Etsy filed for an IPO. I took a look at the filing to get a sense of its growth metrics, which you can see in the accompanying Traction charts. Etsy is a marketplace that started out for crafts, but keeps expanding to makers of all sorts. Gross merchandise sales (the value of all goods sold on Etsy) reached almost $2 billion last year, and grew 43 percent from 2013.
While Etsy's own revenues (the portion it takes for itself) are only 10 percent of the total gross merchandise sales, they are growing at a faster clip--up 56 percent from 2013. In the chart above, gross merchandise sales are in blue, and Etsy's revenues are in green. (The company is not yet profitable. It posted a $15 million loss last year as it ramped up spending).
Gross merchandise sales, of course, are driven by consumers who buy items on the site. If you drill down into some of Etsy's growth metrics, it seems to be doing a good job of attracting more and more buyers to the site. The number of active buyers grew 41 percent last year (almost in lockstep with gross merchandise sales) to 19.8 million, while the number of active sellers grew only 26 percent to 1.4 million.
Given this dynamic, you might think that Etsy is all about pleasing buyers. But you would be wrong because marketplaces are two-sided, and Etsy needs to keep both sides happy. In fact, an increasing portion of its revenues are derived from Seller Services. Etsy breaks down its revenue in terms of buyer-driven Marketplace revenues (transaction and listing fees) and Seller Services (promoted listings, payment processing, direct checkout, and shipping labels). Over the past three years, Seller Services have grown as a percentage of Etsy's total revenues, from 21 percent in 2012 to 42 percent last year.
For Etsy, growth has several layers. At the base is gross merchandise sales--how much consumers are buying on the site. As that number goes up, Etsy becomes more important to its sellers, and it can offer specialized services to them. The number of active sellers don't need to grow at the same pace as the number of active buyers.
A healthy marketplace is one in which existing sellers can generate more and more sales for themselves over time and actually make a living on it. We saw a similar virtuous cycle take hold at eBay during its heyday. But is Etsy another eBay? Well, it's got a long way to go. eBay's gross merchandise sales in 2014 were $83 billion.