Etsy, Inc. (ETSY) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to our keynote session. For those of you who are just joining, I'm Maria Ripps, Internet analyst here at Canaccord Genuity. And I couldn't be more excited to introduce Josh Silverman, Etsy's CEO; Rachel Glaser, CFO; and Deb Wasser, Head of IR and ESG engagement. Josh, Rachel, Deb, thank you so much for joining us for our event this year. It's so great to see all of you. And with that, I think, Rachel, I should turn it over to you for a minute.

Just for a quick second. Thank you, Maria, and thank you for hosting us at your conference. I just wanted to direct everybody to the safe harbor statement that Etsy has on its IR website. So please refer there for our safe harbor. Thank you.

Perfect. So Josh, you and Rachel have been with the company for about 7 years now, and the platform has evolved a lot, including significantly better overall consumer experience, more advanced search and improving brand awareness. As we get started, can you maybe spend a minute talking about that evolution? And what is some of the key strategic priority for you over the next couple of years?

Yes, absolutely. So going back to 2017, when we joined the company, Etsy's growth had slowed very, very significantly. And there were new competitors. For example, Amazon had launched Amazon Handmade. And I think the market had concluded that Etsy was about as big as it could be and that competition was too fierce and that the future was not bright for Etsy. And at that time, Etsy was doing about $3.3 billion of gross merchandise sales. Fast forward to today, last year, in 2023, we did $12 billion of gross merchandise sales, 3.5x more. We had 2 million sellers back then. We have 7 million sellers today. We had 33 million buyers back then, we've tripled that to 92 million active buyers in 2023 alone. And revenue has grown fourfold. We had $444 million in total in 2017. Etsy did $2.6 billion of revenue in 2023. And EBITDA has grown ninefold from $80 million in 2017 to $754 million. So for those who thought maybe what Etsy was as big as it could be in 2017, I think we've been able to demonstrate that there's an enormous amount more opportunity than many people gave us credit for back then. For those who thought we couldn't beat the competition, I think we've been able to show that Etsy actually stands for something different that's meaningful. And I think we continue to be at very early days in this vast space that is e-commerce, where Etsy participates in so many different corners of it. For example, search and discovery. There's over 100 million things for sale on Etsy right now. We've made incredible progress in search. So if you have a very specific idea of what you're looking for, we are vastly better than we were 7 years ago at helping you find the thing. But there is so much opportunity in discovery with 100 -- more than 100 million things for sale, helping you to discover all of the incredible things, serendipity, surprise and delight of the amazing breadth and depth of inventory on Etsy, tons of opportunity there, so much opportunity to help people realize there's great value for sale at Etsy as well. Many of our sellers are willing to sell things at great prices. And because there's not markups between the seller and the buyer, there's also opportunity to deliver that at value. Incredible opportunities for us to elevate quality even more and bring the very best of Etsy to our buyers. And in fact, to create a more positive flywheel where the way sellers earn their spot at the top of search is by delivering even better quality. And so much more opportunity still in convenience and reliability helping to make sure packages arrive faster, that pricing for shipping is really affordable and that people have confidence that we have their back. And last but not least, an enormous amount of opportunity in consideration. Etsy is a brand now that in at least in the U.S. and the U.K., 2 of our core markets, many people know the Etsy brand, but they still don't know when to think of us. And there's a huge opportunity to build consideration, we believe, for when you should come to Etsy, all of which means I think the future is very bright that we can be a much bigger company a few years from now than we are today.

Great. That's a great overview. And speaking of consideration, so last year, you talked about the importance of driving greater awareness and I guess, consideration as to when consumers are initially starting their e-commerce journey. And on your earnings call in February, you highlighted the vital few initiatives that should drive greater buyer consideration. Could you maybe walk us through what those initiatives entail, including the recently launched Gift Mode and how are you thinking about sort of the contribution to GMS growth over time?

Right. So let me start with Gift Mode. I mentioned at the end there that knowing when to think about Etsy is the #1 challenge for shoppers. They love Etsy, but they don't know when to think of us. Gifting is a perfect time to think of Etsy. Gifting is a high-stakes occasion where it really represents you and how much you care about someone or have thought about someone, people feel very stressed when gifting. And we understand that buying for someone else is different than buying for yourself in many ways. There's no better place than Etsy to find the perfect gift because again, with 110 -- over 100 million things for sale, well over 100 million things for sale, if you can imagine it, we have it. We have the perfect gift. So helping people using cutting-edge AI to come up with the perfect gift idea is part of Gift Mode, helping to deal with procrastination, so even if you're buying it for the person on the day of the event, we can give them a really exciting experience saying, hey, the gift is on its way, and make the suspense having the gift arrived, be part of the excitement of the process. So many areas where we think we can build a really cutting-edge giving experience and be the go-to destination for gifting. And gifting in and of itself is an enormous market. We estimate gifting in the U.S. alone is a $200 billion market. So every 1 percentage point share we gain in gifting is $2 billion of GMS. Of our 92 million active buyers last year, only about 43 million, 44 million of them bought a gift on Etsy last year, and they only spent about $39 on a gift or gifts on Etsy last year. We estimate the average consumer spends $1,600 per year on gifts. So for our shoppers who did buy a gift on Etsy, we had only a very small share of their gift and about half of our shoppers didn't buy a gift for anyone on Etsy last year. And for all the people who didn't shop on Etsy at all last year, what better first-use case to come to Etsy or to come back to Etsy than to buy a gift. So we think gifting is a wonderful consideration opportunity. It's a space we think we're well positioned to really lead and to own. And you should expect us to continue to build out a really leading customer experience to find, deliver, fulfill the best gifts, and also to really loud in the market telling people about that. But that's only one opportunity for consideration. If you think about the brand barriers that stops people from shopping on Etsy more often, they're often the counter to the things people love most about Etsy. It's handmade, it's made just for me. That's really exciting, but is it going to take too long to arrive? Well, we think there's more we can do through our deep integrations with postal services to get that package to you even faster to make sure that it doesn't take too long. In fact, we think we can cut shipping times on Etsy by at least 2 days this year. We think we can do to make shipping prices more predictable. Also another barrier that stops people from shopping on Etsy more often, we think we can do more to elevate very best of Etsy to make sure that you have confidence that we have your back and that you're going to love everything you buy on Etsy. We are doing more in international, particularly around fulfillment. We think there's a lot more we can do in fulfillment internationally to make cross-border shipping as easy as buying within your own country. And we think we can elevate and evolve the way search works to make it more transparent for sellers how to win the top spots in search by delivering both great items and great service to our customers. And collectively, those make up our vital few for the year, which we think go head-on against the barriers that stop people from shopping on Etsy more often. Oh, and experimenting with the loyalty program in the back half of this year as well.

That's great. So a big topic these days around your platform and sort of the e-commerce space in general is evolving competition. And we've seen big box competitors like Amazon, Walmart, Temu, SHEIN taken share over the last year. So as consumers have been more price sensitive and allocated sort of greater portion of their spend to essentials. So essentials not sort of the category that Etsy plays in. But could you maybe talk about some of the things that you are doing to better compete with the big box sort of players?

Absolutely. We do see that the share of wallet for discretionary goods has declined very significantly over the past 2 years. And particularly, consumers are pretty shocked by food prices right now. And they're taking up a huge portion of their wallet, much more than they used to. When you combine that with their rising mortgage rates or rent, rising food prices and higher gas prices, they're really struggling just to afford essentials. And so they are going online to largely big box deep-discounted retailers to buy essentials. And that's what's driving e-commerce. The headwind in e-commerce is discretionary goods, where people are, in general, spending less. Our answer to that is, first, Etsy has got to be more Etsy. And so we should never be the blue light special. We should never try to chase to the bottom players whose brand stands for dirt cheap, right? There is great value on Etsy. We need to be sensitive to that. We need to talk about that because it's true. It exists on Etsy, but we also -- we want to react to the times without overreacting to the times. And so we are highlighting amazing deals. We've launched a deals tab in the app, which is getting great customer reception from the fact that you can find great deals on Etsy. But really even more into human elevating the best quality, the things that are the most artisanal, really suppressing things that look more commoditized on Etsy. This is also really important: leaning into experiences that are uniquely Etsy, like Gift Mode. You don't want to buy a gift for someone else at the very cheapest place you can buy it. You want to buy it in someplace that's kind of -- that's going to make it custom, that's going to feel great. And so there's, we think, many experiences that are uniquely Etsy, we're very well positioned. And being old enough to have lived through now and managed companies through 3 economic cycles, part of this is recognizing as well that cycles come and cycles go. And we want to be thoughtful about reacting without overreacting. Ultimately, there is increasing consolidation. There's -- most people are selling the exact same SKUs. And they're just trying to sell that SKU a little cheaper or ship it a little faster. And it is going to be a race to the bottom for those people in whether Amazon wins or Temu wins or Walmart wins, not really sure. There will always be a space for someone who can sell it super cheap and ship it super fast for a really commoditized good. And then consumers are going to be desperate for an alternative to that. We think Etsy is better positioned than anyone to be the alternative whoever wins over there. We think we're best positioned to be the leading alternative, and we think that is an enormous space to be fighting for.

I was just going to add for fun that if you go to our homepage right now, not just on the app for deals, we have a pretty enormous banner for deals on home decor, everything's 30% off. That's not Etsy's P&L. That's our sellers hoping to -- offering discounts at 30% off in that category.

That's great. And maybe just sort of a follow-up question here and sort of more specifically on the question of competition. Do you think you are losing share to Temu?

Well, look, Temu was a company that didn't exist in the U.S. 18 months ago and is doing $10 billion to $15 billion of GMS. So they've obviously taken share from almost everybody. Etsy is -- you don't get to be that big, that quickly without taking some share from many people. Etsy is one of the couple of most popular e-commerce sites in America. So of course, proportionally, we are going to feel some share gain because we're more popular than many. But we don't see any evidence that we have been disproportionately impacted. Also, if I have to think about the polar opposite to Etsy, it's got to be Temu. I can't think of a company more opposite to Etsy in terms of what we stand for, for customers and our overall experience. So when you go talk to customers and say, when you think of Etsy, who else do you think of? The only community I've ever encounter that says I think of Temu when I think of Etsy. There's like a couple of thousands of those people in the world, I think, and they have one thing in common, they're asset managers. The investment community thinks that way. But when you go talk to customers, I don't hear any customers talking about that. The other thing I would highlight there is, and maybe this is a misconception about Etsy that somehow where Etsy is largely impulse purchases. People come to Etsy for the occasions in their lives that mean the most. When they want to buy something for themselves that means something, when they want to buy something for a special occasion, when they want give a gift. These are very meaningful, considered purchases. So the substantial majority of purchases on Etsy have 2 or more visits, 70% or more of purchases on Etsy have 2 or more visits. Many, many purchases on Etsy, 50% of purchases on Etsy have 4 or more visits. These are highly considered purchases. It's the opposite of an impulse buy I bought just because it happened to be so darn cheap. So we face competition today. We've always faced competition, and what's important is we continue to stay true to who we are, because we think the world is going to need Etsy ever more as it becomes more commoditized and more disposable with the other parts of people's wallets.

I just want to correct one thing for the webcast is that it's 50% of our buyers come 2 or more times a year and 50% only come 1 or more times a year.

I was talking about considered purchases. So what percentage of purchases have 2 or more visits.

2 or more visits.

Yes. you were talking about what percentage of buyers buy with more than 2 times per year, yes.

Well, thank you for that, and thanks for addressing this question on competition. I feel like it's one of the top questions right now that we're getting from investors. So let's briefly touch on your financial outlook. But can you maybe talk about your Q1 and '24 and full year guidance? And does your guidance include sort of any changes in the macroeconomic environment?

Yes. So we guided, just to refresh everybody, for Q1 on GMS, we guided to low single-digit to mid-single-digit declines. And we guide at the current macroeconomic headwinds. We don't assume it gets worse or better in that number. What we said was the difference between the mid-single-digit decline and the low single-digit decline is that we expect to have initiatives that will layer on and start to gradually intersect as we went through the quarter and the rest of the year. We also said that our take rate for Q1 would be between 21% and 21.5% take rate, which reflects a 50 basis point improvement in take rate from what we had at the end of Q4. And we said our EBITDA margins would be approximately 26%. We also gave a full year guide that said we would expect that Q1 to be the low point of the year in terms of GMS and that reflects the continued not only annualization of the product and marketing wins we had from 2023, but the new initiatives that we have in the pipeline for 2024. We said revenue, the take rate would be approximately consistent to Q1. So that was the guide we gave on revenue for the full year, and we said that the margins for the full year would at least as high as 2023 margins, which were 27.4%. We don't -- we're not forecasting the economy. We're really just forecasting what we can see, the incremental benefit from the initiatives that we're working on.

And let's maybe expand on your EBITDA margin guidance for this year, which I think you indicated sort of it's going to be -- sort of at least at the sort of 2023 level. How should we think about your investment -- because your investment plans are, particularly in light of your December workforce reduction, that reduced your previous internal projections for operating expenses by a little over $90 million?

Yes. So first, I want to just to flag that we still have about 300 basis points of margin headwind from our subsidiaries. And so Etsy's margins are numbers I gave for 2023 at 27.4% would imply that Etsy's margins are 30 -- are approximately 30%. We've been higher. We've been higher on consolidated margins before, but most of the time when we do anything with take rate, we reinvest a considerable portion of that incremental revenue from take rate back into initiatives that, we believe, create benefit for sellers, for buyers and for Etsy. So we usually only drop about 20% of the incremental revenue to the bottom line. With our subsidiaries, we -- they are -- their margins are getting -- are improving. So we divested ourselves of Elo7, which was a small contraction to our bottom line margins. Reverb, we expect to be modestly profitable this year and Depop's headwind to margins is decreasing, but the fact that their take rates are still much lower than Etsy means that we're getting revenue coming through to the bottom line at a lower overall margin, which is dilutive to Etsy's bottom line. So that's 300 basis points. Overall, the expense we're investing in those subs is not -- it's not [ in a form ] and not even really worth discussing a lot about it. So we think it's a good investment in businesses that have a lot of opportunity. Just a footnote that Depop is doing incredibly well, particularly in the U.S., and Reverb is outpacing its space in the marketplace in the musical instrument category, even though that category has had a lot of headwinds in it. We also did a reduction in force at the end of 2023. And when we did that, we went through and scrubbed and optimized our cost base, we prioritized the things that we were investing in. And so overall, we said that's about $90 million of cost-benefit to 2024 and beyond. But we're also still investing. We're hiring. We're investing and we're -- we expect those things to be ultimately top line and bottom line accretive, but they're not always accretive to the quarter in which we invest in them. So that's the overall shape and structure of the...

One thing I would just add is every year and every quarter has been 1 year and a quarter of efficiency at this company. There's never a quarter when we've said -- let's not worry about efficiency, let's just strive for growth. We have been very focused on every dollar spent. And is that dollar working hard to drive value that would make the pie bigger for everyone. We've been very focused on that for every quarter and every year of the past 7 years, and we will continue to. We've never been a growth-at-all-cost company. And we're proud of the fact that, for example, our revenue per head count is higher than any company of our scale, any marketplace company of our scale that we know of. We run this company quite lean and I think scarcity breeds ingenuity, scarcity breeds focus. We're proud of that, and we think it's been a strength of ours.

That's great. So let's switch buyer metrics and behavior. I think in Q4, you reactivated a record number of lapsed buyers at nearly 10 million. You acquired over 8 million new buyers and also continued -- sort of continued to retain buyers at levels above prepandemic rates. And you -- I think you ended the year at over 92 million active buyers. What drove the strength in active buyers? And how should we think about sort of active buyer growth from here?

Yes. So we have increased our penetration, particularly in the U.S. and the U.K., quite substantially, particularly if you look back, prepandemic. As I said, the number of active buyers on Etsy has tripled. And during the pandemic, we had tens millions of people who really had very few options for where they could go to buy things. Etsy was kind of one of the only places that was operating completely as normal. And so we had tens of millions of people come to Etsy because they had to. We're really proud of the fact that those cohorts are coming back to Etsy again and again now in spite of tremendous headwinds, tons of competition because they want to, because they love the experience. And we're proud of the fact that we had an all-time high of active buyers in the fourth quarter of 2023, higher even than our peaks during COVID. And those cohorts are spending about 23% more with us today than they were pre-COVID. So not only do we have triple the number of buyers, but on average, those buyers spend more. Now, they were spending 29% more than they were pre-COVID, during COVID. During COVID there are very few places. So we've held almost all of the spend, but not quite all of the spend. And so active buyers has continued to grow. Spend per active buyer, we've held almost everything, but it has shrunk a little bit over the past few years, which has been our headwind to GMS. Where do we go from here? While we have a lot of penetration than we did of buyers in the U.S. and the U.K. It's still the case that only 1 out of every 3 women in the United States bought something on Etsy last year. And if we have something for 1 out of every 3 women, I'm confident we've got something for the other 2/3. And only 1 out of every 10 men bought something on Etsy last year. And our penetration among men is growing faster now than women as we started to really lean into that opportunity. So we think there is still significant room to go in both bringing new buyers, brand-new, first time Etsy buyers, but also this pool of 100 million lapsed buyers that we have the opportunity to reactivate. These are people who have shopped on Etsy before, who have -- the vast majority had a great experience and if you ask them, think good things about Etsy, they just haven't thought of us. We need to earn our way back into their consideration set. That's our opportunity, and we think the opportunity there is large.

That's great. So let's talk about marketing next. So then marketing was up 24% last quarter and continues to move higher as a percent of total advertising spend, I think reaching about 20% of consolidated spend last year. Maybe talk about some of the metrics that give you confidence to continue leaning into upper funnel marketing strategies?

Yes. So we have a full funnel approach, where we have the opportunity to talk about our brand and tell stories through above-line advertising like TV to really communicate in a more rich way what we're about and why we're different. Mid-funnel is reaching people, for example, who are in the process of getting married or moving home or having a baby to talk about specific types of shopping one can do on Etsy. And then bottom funnel in places like Google PLA when you're looking for toy, for a wooden toy for your baby, that's a very specific moment. You know exactly what you want. We can show you a PLA, take you to a landing page and close the deal. And we've really worked on being world-class across each of those areas of the funnel. I think we've made tremendous progress. And for each of them, we measure and hold our spend accountable. On top of the funnel, as you mentioned, we are, of course, looking very much at things like visit intent and brand affinity and we've made real progress there. So for example, prompted awareness is up 10% in both the U.S. and the U.K. over the past 4 years, it's up 100 -- much more than that, 40%, I think. It's more than twice as big as it was since prepandemic in Germany. So where we've run TV ads, we are seeing real gains in things like prompted awareness, but we also look at GMS. We run incrementality tests, where, for example, we go dark in some markets and run ads in other markets and look at how much incremental GMS is this actually driving and what is the ROI? And even for our brand marketing, we have a strong ROI lens on that spend.

Germany's prompted awareness is up over 100%. You were safe with 40%, but it's even better.

Great. So -- and your performance marketing spend, on the other hand, was down a little bit in Q4 as some of your models sort of pulled back on certain ad units given sort of higher than normal CPC. Could you maybe talk about some of the dynamics that were in play in Q4, particularly as it relates to kind of impact from some of the sort of newer competitors that we talked about. I guess, when you look at their spending, how sustainable do you think that is?

So first, I wanted to set the table with reminding people that our performance marketing -- our GMS, 80% of our GMS comes to us through free channels and 20% comes to us through paid channels. And in those free channels, 50% approximately is direct, and the other 50% are either SEO or other parts of our funnel, like CRM or organic, social and things like that. So that's the first piece is we will always spend in performance marketing as long as it's delivering and what we call delivering is that even the last marginal dollar of spend is hitting our -- the ROI threshold that we determine for ourselves and then when that goes away, we stop spending. And the models will dynamically do that. So when you see competitors come into the marketplace and spend either with a different ROI threshold or no ROI threshold, meaning they're spending, fighting to the death, if you will, and driving CPCs up, our models will dynamically pull back because it's going to no longer deliver the ROI thresholds that we have asked it to deliver. So that's a little bit of what we were seeing in Q4. Again, the good news is we count on that traffic to a small extent, a greater extent is our direct traffic that we get, and we use a full funnel. So in the case of Q4, we were able to lean more heavily into above-the-line marketing where seasonally competitive as far as lots of people spending on ATL and driving CPMs up but not more than normal, not competitively out of range and the rest of our funnel. And I think there's actually parts of our funnel that are a little bit -- we need to put them to work more. Those would be CRM capabilities are as well as paid social. We've worked hard to drive the amount we invest in paid social as high as we can, but there's more room to run there. So we're working hard to optimize that piece of the funnel. And then in Q1, we also tested, I'd call it, like network TV, large sports spending in -- for the big game. We're not supposed to use the exact name of the big game or for the big games. So we were able to test that as far as all the wraparounds we could get with not only buying an ad on that big game, but with more influencer spending with a lot of other parts of the funnel at work with the same creative content. And so we are excited to be able to continue to test parts of the funnel and put them to work.

And I just want to double down on where Rachel started which is how much of our traffic comes to us through free channels. There are very few brands of any kind, but certainly in e-commerce, there are very few brands that do something important enough, different enough, often enough earn one of those precious few spaces in your brain. One you're going to actually remember and not have to go to Google or Facebook and be downstream of. And Etsy is one of those precious few brands that really does that. That, I think, is of incredible lasting value. And our job in the up and the down of the cycle, but especially in the down is not overreact to things like all people care about right now is cheap, cheap, cheap. Our brand stands for something incredibly precious. We've earned the space in people's brain. I think that, that role is going to become more and more important. We need to make sure Etsy gets more and more Etsy, stays different from the pack, and I think there's a huge prize at the end of that road.

Great. So before we move on, Etsy has been increasingly experimenting with promotions. Can you maybe share your recent thoughts on utilizing promotions versus leveraging advertising spend? And can you talk about sort of some of the learnings from these promotions? And how are they impacting buyer metrics?

Okay. So for quite some time now, we've offered tools for our sellers to put items on sale, and they are taking advantage of those and using that to adapt to the market. The vast majority of things on sale are seller-funded, meaning a seller decides to put her inventory on sale. And it may be that she just launched a new line and she wants to make some of her first sales. And so she's going to offer some deep discounts or maybe she has some leftover inventory that she wants to move out. There's lots good reasons why a seller might have some of their inventory that they want to put on sale, and in this environment, that's important. So a increasing share of things bought on Etsy are bought on sale, almost always bought on -- with the sale being funded by the seller. We're learning how to give sellers better insight into how to use those tools as well as make those tools richer. So for example, for a long time, the default sales was 10%. If seller put something on sale, by default, it would be 10%, and many, many items on sale on Etsy, therefore, were 10% off. Our research showed that 10% off is a waste in this market. It's not enough to drive an incremental conversion, so all you did is give up margin. So recently, you've seen us both change the default and talk to sellers about how if you're going to put something on sale in this environment, it needs to be at least 25% off. And so that's an example of us working with sellers to help them be more successful giving them both tools and insights. In addition to that, we've dipped our toe in the water with Etsy-funded promotions. So very recently when we launched Gift Mode we said, "And if you're buying a gift on Etsy for $50 or more, we'll give you $10 off on a gift of $50 or more." And you're seeing us do that very occasionally. It is very small dollars in the grand scheme of Etsy, and we are continually testing and learning what works. And some of those have worked better than others, but we're continuing to iterate, it's one of many tools in the toolkit. I would expect that for quite -- for the foreseeable future, if not forever, the vast majority of sales on Etsy will be seller-funded. We think that's the appropriate model.

Got it. So let's switch to one of my favorite topics, which is platform innovation. So when we've talked about this several times in the past, but with over 100 million handmade unbranded items on the platform, one of the friction points of buyers is actually finding what they're looking for and then having trust to make a purchase. So first, in terms of search, you've invested a lot in this functionality in recent years. So given the momentum with AI and chat-based search tools, could you maybe talk about some of the main investment priorities? And how you sort of envision search evolving over the next couple of years?

Yes. So we've made a tremendous amount of investment over the past number of years and getting better at understanding what you said and what you meant. And that's required infrastructure from the ground up in terms of data-processing capabilities and using cutting-edge machine learning tools and whatnot. But so for example, when you ask for a wedding dress, we give you wedding dresses, not wedding dress hangers. Maybe more impressively, when you ask for cocktail attire for men, we show you blue blazers. Even though there's no words in common. And we've gotten pretty good at that. And that task on Etsy is exceptionally hard because we have well over 100 million things, and those things don't map to a SKU. So step 1 is even understanding what the thing is. And the seller's input is not always very reliable. So using things like computer vision to actually understand what the thing is, is important. And then what did the person mean? And neural network translators are one of the main technologies we have been using for several years to bridge that gap and get really good at understanding what you meant, and therefore, what inventory is relevant. Now that term, neural network translator may sound familiar because it's the same fundamental technology that is powering gen AI. So we have a team with both the kinds of data infrastructure we need and the kinds of skill sets we need to be quite fluent in this technology and able to work in the cutting edge. We're not building our own gen AI models. Of course, we're partnering with some of the big players in the world that you would expect us to partner with to tune those models for our particular use case. But I think that there may be a few people better positioned than Etsy to benefit from that. If you think about the role of a sales associate when you enter a store, the role is, you went there and say, "I'm looking for a television." And they say, "Okay, here's 300 TVs." But they ask you a couple of questions and they narrow it down to here's the 3 TVs that makes sense for you, and here's the worst point about each of them. And that's kind of how you can decide which is the best option for you. On a world with over 100 million things where very many of the people who come to Etsy are saying, "My sister has just had a baby and I'm looking for a gift for the baby." There's a tremendous amount of context in that, which we don't get in today's search engine like, this gift, it isn't for you, it's for someone else, right? And it's our sister's baby and "oh, well, what kinds of things and what kind of household." You can imagine a conversation that would very quickly narrow from many, many ideas to a few ideas and then the very best item within each of those few ideas. And given the incredible breadth of Etsy inventory, that kind of context and that kind of conversation can be even more valuable for Etsy than for many. So we are very much investing in experimenting live as we speak on that. We do think it's going to be a journey. I think that the technology is coming a very long way very fast. Having consumers understand and be confident in how to engage with chatbots. When do they want to engage with chatbots? Where do they want to engage with chatbots? How will the presentation layer look? There's going to be a lot of test and learning on that. We are very active in that. I think it's a great investment for us. And I think that the tailwinds, it provides real tailwinds for us that I think are going to be very fruitful in years to come.

Great. I'm just realizing that we have literally just 1 minute left. So it was a great discussion, but we can't let you go without asking you our top question of the day, and you probably saw this coming. But what is your one prediction about the e-commerce space that you think might surprise people over the next couple of years? Rachel? Please go first.

Oh gosh. That's a surprising one. I think that the prediction is that Etsy is going to -- Etsy is going to continue to stand out as doing something different and special and will surprise people. We've surprised ourselves that we've gained 2.5x the size that we were before the pandemic and kept almost all of it. And that's my prediction is that we're going to continue to hang on to our differentiation and our special.

Yes. I think people continue to capture in on the latest competitor and get very obsessed with that particular competitor. But when you pull back, the landscape of competition has not changed. There's a group of people competing to sell the same thing cheaper or ship it faster. There's going to be new entrants always, competing there to see who can do that. But that is going to be constant. I think there's going to continue to then be -- we're playing a different game that speaks to some very different needs for people. And I think that, that Etsy is uniquely well positioned. And I think that is a large space, and I think we're well positioned to continue to do well.

That's great. We're going to leave it there. Josh, Rachel, thank you so much for joining us.

Thank you.

Take care.