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

Awesome. Great. Let's get started. I'm Bryan Smilek, JPMorgan's Internet Analyst. We're pleased to have with us today Etsy's CEO, Josh Silverman; and CFO, Lanny Baker. Etsy is a leading 2-sided marketplace, providing about 95 million active buyers, access to 100 million-plus listings from 8 million-plus active sellers, primarily focused on the sale of unique creative and handmade goods. We estimate Etsy will generate $12 billion in GMS this year, 26% adjusted EBITDA margins and $600 million in free cash flow. Josh joined Etsy as CEO in May 2017 and previously served as President of Consumer Products and Services at American Express, CEO of Skype, CEO of shopping.com, and he was also the Co-Founder and CEO of Evite. Lanny joined Etsy as CFO earlier this year and was previously the CFO and COO at Eventbrite, CFO at Yelp, CEO and CFO of ZipRealty and CFO at Monster Worldwide. Welcome, Josh and Lanny.

Thanks. Thanks for having us.

Thanks, Bryan.

Awesome. So the format today is fireside chat. With that, let's get started with a series of questions around the macro environment. So kicking off, Josh, considering the macro volatility and uncertainty that we're seeing in the market, could you just provide your perspective on the state of the consumer and discuss the confidence behind your 2Q guide for stable to slightly improved GMS trends compared to 1Q's negative 6%?

Sure. And just to pull back for a second for those who are new to Etsy, Etsy is a marketplace with over 5 million sellers, close to 90 million active buyers where you can buy from the person that actually made or designed the product themselves. So what we offer is a 2-sided asset-light marketplace that's truly differentiated from the vast majority of other e-commerce in a way that I think is more needed now than ever. In the 12 months prior to the pandemic, Etsy was doing about $4.9 billion of gross merchandise sales. In 2024, Etsy did close to $11 billion of gross merchandise sales. So we grew extraordinarily during a time when people had very few other options. And the vast majority of those buyers have stayed with us since the pandemic. And that's been the team running hard to try to replace sales for things like face masks with other things that people want. And now the opportunity ahead is for Etsy to really demonstrate that we can grow on top of that, which we very much believe we can. To your question specifically about the consumer macro environment, we landed the plane exactly where we thought we would in the first quarter. And it's a little tough to tell whether that's because the macro got a little worse, but our product and marketing teams did a little better on their execution or it was kind of net-net on both. What I would say, though, is we haven't seen a marked difference or as of the first quarter when we reported, we hadn't seen a real marked difference in consumer spending in spite of all the crazy volatility that we've all been writing in the marketplace. That said, we have a lot of agency. And what I'd point to is the real resilience of the Etsy marketplace. We've been through consumer supply shocks in the past. In fact, in the very recent past, we all remember when we were all tracking the movement of boats across the Pacific Ocean and through the Suez Canal, and that wasn't very long ago when store shelves were empty in a lot of places. That proved to be a great tailwind for Etsy because Etsy sellers were very resilient to that much, much more so than most. When pricing shocks have happened, Etsy sellers have been much more resilient. They have not passed through those kinds of price increases we've seen elsewhere. We've also seen what happens when inflation spikes and consumers feel poor. In 2023, when inflation spiked, there was a real headwind for Etsy. So it's tough to tell. While I think that the supply shocks might provide a tailwind for Etsy, should there be some. Let's hope that we don't see a lot of inflation and things like that, which could be a headwind. It's hard to tell how those 2 will net out. And I'd say it's a little too early still to see any actual changes in consumer behavior.

That's super helpful. So sticking with the macro and you alluded to as well, competition has really intensified as the lines between online and offline blurred into omnichannel over the past few years. So just thinking about the removal of the de minimis, which we got an update this morning as well, too, so very timely. Can you just help us understand, did you see any near-term benefit from Asia-based retailers starting to pull back in terms of advertising spend and just overall U.S. presence? And I guess, how would you frame the operating environment more broadly from a competitive standpoint?

Yes. So I'd say it's been so dynamic and so volatile that it depends on which week and sometimes which day of the week. The other thing I would say is we keep reminding people, it's actually a very competitive e-commerce market broadly, and Temu and Shein are only 2 of many players, and they're not 2 of the biggest players. I mean the biggest players are Amazon and Walmart. And they are very active and they're moving in and out of the Google auction and other places all the time. So there's a lot of moving pieces there. Broadly speaking, I would say that the advertising market has held relatively strong. And if you look at the stock price of the advertising companies, I'm not saying anything that I think is particularly shocking or proprietary. And that's a testament to, I think, just how robust the market is in general. Etsy's martech keeps getting better as well. So we're able to continue to invest in a way that is, we think, profitable. But the most important thing is we're leaning into the things that we have agency over that we can do differently that we think allow us to outperform the market. So for example, in a world where we may see a lot of tariffs, Etsy is building a lot of merchandising on the site, talking about how you can buy from millions of sellers in your own country. In the United States, we have millions of sellers. Also in Canada, we have a lot of sellers. In Germany and the U.K., we have a lot of sellers. So you can support local sellers in your own country, not pay tariffs. That's something we have under our control, and we're really amplifying our marketing and messaging around that. And then I think there's a ton of opportunity for Etsy to do better, and I'm sure we'll talk about this in driving people to the app, providing a more personalized experience and especially leaning into what makes Etsy different. Over the past couple of years, we've really done a lot on table stakes, making sure that there's great value on Etsy that we get you to the product you want. But leaning into why Etsy is different and better, I think there's a huge opportunity for us to do even more there. And I think we are very unique that way. Almost everyone in e-commerce is literally selling the same product made in the same factory overseas and all you're picking is your supply channel. Etsy actually offers a different product, and I think that's going to become more and more valuable.

Awesome. One more on tariffs before we transition into a series of questions around GMS. Just looking at Etsy's direct exposure, just over 1% of GMS comes from U.S. imports of items purchased from China. Just curious more broadly, how are you working with sellers on pricing, marketing and demand gen. You mentioned it as well more by domestic. And then Lanny specifically, 90% of supplies are sourced domestically. Is it fair to assume as well that exposure to China-based input sourcing is also low from a product standpoint?

Yes, it's a hard question to pick apart, and I'll do that in just one second. Let me say really quickly, these comments are covered by our safe harbor public disclosure. You can go to our website to get access to that. And I'm not usually the person to say that, but I wanted to get that out there. On tariffs, what I would say, when we survey our customers, they tell us that 90% of their sourcing, 90% of them source locally and even within 100 miles of where they are. So -- but it's hard to know whether the person who is sourcing yarn locally is purchasing that yarn from somebody who sourced it from China. And -- but the good news is there's lots of places to get yarn. And our sellers have proven to be pretty creative and pretty flexible and dynamic in managing their businesses over time. So it's hard for us to pin that down directly, but our direct exposure to some of the trade lanes where the tariffs have been most significant is really, really small, as you said, 1% coming out of China and about 25% of GMS traveling into the United States or going out of the United States to Europe. So pretty limited exposure. What we've done for our sellers is try to -- we took a very small team at Etsy and gave them the full-time task of staying on tip top of everything that's happening with tariffs. And we use that team to then communicate internally about what we're seeing in business trends, but also to lead our effort to keep sellers abreast of everything that is going on. And in our seller forums and elsewhere, we're getting fairly good feedback right now for the care and the handholding that Etsy is doing on their behalf. We're also lobbying in Washington on their behalf. So that's a very important role that we can play in this moment in time. And as Josh described for the -- or I'll add for the buyers, we've added contextual references to, hey, these are items that are sourced locally, that are not subject to tariffs, that are in your local domestic market or if you're going to purchase that item, there might be extended delivery times on that item because it's coming through those [ places ]. So we have the -- we're fortunate in that we are not sitting here thinking about holiday inventory and shipping lanes of our own. But we've taken that bandwidth to try to do it right by both the buyers and sellers in this time with kind of some uncertainty.

Awesome. That's super helpful. Let's shift gears a bit to Etsy's growth strategies. So you've made the decision to recalibrate your strategy to balance near-term conversions with more medium- and long-term initiatives. Can you just help us remind the audience how do you quantify that drag from 2024 as you prioritize longer-term bets like the app, for example? And how quickly have the squads started to recalibrate to drive near-term conversion?

Yes, great. Let me do a little bit of storytelling. We come out of the pandemic. And candidly, I thought and said in all of our earnings calls, I thought when we came out of the pandemic, we'd lose like half of the buyers and the volume that we got. We kept virtually all of it. And in 2022 and 2023, what the teams were doing was scrambling urgent growth hacking to try to figure out everything we could do to drive more conversion rate on the site to some success relative to our peers, I would say, fairly significant success relative to our peers in terms of maintaining the GMS, not having it fall much, much further. But as we entered 2024, prepared to do one more year of that, we looked at what is that really about. And a lot of the things that were really successful in growth hacking were things like building tools to allow our sellers to put things on sale and nudges about this sale is ending soon or you've got this in your cart, make sure to buy it. None of those are really leaning into the differentiation of Etsy. What makes Etsy truly better and different. And we're not going to beat Amazon or Temu who can sell it cheaper. That's just not what Etsy is about. We have so much more to offer than that. So in April of 2024 about, we looked at ourselves as a team and said, we think we should just really lean into investing in the things that are going to provide really long-term differentiation, and we think a lot more growth going forward. And in particular, the infrastructure around elevating the very best of Etsy, what is really the highest quality product in Etsy, doing a lot more not just to serve the mission you're on today, but to spark whole new missions every time you visit Etsy, teach you something new about Etsy and learn something new about you to allow Etsy to become more personalized and to do all of that through the app, to do much more to drive people to the app. So we rotated most of our squads in 2024 over the summertime on to building this kind of infrastructure. And there was a real opportunity cost to that. As we said in one of our earnings calls, hundreds of millions of dollars that those squads probably would have produced in terms of incremental GMS had they done the growth hacking that they were doing. And as we entered 2025, Q1, we normally would have benefited from the tailwinds of all of that growth hacking throughout 2024, which we didn't. So there was some opportunity cost to it. But what did we get for it? If you look at the customer experience on Etsy, it is dramatically different today. Only 1 year. It's only been a year. We've already made tremendous progress. So for example, the first thing I said is quality. We want to elevate the very best of Etsy. We rearchitected our search engine to have a quality score, not just relevance. Historically, Etsy's search engine has just prioritized what are you most likely to buy. Now we have a point of view on what sellers actually deliver the best and most delightful customer experience. So when you're a seller, the way to earn your way higher in search rankings is to deliver better customer service. That creates a really virtuous cycle. It took some of our most valuable squads, our search squads, multiple quarters to re-architect our search engine and build a Q score. But now we've got it, we're exposing that to the sellers, by the way, in a very transparent way. So we're telling them, these are the actions that matter the most to improve your quality and to, therefore, drive more prominence in search. And we're able to really direct their behavior in that way. That's a really core piece of infrastructure we now have that now that we have a Q score, we're learning more and more how do we leverage it. Second, and I think very importantly, most of the screen real estate at Etsy was all focused on conversion. If everyone's growth hacking, then every piece -- every pixel is trying to get you to buy now. And if you think about what you're most likely to buy today, it's whatever you bought last. That doesn't mean you're likely to buy it, but it turns out RFM models are still true. Recency and frequency models are still true. So what we're showing people on Etsy was just versions of the thing they bought last. And well, maybe you have a 2.8% probability of buying that instead of a 2.5% probability of buying something else. That extra 30 basis points is a big win for our recommendations team. But for the other 96.4% of people looking at Etsy, they learned nothing new about Etsy in that visit, and we learned nothing new about them. What was happening that the vast majority of people who weren't buying, we weren't making great use of that. So we spent the second half of last year collapsing a lot of the screen real estate that was focused on driving purchases based on your most recent actions and freed up a lot of screen real estate to show you things you didn't know about Etsy. And I would encourage you, pull out your phone, launch your Etsy app and just look at the home screen now. You're going to see trends inspired for you, and you're going to see really cool over 200 trends that we've identified. And within each of those trends, hundreds of really cool products that's all powered by really cutting-edge Gen AI to pick the coolest products within each trend at a scale that we couldn't have hired humans to do in the past. But what's going to happen with that is now when you visit Etsy, we're starting to teach you more about, yes, we can serve the need you have, but here's really cool things for dog owners. Here's really cool things for people who are planning weddings. Here's really cool gifts you might think of so that you start to realize Etsy can serve all of these needs. We start to train you to understand all of the different things you can use Etsy for, and we start to collect a ton more data about you so that next time you come, Etsy is even more personalized. Third, we talked about quality. We talked about personalization, delivering all of that in the app is another major focus. So we spent a lot of time in the second half of 2024 on using mobile web to be more of a billboard to drive you to the app. And so there's friction in that. There's actually not just an opportunity cost of having the squads work on that, but actually conversion rate in mobile web goes down. But to the extent that we're driving more people to download the app, we increase lifetime value and that's better for Etsy over the medium term. And what we shared in the first quarter is a lot of really encouraging stats we're seeing, 44.5% of gross merchandise sales now bought through the app. We had really high numbers of first-time buyers buying on the app. We're seeing growth -- GMS growth on the app substantially outpaced the rest of GMS on Etsy more broadly. So we're encouraged by the early trends we're seeing. And last but certainly not least, gifting. That's a big investment we made last year to have a best-in-class gifting experience. And we continue to see gifting share do well. And that's one example of a time when Etsy can really outshine our competitors. So I'd say we bore an opportunity cost last year for shifting to a lot of investments that we think will differentiate Etsy and set us up well for success. We've spent time building the car. Now fast forward 1 year later, we're learning to drive that car. And what we expect is through the course of this year, the gains, we put some squads back to growth. So about 1/3 of our engineering team is now specifically growth hacking. The other 2 continue to work on these longer-term tracks of differentiation, and we expect to see benefits of that stack as we move through the year.

That's super helpful. Let's dig a bit deeper into the app as well. You mentioned 44.5% of GMS in 1Q. Can you just talk about where traffic and GMS you think can go as a percent of total over time? And what are the building blocks to get there? You mentioned integrating the gifting and shopping tabs as well and just overall more algotorial search within the app itself.

Yes. Let me start with just like the way we -- the way I've been running the company for the first 7 years or so of my 8-year tenure, every squad focused on a GMS target. Like what can you do this month to demonstrate that you can drive more GMS? And every squad has got a customer problem they're trying to fix and then they launch typically 1 or 2 experiments a week. Those are all A/B tested. And every month, they report out on how much did they deliver. And there's a lot of great about that, but there's also some real downsides that we've come to see. It's faster and easier to test and learn on the web. So what that means is every squad was incented to test and experiment on the web and then take the subset that worked and port it to the app. That's actually not the best experience. Now all your app is, is sort of a mirror of the web, but the app actually has different capabilities and different user interactions than the web. So designing to be truly app-centric is really a different way of designing and the way we'd incented the team, while it made sense at the time, really wasn't driving the best incentives to create a truly app-native app-centric experience. So we've regaled the teams to really think about what is the best experience in the app, even if product velocity there may not be quite as fast. And that's where learning about how to create really immersive scroll experiences where we capture a lot of data, not just about what have you favorited and what have you bought, which is the data that's powered our recommendations historically, but things like where are you dwelling on? What are you swiping past quickly? Which images are you choosing to enlarge? Those data are very powerful in the models of places like TikTok, Instagram and Pinterest, but they're not data that we've used historically. So I think we have a tremendous amount of opportunity as we are more app-centric and more app native to really build immersive experiences where we learn more, we get much better recommendations and drive more people organically to come back again and again to Etsy. Your question specifically, where can this go? Well, we're definitely underpenetrated relative to many of our peers in the app. And so we believe that we can get a lot more of our customers to be using the app as their primary customer experience. Only 47% of our active buyers, people who've shopped on Etsy in the last 12 months have used the app in the last 12 months, less than half. So we have real opportunity there. I think over time, there is a role for a large screen. There is a role for desktops and laptops because sometimes you want to buy big things or you want to see a big photo of something you're buying on Etsy. Where I don't think there's really a powerful use case is mobile web, which is still a lot of our visits. All those mobile web visits, I'd like all of those visits to convert to be app visits over time.

Great. And digging into the other side of the equation on GMS overall, just marketing as a core driver of GMS going forward. Etsy is also integrating into third-party AI platforms, right? OpenAI's operator, for example, Copilot's as well, too. How can you leverage not only AI, but full funnel marketing as well as you shift towards the app to drive GMS wins over time?

Yes, great question. First, agentic search is coming. It's going to be very exciting. And I think it's going to be really beneficial for Etsy because I used to be the CEO of something called shopping.com, which is a comparison shopping engine. And what I learned then is while there are hundreds of e-commerce sites, there's actually a very finite number of factories, many of them in Shenzhen, a few cities around the world that are distributing the same product. You can go to 50 different websites, but you're actually just finding the same product fulfilled through 50 different supply chains. Agentic search is going to start to uncover that for people. It's going to go to all the different websites. It's going to discover this all just the same product, and it's going to surface the one that's shipping the fastest and/or sold to you the cheapest. So let everyone else compete in that race to the bottom over who's willing to have the lowest margins or invest the most billions of dollars in fulfillment. Good luck to all of them. There's very few people that are offering a genuine alternative to that. And Etsy is a genuine alternative to that. So when those agents have gone and said, this is the cheapest, I think buyers are going to want choice. And they're then going to see, here's something that can actually be personalized just for you. Here's something that can be customized. Here's something that's unique that expresses your sense of care for someone else if you're giving it as a gift or of your own taste and style that no one's seen before. I think there's going to be a desire for choice. And I think Etsy is going to often be a relevant choice. And I think it's very encouraging that when you look at these large-scale model operators, Etsy is a very early partner for many of them. We are an alpha partner for many of them. And the reason is a couple fold. One, we've got a very large, highly unstructured data set that is just a very interesting computer science problem for them to work on. We're not like everyone else, and I think that's interesting. Second, we've got a really capable, strong engineering culture with really capable engineers. So we're capable of talking engineer to engineer with these best-in-class players in a way that not many of our peers are. So I think being at the table at the very early stages gives us a chance to help shape where this goes. And I think over time, it's going to be very helpful to Etsy. But your question was full funnel marketing. And I do think there is also a real opportunity for us to get better at full funnel marketing because of the power of LLMs. What do we mean by full funnel marketing? Where Etsy has historically been really good is at Google. You go to Google and you type in a very specific product, then Etsy is going to show up because you already know exactly what you want. Etsy, in many ways, has gotten really good at being the place to go to get something when you know what you want and you haven't been able to find it anywhere else. We have an opportunity to actually be a starting point. We can be so much more than that. If you're just beginning to plan your wedding, or even if it's relatively near, but congratulations on the upcoming wedding, or you're just moving into a home or you're just buying a dog. We can do so many things for you in that moment that we haven't known where to start. And LLMs are actually wonderful for getting context for where are you in your journey and then organizing a landing experience that says, "Oh, if you're 5 weeks away from your wedding, you're probably not shopping for wedding invitations or an engagement ring. We're great at those, by the way. But you are getting a tables escape. You are getting bridesmaids gifts, right? You are getting place card holders. We're great at all that, too. So for someone 5 weeks out, here's an organized browse experience for all the different things we can do with you. Why is that relevant for marketing? Because marketing in YouTube and in Meta and in a lot of the places that are really where a lot of attention is today, what those guys are good at is telling you this is someone that is generally planning a wedding. They're not great at this is someone looking for place card holders. They're good at generally planning a wedding. So we need a landing experience that's good at buying an audience that's generally -- that's in the mid-funnel of consideration. And LLMs are really helping us to get better there, which I think is going to, over time, allow us to lean in a lot more.

Great. Thank you. Lanny, let's transition to a series of questions around revenue, which has held up relatively well despite GMS declines. So just thinking about the ability and drives of take rate expansion in 2025 and beyond, can you just walk me through the building blocks between advertising, payments, other drivers through 2025 around the take rate?

Well, let me start with the long term. And in the long term, the most important driver of revenue growth is GMS growth. And so much of what Josh just described, so much of our optimism and enthusiasm about the future really centers on growing GMS. But that said, in the last couple of years, we have not been growing GMS, but we have been growing revenue. And so how does that happen? Well, it happens by delivering more value to your customers, even though they -- the size of that business may be shrinking a little bit. And the primary places where we've been doing that is delivering services to them that help them with the profitability and the success of their own business. So 2 that have been real big drivers for us on the take rate side and contributed to revenue growth in the last couple of years have been Etsy Payments, where they were paying somebody else for the payment processing. We brought that on board. So from their operating cost, it was no incremental cost. They're just paying somebody different. And they're paying us. That's a very cohesive experience. It's we can help them with trust and safety and all those kind of things having it on Etsy. So payments has been one source. And then the growth of Etsy Ads has been another one, where we have made it available for people to promote their listings to the top of our pages and the top of our search results. And in a marketplace like ours, where you're not searching for a specific SKU and a specific model number or a specific product, but you're searching for something more generally. The breadth of alternatives that we have literally numbers into the thousands that we could answer that search request with. And in that context, being at the top of that search ranking is very, very valuable to advertisers success and sell-through. So what we have is we've got those thousands of customers who are looking to promote their wears to the top of our search results and drive that incremental sale. We have -- but we have so many choices, and we only have 3 spots to show those ads in. And so the performance of our search technology is really, really critical that we're picking the right ad for that user in that moment. And we've made advances there using ML. It's a big ML problem to solve. We don't have SKUs. We have these conceptual sort of broader search categories, which ad do we pick? As we've made strides there, we've been able to recognize more of the advertising budget that our sellers say they are willing to spend, and that helps us generate more advertising revenue on top of the GMS that we're able to generate. So as you look forward, I think that it's our ability to grow revenue and grow the take rate really comes back to the first 2 things I started with -- first thing I started with, which is adding more value to the seller's business. And the advertising product, just -- I mean, Etsy marketplace really is unique in its potential from an advertising perspective. And we have made huge strides there and built really probably one of the healthiest advertising models in any 2-sided marketplace, and yet there's still a lot of opportunity to go there.

Definitely. And you've noted that the benefits of off-site ads as well, too. It's a nice offset of the chunk of a portion of performance marketing spend. I guess how do you think about the trajectory of off-site ads as well, too, in addition to Etsy ads on the platform?

Yes. So the way off-site ads work, I think the best way to think about it is almost like a cooperative advertising program, where we go and spend money off of Etsy on other sites, very often search. And we will market a seller's specific wear. And when that generates a sale, the seller pays us a fee for that marketing that we did on their behalf. And that has -- that's been a nice growth business for our sellers and for Etsy to using -- leveraging our page rank, our knowledge, our resources, our budget we can do things for sellers that they probably could not do on their own. And we've been really focused with that on search. And it does create a nice -- it's sort of self-fund -- it's customer-funded marketing that we can do on their behalf. It's mostly in search. I think there -- we haven't figured it out today. We've started to run some of that off-site ads in the lower funnel of social. But I think in the long term, when we start thinking about things like agentic AI and even getting better on the conversions that we drive through mid-funnel social, I think there's a lot of open frontier for us to continue to bring that value to customers and helping them market.

That's super helpful. So on the other side of the P&L, too, just as you balance near-term product investments, how should we think about profitability as we go through 2025, more on the gross margin side of things, but also on the SG&A leverage too in the model going forward?

Yes. We've had -- let me go back to the take rate. Over the last couple of years, we've done like 170 basis point improvement in take rate each of the last couple of years. This year, for the near term, it looks like we'll maintain those gains that we've made in the take rate, but the take rate will stay about where it is. Our gross margin also made a big step up last year. And I think for this year, we anticipate that for the full year, our gross margins will be comparable to what they were last year, kind of in that low 70s range. This year, we expect that our overall EBITDA margins in the typical year, the second half tends to be a little bit stronger margin performance than the first half of the year. A lot of that is seasonal, but there are other factors for us this year as well, which is, as Josh talked about, our engineering teams coming up to speed on that growth near-term conversion driving activity, which will layer into our numbers as we go throughout the year. So we feel really good about the long term and really the 2025 margin structure of the business.

Awesome. That's super helpful. Just hitting on Depop as well, too, a very bright spot of GMS growth over the near term. Just can you help us unpack -- obviously, it's more of an app-centric platform overall, too. Can you just help us think about the strategy there going forward with Kruti taking on a bigger role on the core marketplace?

Yes. So Kruti and Rafe, together with their team did just a fantastic job leading a turnaround of that business, and it's grown like gangbusters in the U.S. And many of you may not be aware, Depop is an app where you can buy and sell your clothing. So it's particularly popular among young people, like my daughter and her college friends, they each think like, I've got room in my dorm for 10 shirts. If I'm going to buy a new one, I got to sell one. And so they're constantly buying and selling together on the app, and it's been growing really well. It's a really app-centric experience that's very much driven by recommendations. And so having Kruti and Rafe come back to core Etsy to help Etsy become more app-centric with much more powerful personalization and recommendation, I think the learning they've had in Depop is incredibly perfect for igniting that next phase of growth at Etsy. I think there's a meaningful runway at Depop. Can they be the Venmo to our PayPal? I think it is an exciting challenge to the team. And when we think about the size of that opportunity for them, we think that's very much possible. And we've got Peter Semple now as the interim CEO, while we look to replace Kruti with a full-time CEO in that business. They have a lot of momentum. They've got a very clear plan. They're executing like crazy. And now Kruti and Rafe coming back to the core Etsy marketplace are already bringing a lot of insight, a lot of learning, and I'm super excited to have them in the core.

Awesome. And sticking with subsidiaries, can you just elaborate on the recent decision to sell Reverb as well, too? And I guess as we think about EBITDA profitability, how much of that will be reinvested of those proceeds towards the core Etsy marketplace versus dropping down to the P&L?

So the team at Reverb has done a great job, but the musical instrument industry is shrinking, not growing. And so when we think about our aspiration to be growing at and then faster than the rate of e-commerce, it wasn't clear that Reverb was going to be helpful as a tailwind there. So there's someone else who has a lot of investments in the musical instrument industry that is committed to the musical instrument industry, and it seemed like it was worth more to them than us. So we sold Reverb. I think they're in great ownership, and I think the team will do great. And then in terms of reinvesting margins, I don't know if you want to comment on that...

Well, it's -- there is a slight positive adjusted EBITDA contribution from that business. So as we divest it, there's not -- there's a higher margin for the company because Etsy's margins are quite a bit higher than Reverb. So by subtraction, it will blend up the overall profit margin percentage of Etsy on a consolidated basis as a company. But I think the reinvestment is really -- I don't think that's the right way to think about it. We have cash proceeds, which will go on our balance sheet, and we've been buying back a lot of our stock, and we continue to feel like it is an undervalued equity right now. So I think that's the way I would think about it.

Great. Awesome. And I guess sticking on that point, just to clarify, too, right? Etsy marketplace core margins have been 30% plus over time. How should we think about the drivers there as well to just operating leverage in the model more broadly over the multiyear?

GMS growth is the most important. And we talked a little bit about the take rate, which has the potential to drive to the bottom line. Our G&A expenses, we don't need a whole lot more G&A to continue to grow the number of -- or to get back to a growth mode and then grow in the longer term. So there will be leverage there. I think historically, we've invested a lot of money on the marketing side. And what we've said for this year is our goal is to keep marketing as a percentage of revenue about even with where it was last year, but to spend a little bit more relative to revenue on the product and engineering side for some of those longer-term efforts and the health of the overall product that Josh described earlier. But all of that's within the confines of Etsy has, we think, the continued ability to drive very high margins. The Etsy stand-alone unit, you're right, they are about 30%, and we expect to be able to maintain that.

Great. With that, I think that's a great place to wrap Lanny and Josh, should you just have any closing remarks as well?

Yes. I would just say that the more the world consolidates around people that sell the same thing cheaper and faster, the more they will desperately want an alternative. Etsy is an incredibly powerful alternative. And candidly, it's one of the very few alternatives. We are truly a different model, and we've also proven to be incredibly resilient. And in a world that unfortunately is having more and more macro shocks, many of them very big macro shocks, the Etsy marketplace has proven remarkably resilient to those shocks, and I think that's very valuable as well. Thank you all for your time.

Thank you.

Thanks, Bryan.