as in free shipping) and Etsy's not seeing any of it.
I don't feel that bad about it. If they want to encourage me to pick ads back up they'll have to separate out PLs and Google Ads again and I doubt that is happening.
Question. Etsy's Services is up 10m from last quarter. Is "Services" seller services? And if so, what caused that large of an increase? I know that it's factoring in Reverb but if I'm reading the numbers right, Reverb brought in 6m in revenue this quarter so there's no way the 10m came from that right?
For reference, I'm looking at slides 29 and 35.
@Gokojo hard to account for every penny with what little info we have been given, but most has to be Etsy Ads, as PLs were the top producing Etsy seller service before this quarter. Etsy labels were a distant second, but even increased usage due to the increased sales, & attracting new users, would not equal $10 million. (Reverb has ads & something involving shipping, but as you say, that will be a small increase, relative to the whole.) I am pretty sure they haven't seen a big increase in Etsy Plus or Pattern subscriptions!
Remember, some sellers are now paying for some Google Ads, as well as their PLs - Google Ads were not included at all before, since Etsy paid them exclusively. And they are expensive. So Google Shopping alone would be part of that. Etsy adding ads to the bottom of our listings is also a part of that increase, I suspect, although a smaller part.
Seems to prove that sellers haven't decreased their Ads budgets much, yet.
(Thanks for pointing that out! I have not had time to do a close comparison yet.)
@cindylouwho2 hahahaha Pattern, I forgot that still existed!
The ads on a whole really only had what, 21 days from when they seemed to roll out for everyone? That seems like a huge windfall for Etsy if they increased revenue that much over the span of 3 weeks. I just pulled up the transcript and am going through it now. I have a pretty good idea the increase has something to do with shipping services, especially in regards to Fed Ex given the latest news/changes this past quarter with them but want to see if it was brought up at all. Also curious about the switch to Pitney Bowes.
@Gokojo they started on August 27, & some people converted immediately, so over a month. Furthermore, many were posting about increased CPC in August even before the 27th. (Some of us were experimenting with increasing CPC to see if we could counter the free shipping thing.)
Given how little Etsy makes per label, I just can't see $10 mil increase being from labels, even with new providers. The last time they gave $ figures, it was really very little.
@cindylouwho2 that's really interesting. When did they give numbers? I get on my own a 60% discount with Fed Ex. I've always assumed that Etsy was getting a much larger discount, passing 30% to the sellers and pocketing the difference. I always thought that was one of their biggest money makers and why they never broke down how much they made from labels. With Fed Ex ending their Amazon contract, my rep contacted me with huge Express and International discounts. Again, I assumed Etsy capitalized on that.
@Gokojo it was a few years back, I believe, that they gave a more detailed breakdown. They always list PLs as far & away the biggest seller service.
Etsy also overcharges on Canada Post labels, but they would really have to increase usage for that to total $10 mil. I can't speak to how many people might be using the new US label options, because we don't get those here.
I knew they weren't going to take a hit this quarter as all this crap was rolled out in Sept. No one had a clue how to handle it all, but I think everyone posting on the forums cannot be the only ones hurting, some people just don't use forums, it doesn't mean they are not experiencing the same drop in sales.
They even said at one point sellers outnumbered buyers so if that is the case how can they be be doing as well as they say. I think buyers are just as frustrated as we are with search. We aren't the only ones getting skewed search results and after awhile you just give up.
I think you will see more realistic results in 4th quarter although it encompasses Christmas. I expect to have a very poor Christmas this year. I guess it all depends on what you consider what amount of sales are good for your shop. When people are saying they are doing great maybe 100.00-200.00 is great to them, others that doesn't even cover advertising. I know most vintage is suffering and nothing Etsy said today makes me think it will get better anytime soon. Sometimes I wonder if they skew things to pacify the "street" There is no way they can firmly judge how well free shipping and Etsy ads are doing in one short month, hell we can't even figure out how WE are doing. Feast or famine.
Jury is out until Q4 and even then you have to wonder...
@MemoryLnAntiques I think you misunderstood something - buyers outnumber sellers by a wide margin, always. New buyers outnumber new sellers by a wide margin in the past few years, easily. The rate of increase in new buyers was slightly less than the rate of increase in new sellers this quarter, for the first time in a few years, but that is just the rate of increase, not the total number of buyers or sellers. Heck, Etsy brought in over 4 million completely new buyers this quarter, & they only have 2.5 million sellers in total (half of which are not active at any given time).
Unfortunately, the forums give a skewed perspective of how well people are doing, because if you say you are doing well, you get accused of bragging, plus then opportunists check out your whole shop & copy you. I've learned that quite well over the past few months. On Reddit, where many people post without linking their shops, people are talking about spending $2000 a day on ads, because they feel free to speak when no one can copy them or attack them. Here, when someone in my Ads thread said they were doing really well & had to extend their processing time, they were immediately accused of bragging & making others feel bad. Some posters seem to think you are not allowed to post here unless your sales suck LOL - and it has been that way for years. So many sellers who do well will never post in a forum, although some contact me from time to time and tell me things they are afraid to post, to help with my research. There are people that make thousands of dollars each week here; some make that in a day.
I fully expected for Etsy to have a great 3rd quarter, based on the people I've been speaking to.
Okay I'll take a WILD GUESS at what Etsy is planning ... haha or maybe I'll start yet another wild rumour ...
My guess: In November Etsy will start a huge new advertising campaign. That advertising campaign will partly be funded by the money they're diverting from google ads (which is why they needed to create Etsy Ads). And that advertising campaign will consist of two big items: (1) FREE SHIPPING (which is why they were so obsessed with having sellers offer free shipping), and (2) FORCED RETURNS ... which they haven't announced, but there have been a few very tiny hints that they're considering this.
November could be rocky!
EDIT: oh and whatever new item they're announcing in November will be 3/4 completed. US sellers will get some tools to help them deal with it. And international sellers will be told they'll be getting tools sometime in 2020.