Q2 2025 Etsy Inc Earnings Call
I'm Doug were VP of investor relations. And joining me today for our pre-recording, our Josh Silverman, CEO Lanny Baker, our CFO and cusy Patel goyal president and chief growth officer. Once we are finished with the presentation. Josh and Lanny will take questions from our publishing sell side. Analysts on video. Please keep in mind that our remarks today include forward-looking statements related to our financial guidance, our business, and our operating results. As noted in the slide deck posted to our website for your reference. Our actual results May differ materially
Forward-looking statements, involve risks and uncertainties, some of which are described in today's earnings release and our most recent periodic report in which will be updated in future periodic reports that we file with the SEC, any forward-looking statements that we make on this. Call are based on our beliefs and assumptions today and we just claim any obligation to update them
Also, during the call, we'll present both gaap and non-gaap financial measures which are reconciled to gaap financial measures in today's earnings, press release and our slide deck posted on our IR website, along with the replay of this call with that. I'll turn it over to Josh.
Thanks Deb, and thank you all for joining us.
I'm pleased to review our second quarter 2025 results, which exceeded Topline expectations with adjusted ebit da margin in line. With guidance lie, will detail the financial shortly. I'll focus on performance drivers and then kruie will put further definition around our key near-term growth initiatives.
I'm really encouraged that our performance in the quarter is directly related to the Strategic shift. We made Midway through last year.
As you may recall, we changed our ways of working challenging ourselves to make Etsy. A more delightful place to shop and not just to buy
We sent it our teams on elevating the holistic customer experience, a concept, best illustrated by our customer relationship flywheel.
By creating a more intuitive, browsable app for services built on a foundation of more robust customer insights, we can understand our customers' interests more deeply. This, in turn, fuels the powerful LLMs essential for building a truly "made for you" shopping journey—a recommendation-driven approach that proved highly effective at Depop and which Kruie will detail further.
Today, we're seeing early promising. Signals that our flywheel is gaining speed. We're fueling re-engagement through product improvements and owned marketing channels helped with Discovery, on-site complemented by increased paid social investment where people discover off-site.
These focused efforts combined with external factors like favorable competitive, Dynamics and paid search. And relatively stable consumer spending helped the Etsy Marketplace deliver a quarter that exceeded our prior expectations, with GMS, down 5.4% year-over-year, a notable improvement from the prior quarter.
And while we're, of course, not satisfied with the year-over-year decline, we do believe this sets us back on a path to growth.
Complementing. This depop reported in excellent quarter with GMS. Growth accelerating to 35% year-over-year, reaching an annualized run rate of 1 billion dollars in GMS.
In the US GMS, grew 54% year-over-year, positioning depop as the fastest growing player in this large online fashion resale market and by a wide margin. Now, in Q3, we've started to build on this momentum with accelerated marketing Investments, geared towards driving awareness across an even bigger audience through more diverse channels and community-led programs. As we embark on deep Depot's. Next chapter of growth, I'm pleased to announce that Peter simple previously. The company's Chief marketing officer and acting CEO has been appointed the permanent depop CEO
Peter is an exceptional leader, who deeply understands, the depop brand customers and needs of the business and has a passion for the depop community.
Moving back to Etsy, the app is key to our flywheel today. It's not just different than a year ago. It's markedly better more intuitive more inspiring and a lot more browsable with the introduction of multiple new features. You can see by simply opening the app homepage
We're tracking user perceptions of our work in real time. And during the quarter survey results, indicated an increase in app visit satisfaction across all by our frequency segments with Shoppers reporting greater ease of browsing.
Equally encouraging data indicates a jump in buyers who say, "I'm loving every second of my visit on Etsy today," and more buyers agree that we're consistently showing high-quality items.
Perception have improved app GMS has outpaced non-app GMS growing year-over-year in the second quarter and rising to almost 45% of total GMS.
We believe these indicators show. We're moving in the right direction as we aim to make the Etsy app, a source for Discovery and inspiration early not just at the end of your journey when you're ready to buy. And there's more to come our preh holiday product development roadmap includes improved app, navigation, better buyer, seller conversations more informed browsing and substantially, improved matching models to pick the best content for you. In addition to making our experience more browsable, we're harnessing what we learn about our buyers, proving we get them by delivering more personalized, content by owned marketing channels, including email and push notifications which are becoming increasingly powerful drivers of customer connectivity.
In the second quarter, we grew attributed GMS from these channels by a third year-over-year driven by higher open rates which we achieved by including more personalized content in our messages in Q2 about 40% of our email and push Communications were personalized. And by year end we're targeting to have nearly every 1 of these communications tailored to each buyer, which we believe will add fuel to our organic flywheel over time.
When it comes to a genetic shopping. As you've heard me, say before we believe Etsy is uniquely positioned to benefit due to our sellers, massive set of unique and highly differentiated inventory while still very early days were actively engaged to best position. Etsy, as a winner, in a genetic shopping, third-party data points to that opportunity. A recent report shows while overall volume is small. Etsy is already 1 of the top retail e-commerce, recipients of agentic chatbot traffic.
And in another proof point of how we're viewed in the space, we were featured in Apple's 2025 Worldwide Developers Conference as part of an update to visual intelligence, which builds on Apple intelligence to help users do more with what they see across their iPhones by seamlessly integrating into this experience. Etsy makes it easier than ever for users to discover and shop for unique handcrafted items.
In closing we're encouraged by our recent performance and working with urgency and a Clear Vision to get back to, where we believe we belong and e-commerce market share Gainer with that. I'll hand it to truthy to detail our near-term. Priorities
Thank you, Josh. And good morning, everyone.
Since stepping into my new role. As Chief growth officer. I've had the unique opportunity to reimburse myself, in the Etsy platform, and experience, with a fresh perspective, for my time, leading Depot to develop our approach to tackling the opportunity ahead.
My focus has been on translating these observations.
Into actionable priorities.
Click on a clear.
To sustained growth.
We believe that there is immense opportunity ahead that can be unlocked by addressing the needs of our customers across multiple touch points in their Journeys.
To achieve this, we've reoriented our customer-facing teams from product development and marketing to customer support and Trust in safety to work in lock step aligned around 4 shared priorities to improve the customer experience.
These 4 priorities are
showing up where Shoppers discover on and off Etsy matching Shoppers with the right inventory, through even better machine learning.
Retaining and rewarding our most valuable customers. And further amplifying the human connection, you can only find on Etsy.
Let's start with how we're showing up where our customers discover.
We want Shoppers to engage with Betsy naturally across all the places. They spend time, social platforms, mobile apps, search engines, and AI tools.
As just 1 tangible example of our efforts, while brand media has worked very well for Etsy. In terms of driving. Top of Mind awareness, we've made meaningful shifts in our brand media mix.
By the fourth quarter of this year, we'll dial down our linear cable TV investment to an estimated low single digit portion of. Our us brand media spend, it was about a third of that spend in Q4 2024,
And we'll have dramatically shifted to Ott audio digital video and other streaming platforms which will represent about 65% of our Q4 brand. Spend up from about 40% a year ago.
We've also meaningfully increased our use of Partnerships and influencers to build awareness and credibility.
As Josh covered. These efforts go hand in hand with our work to build a better app experience so that when we reach buyers, they land on an engaging intuitive shopping experience that both inspires and enables them to browse and explore.
We're also focused on advancing our machine learning models.
While our greatest asset is our seller's vast collection of over 100 million listings inspired by their creativity. It also presents our biggest challenge in terms of delivering search results and recommendations that show. We truly understand our buyers tastes and needs
As our CTO, Rafe Coburn has rejoined the business he's observed that while our previous search ranking models were trailblazing in many ways and did an excellent job or organizing our inventory, they're not the right fit for where the future of personalized, shopping experiences are headed.
And the power of today's Technologies make what was previously impossible possible.
So we're retooling our ranking platform to more effectively leverage capabilities of llms in generative, AI allowing us to understand our listings users and their activity, much more deeply as we work to deliver better search results.
And we're creating more diverse and engaging recommendations by scoring items across, a very broad range of interests and clustering them to capture, non-obvious connections to encourage discovery.
We believe these investments will help us get significantly better at matching and predicting buyers' interests over time.
this approach has proven very successful at Depot,
Settling increased buyer recommendations. Have become a significant driver of growth with the share of purchases from recommendations doubling since the end of 2022.
For virtuous Cycles, the more buyers discover items, they love the more insights, we gain to improve our recommendations models.
Ultimately this positions. Deep Depot today, not just as a place to find an item, but as a source for inspiration and discovery,
Work shoppers on Etsy feel this sense of delight every time they visit, not only by matching them with the perfect item but also by surprising them with unexpected special finds throughout their journey.
Our third focus is on retaining and rewarding our most valuable customers, both buyers and sellers.
They contribute the most to Etsy's success, and by recognizing and incentivizing them, we aim to foster stronger loyalty.
For buyers, we're developing a portfolio of tactics that will allow us to build experiences that resonate with different buyer segments.
Those new to Etsy are repeat buyers and of course, our habitual and already most loyal customers.
Will likely include reward programs. Targeted offers nudges and more
As a first step, we're evolving our Etsy Insider beta loyalty program which is shown excellent results at driving frequency and consideration. Yet didn't provide scalable economics in its V1 iteration.
So by this holiday season, we'll launch a V2 program to an expanded buyer set, including our top buyers, enabling us to test and iterate on a refresh set of rewards and benefits.
We also see a significant opportunity to recognize and reward, our most committed, sellers, by evolving our offerings, depending on where a seller is in her business Journey with Etsy.
This year, we've already launched foundational improvements and tooling, including to our shop manager, dashboard to better and more quickly. Serve seller needs.
In the coming months. We'll roll out, AI enabled, tools to boost efficiency, all in service of empowering. Our sellers to focus more on creating or curating Goods, delighting our customers and growing their businesses on Etsy.
And finally, true to our mission, we're re-entering around what truly sets Etsy apart.
Seller creativity, human connection and meaningful experiences.
As a Marketplace, we enable transactions, but as Etsy The Experience shouldn't feel transactional.
What makes Etsy stand apart from other? E-commerce platforms, is the genuine connection Shoppers can make with the real people behind the products. They're buying discovering the stories creativity and passion of our makers understanding, not just what they're purchasing, but who made it and why it matters,
So, while most marketplaces push sellers into the background, we have the opportunity to bring sellers to the Forefront.
We're finding ways to better highlight the sellers behind the items and create more seamless connections between them and buyers throughout the shopping Journey from the listing page to the custom order process and direct conversations.
On prompted awareness customer satisfaction and engagement scores will be some of the success measures will be tracking along the way.
I am so excited by what we're doing to demonstrate Essie's value and potential by focusing on these 4 Pryor.
And with that, I'll turn it over to Lanny.
Thanks, Kathy. And hello everyone. It's a pleasure to connect with you today.
Investment areas, as well as a strong execution in a dynamic environment.
And as we'll get to in a few moments, we expect continued Improvement in growth comparisons in the second half of the year.
As we review our results today, please keep in mind that we completed the sale of Reverb on June 2.
As a result, our reported 2q results include 2 months of Reverb contribution in 2025 versus a full quarter contribution last year.
In our press release and slides, we have provided reverb, historical GMS, and revenue, so you can more easily understand the impact of the sale and separate that from the results of our ongoing business.
Second quarter of 2025 Consolidated, GMS was 2.8 billion down 4.8% year-over-year on an as reported basis.
Excluding Reverb from all periods. Second quarter of 2025 GMS was approximately 2.7 billion down 2.6% year-over-year. This compares to a 6.2% decline in Consolidated GMS in the first quarter of 2025 when calculated on the same basis. Excluding Reverb?
the improved second quarter, Consolidated GMS comparison, reflects healthier trends at Etsy, an acceleration in GMS growth at depop
as well as favorable foreign currency comparisons.
Consolidated Revenue increased by approximately 4% to 673 million.
And adjusted Eva was 169 million. Representing a 25.1% margin.
The absence of Reverb in the final month of the quarter, represented a minor benefit to the adjusted, Eva margin for Q2.
Turning the focus to Etsy Marketplace, second quarter GMS.
After a softer start to the quarter, which was magnified by a shift in Easter timing, we saw more favorable GMS across the remainder of the quarter.
For the full quarter at cgms was down 5.4% year-over-year.
And a half percentage points better than the q1 GMS comparison.
FX provided a 90 basis point benefit to GMS in Q2.
and on the currency neutral basis at these GMS was down 6.3%, year-over-year in Q2 compared to down 8.1% in q1,
As quickly mentioned, strengthening the retention and loyalty of our best customers, both buyers and sellers, is a top priority.
Trailing 12-month active buyers in the Etsy Marketplace, stood at 87.3 million at the quarter's end.
Down 4.6%. Year-over-year and 1.3% sequentially.
Because it looks backward across a year. This is a bit of a lagged indicator and an inflection from our new product and marketing. Investments may take a few quarters to materialize.
We reactivated 6.5 million buyers in the second quarter up 2.8%. Year-over-year
We added 4.8 million, new buyers in the quarter.
And our trailing 12-month number of Habitual buyers was 6.1 million at the quarter's end.
Trailing 12-month GMS per buyer was $120. Showing signs of stabilization.
As the measure held steady sequentially, while still pacing 2.9% lower year-over-year.
Trends. Strengthened over the course of the quarter inflecting into positive year-over-year comparisons in May and June
even on an fx adjusted basis.
As Josh highlighted, our app was a bright spot this quarter.
Downloads remain, strong, monthly active users were 7% higher than a year ago and app GMS grew year-over-year in the quarter.
the proportion of etsy GMS generated on the app increased to 44.8%
3 percentage points higher than a year ago.
We're focused on expanding the Etsy app because of the highly personalized and Direct Customer relationships. It creates
GMS comparisons in most of our top 6 categories, improved on a sequential basis yet remained down versus last year.
Third-party data from Consumer Edge indicates that we performed in line with or better than our Pure Play users in 5 out of the 6 top categories.
Gifting personalized items weddings and vintage items. Each outperforming sitewide GMS.
Etsy Marketplace, active seller count, also a trailing 12-month figure was flat sequentially at 5.4 million.
Importantly, we're bringing on board, sellers more likely to be successful on Etsy.
a higher percentage of current active sellers have made a sale in the last 12 months versus before we introduced the onboarding fee,
And the number of new sellers who made a sale in the second quarter grew year-over-year.
On to consolidated revenue, which was split about 70% to 30% between Marketplace and services.
Marketplace Revenue decreased 0.5% year-over-year.
And reflecting the decline in GMS.
Offset by growth in both Etsy and depop payments Revenue.
Services Revenue, grew 15.3% year-over-year with very strong growth in on-site ads Revenue at both Etsy and deep Depot Etsy ads. Delivered notable value through improved relevancy serving, better quality of ads for sellers which we were able to monetize accordingly.
Consolidated Q2 2025 take rate improved to 24%.
Meaningfully ahead of our guidance.
Take great care to expand by 200 basis points over the 22% reported in the same period last year.
Driven primarily by the factors. I just outlined and aided by a slight Tailwind from the destitute of Reverb, which was a lower take rate business.
Consolidated product development, spend declined by 2.3% year-over-year to 1002 million, gaining leverage as a percentage of Revenue.
The primary source of leverage came from stock-based compensation costs, which declined year-over-year.
For the Etsy Marketplace, our team's velocity as well as experimentation GMS wind size are back in line with or ahead of where we were at this time last year.
Primarily due to increased Performance, Marketing, spend versus the prior year.
Including search engine marketing, PLA and paid social.
while deeper marketing spend reduced, the margin flow through from our Revenue beat
We believe this was a sensible and opportunistic investment in our future. Allow me to explain
First competitive spending patterns in the Google pla markets, were helpful to the Etsy Marketplace during the second quarter.
While cpc's were relatively stable, we gained a higher Click Share in auctions to drive more productive. Spend
And we leaned into investments in an ROI-positive way. We believe we caught some momentum from this dynamic, but that's only part of the story.
During the quarter, we successfully implemented a new segmentation tactic to optimize Google shopping listings.
This approach allowed us to prioritize listings with more click history and higher investment returns.
Thus, providing Google with a stronger performance signal, which resulted in significant lifts to both GMS and Revenue.
We'll continue expanding this segmentation tactic in the United States and are also testing it in the UK.
Second, we continue to lean into paid social and sharpen our efficiency in this channel, with Etsy Marketplace attributed GMS from paid social increasingly in the quarter.
As kuthie stated earlier.
Making Etsy more visible. In all the places, where Shoppers discover products, particularly on social platforms is a core strategic imperative.
The progress, we are making enables us to underwrite Greater paid, social investment for Etsy with Partners, such as Pinterest, meta and Tik Tok.
We also accelerated our creator Collective spend by nearly 50% sequentially in Q2.
Primarily directed at influencer marketing.
And third-party owned marketing channels, including email and push notifications, allow us to deepen our direct connections with buyers. These channels are becoming meaningful, high-growth drivers of attributed GMS without an associated investment in external ad spend.
We believe these direct and personalized interactions with our customers will have a multiplier effect over time.
Helping boost loyalty retention and lifetime values among the buyers. We attract.
Turning it to our financial position. We generated 90 million dollars in free, cash flow in the quarter and 635 million in the trailing 12 months.
$0.5 billion in short and long-term cash and approximately $3 billion in convertible debt.
Including the 700 million issued in June.
We were pleased with the execution and attractive terms secured in that transaction, which provides added Financial flexibility to manage upcoming convertible maturities.
We repurchased a total of 335 million or 6.4 million shares of etsy stock in the quarter.
Including the 150 million repurchased in connection with the transaction.
our leadership and board have conviction in etsy's future, and the value of our shares,
With expectations for continued healthy free cash flow generation. We're confident in etsy's financial flexibility to continue to share our purchases manage our debt, balance and make ongoing investments in the business.
Moving to our Outlook, we're pleased to see compounding impacts from a product and marketing Investments as we head into the second half of the year.
and the accumulating benefit of these initiatives underpins today's outlook.
in contrast to recent practice, we're providing a specific dollar range for GMS guidance.
And this reflects our view of a relatively stable, macroeconomic environment.
As well as the desire to provide Outlook clarity through the Reverb devices, which muddles year-over-year comparisons.
We currently expect Q3 consolidated GMS to be between $2.6 billion and $2.7 billion.
Which at the midpoint would represent further quarter-over-quarter improvement in the apples-to-apples growth rate.
We expect that Q3 consolidated take rate will be approximately 24.5%.
And Consolidated adjusted ebit down. Margin will be approximately 25%?
Our margin guidance reflects sequential expansion and strong profitability for the core Etsy business, where we are managing adjusted EBITDA margins to the high 20% range.
This is consistent with what we've delivered in the past.
Yet, it is now being paired with accelerated investments at Depop.
We're really encouraged by our progress, and we're optimistic that disciplined and strategic Investments at both Etsy and Depot.
Two marketplaces, which offer consumers something truly different.
We'll drive sustained, long-term growth and shareholder value.
Thank you for all your time today. I will now turn the call over to the operator for Q&A.
Thank you at this time. If you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen.
You may remove yourself from the queue at any time by lowering your hand.
When it is your turn, you will receive a message on your screen asking you to be promoted to a panelist. Please accept, wait a moment, and once you have been promoted, you will hear your name called. You may then unmute your audio and video and ask your question.
As a reminder, we are allowing analysts one question.
We will, we will wait one moment to allow the queue to form.
Our first question will come from John Colin Tony with Jefferies.
Great. Uh, thanks for taking my questions. Um, so it looks like the sequential improvement in Etsy's GMS trajectory resulted from moderating declines in buyer spend. Can you talk a bit about what helped drive improved spending and help explain why you're able to deliver that spending improvement despite habitual buyers continuing to moderate? And second question, uh, Lanny, this is probably for you. You're talking to managing the Etsy Marketplace to a high 20s EBITDA margin, which is below the 30% plus margin you've talked about in the past. Talk about what's driving the market.
Charging compression in your core business and whether high 20s represent a near-term or longer-term target for operating that business. Thanks.
is it the first so, um,
Uh we are pleased. Uh with with the progress we made in the quarter as you pointed out. There's some real sequential Improvement in GMS versus the first quarter. And what I'm particularly encouraged by is that it's really very directly related to the Strategic priorities. We've been talking about and leading into there's 4 particular things we did. We drove this quarter that uh were helpful that I'll describe. And then there's a couple things that were external factors. That were also helpful. First uh, we were successful in driving more Etsy buyers to use the app and to make that app experience, even more delightful. So monthly active users are up 7% year-over-year.
Becoming a starting place for inspiration and not just an ending point. When you are ready to buy, we're seeing some encouraging green shoots there. Uh, the second thing is that we have um made real progress with our owned channels particular, push and email getting our current buyers to come back and visit more often that is largely driven through making those messages a lot more personalized. Um, the third area, we're making progress is leading into paid social, where we want to be, where people are discovering and seeking inspiration in the first place, in places, like Instagram and YouTube, uh, Pinterest Tik Tok, our areas where we, we think we've been under penetrated in the past and we are closing that Gap and we're really encouraged by that. Fourth is PLA and I'll talk about some external competitive Dynamics in a second, but in addition to that, we've made some martech, uh, Investments that are really bearing fruit in particular, being able to
Prioritize uh, in the Google pla auction listings that we have history around that we know are likely to deliver High Roi and that's a structural improvement in our pla program that we think is uh very sustainable. In addition to those 4 areas of progress, there were a couple of external things that helped as well in particular. There were a few periods of time when some combination of Amazon Teemu and shien pulled out of the Google auction. That was a
Small tailwind and consumer spend stabilized after what was a very volatile April. Uh, consumer spend stabilized in May and June, uh, and that was helpful. What were particularly encouraged by? Is that these Trends have largely sustained and I think that's why we have a, a guide for the, the third quarter, that shows sustained continued progress.
Uh to the Etsy even margins, uh, there's no big change in our outlook for the profitability of of etsy, we are managing to the high 20s, the very high 20s. And uh, as we look into the third quarter, we're anticipating a step up in Etsy core margins. In the third quarter from where they've been in the second quarter. Um, we are investing in the near term in the app experience in. Paid social in uh, the machine learning that will drive Etsy core Marketplace back into a position of GMS, stronger GMS, growth and revenue growth over the long term and that Revenue growth as we've shown in the past. When the Etsy Marketplace is driving growth, the incremental profitability of the marketplace model is really, really attractive, so no big change there. We're going to continue to manage it. Well, while making investments will drive the long-term growth of Etsy,
Thanks so much, appreciate it. Hey, John 1 thing I would just add is I hope that this management team has demonstrated tremendous discipline and focus on Roi every dollar we spend whether it be on people or on marketing, we're super focused on that. And what we've always said is, we don't manage to a Target, uh, numeric Target. We always look at what confidence. Do we have in the return on investment and when we think there is an opportunity to grow more by investing, we'll take it if we're not confident that we're getting a good return. Uh, we'll we'll deliver those those dollars to the bottom line.
Thanks very clear. Thank you. I'll take an excellent 1.
Our next question will come from Chris Kenard with UBS.
Just 1 moment, Chris will be joining us shortly.
Okay, Chris feel free to go ahead and ask your question.
Great. Uh, thanks for taking the question here. Um maybe just on the app side of things. Uh you called out growth here. I think it's somewhere in the neighborhood of about 1% growth. Sort of implying that uh, this growth is being funded from the core business. So how should we think about where we're at today as more users shifting from uh a web-based solution to an app-based solution and the evolution in the steps that that are going to need to sort of unravel?
Here to this being a new source of incremental growth.
For 1 specific need and too. Often we just meet that need and we show them things, very related to that, need what we miss in that opportunity, then is the chance to show them other things. They didn't ask for that might spark their next inspiration or help consideration for other needs in their life. You came for Home Furnishings but we also have pet products or baby products, right?
So, what you're seeing in the Etsy app today, and I'd really encourage everyone, like, pull out the app, look at the home screen, you're going to see a lot more screen, real estate dedicated to surprising and delighting you with really cool stuff. You didn't necessarily ask for, and we think by getting people in the habit of coming to the app. We see that we can engage them more often in more things. So we have been taking some of our mobile web screen, real estate, and dedicating it to pushing people to use the app and we're seeing that drive benefit. We always do it with an eye towards LTV. We're not Reckless about it, but it is going to provide some friction to our mobile web GMS, in the spirit of driving more buyers to adopt the app or using push channels and email channels and other things to drive people to the app. And those free channels is most of what's driving more growth in app users. We are also learning how to do paid app marketing. More our paid app spend is
Up somewhat year-over-year and our paid app. Growth is up somewhat year-over-year that is still the smaller portion of what's driving app growth. But it is, um, you know, something we're investing in and leaning into the main point though, is that we really want the app to be the, the hero, the centerpiece of most people's, uh, customer experience, because we think that's where the flywheel really works the best. You come to the app, we see what you engage with. We learn more about you and we become even more personalized with every visit
Great. Thank you. Great. Thanks, Chris.
Our next question will come from Anna Andrea with Piper Sandler. Please go ahead.
Hey guys. Uh, thanks for taking the question. This is Noah on for Anna. Just a quick question on demand.
Um from the various household income courts. So is the higher end uh still relatively resilient for you guys and kind of what are you seeing with the lower end consumer uh in terms of the demand profile there? Uh, and just kind of a follow up, uh, can you talk about what drove that inflection you mentioned in TMS uh, in May and June and then kind of um, what should we uh, think of the initiatives? Uh resonating. Thanks.
You know, I think with respect to the consumer backdrop, we've seen a slightly healthier, uh, consumer spend across all the different cohorts. Yes. The higher income households are a little bit healthier and stronger, uh, sequentially than than lower, um, but not, but but both are better and they're not a dramatic difference between the 2 right now. Um, we have not seen any big shifts in spending across those related to tariffs or trade, uh, announcements that have happened and so kind of the general read is the consumer that we're seeing looks a little bit better. Uh, slightly better than it was perhaps 3 months ago. Um, with the higher higher income households, a little bit healthier within that. Um, in terms of the the step up in our comparisons year to year in the second quarter versus where they were in the first quarter, it's really the things that Josh talked about earlier. Um, it's the momentum in our mobile app is the things we're
We're doing in uh, paid social its progress. We're making in our owned media channels, to push and notify an email people and bring them back into, uh, the business, which you're seeing show up in some stabilization in GMS per buyer. Um, the the work that we're doing, we leaned into opportunistically, uh, some
dislocation in the paid, search Marketplace to, you know, bump up, etsy's visibility and and on top of that,
As I described, we had some some real successes with some segmentation of plas that helped us improve the efficiency of the spending that we were doing there. So is all the things we've talked about really kind of added up to, uh, what we would, what we consider that, like, Sustainable, acru Building momentum, uh, that's coming from the initiatives that we're undertaking against the background. That's
That's relatively stable from where it was related to this year.
All right, thanks Noah. Next question.
As a reminder, when it is your turn, you will receive a prompt on your screen promoting you to a panelist, please accept, turn on your audio and video and ask your question.
Uh good morning, thanks for taking my questions. Um so would love to hear some more about the the personalized communication. So it's stepped up. Its the only 40% I think you talked about yes getting that to almost everywhere by the end of the year uh would love to just kind of understand, you know what that lift you're seeing is and and either conversion or GMS and just kind of talk about
How that, um, you know, will roll out. Like, what, what, what more features can you add as part of your road map for that, um, in the coming years and then just on payments. Very, nice growth there. Um, I think it was up compared to down GMS and just recognizing your, your just about entirely penetrated on a geographic basis. Just with love to understand what drove that growth. Um, was a new products or or um, as you know, international business, whatever. Whatever that might have been would be great. Thank you. Yeah, great. I'm so excited to talk about personalization. Thank you for that question. So what drove the gains in our push and email notifications? This quarter was um more personalized things like more personalized titles and more personalized content and you can imagine if you have an llm write a title that's made just for you, it's going to feel more compelling. Also things like what time of day is the best time of day for you to receive this? We're making
Real gains in those, and that is exciting. But the thing that's going to matter the most is, are we actually pushing the content that feels like, we really know you. We really get you. And there, I would say, we are early days with a ton of opportunity to do better. Etsy, uh, etsy's personalization. Today is still largely based on listing to listing, personalization people, who looked at this listing. Also tend to like these listings and where the state of the art now has moved. And again, with the power of geni, with the power of llms, you can start to say, what kind of person is Marvin Fong. What do we know about him? And where would we map him in the entire universe of buyers? And where would we map all of our listings in the entire universe of our listings and we can make much more non-obvious connections that will really Delight, where we feel like we really know you and those connections might be things that
Feel like they're tailor made for you, but maybe in an entirely different category that you've not shopped before and that's something that we can both deliver to you.
In push through things like email and and push to get you back onto the site.
Even more importantly, every visit we want the site itself. The content you're finding on the home screen for example, to become more and more personalized. So the home screen today, has a lot of really cool browsable content, I recommend, please go check it out. I think you'll see there's a lot of really great, really high quality stuff. You can really get lost in, but what you'll find is when you come back again and again, it doesn't really show that it knows you and that it's getting better. Every visit that is something that we think we can get a lot better at and we are in a big hurry to to do that. And I think Rafe coming back uh from with a lot of experience there and a lot of focus on how to drive that we think that could be uh very important for us in the future.
Let's run. Uh, there was a, you're right, it was a small benefit in this quarter, we're getting pretty close to the end of the road of getting, uh, our sellers to adopt and use, uh, Etsy payments, which we think is a nice value proposition for them. It simplifies their lives that consolidates everything with Etsy. It means 1 less vendor for them. It's a cost that they were carrying the anyway and we can provide our trust and safety uh, and account management for them when they're on our payments platform better than when they're not. So we're, we're pretty much to the end of the road. There are a couple more countries where we will have a little bit of benefit going forward. Um but we're we're really pleased with the way the payments has gone. Uh and as I said, it's it's part of the value.
Proposition we delivered to keep our sellers in a really strong, loyal relationship with Etsy.
Great, thank you for the next.
Our next question will come from Nathan Feather, with Morgan Stanley. Please go ahead.
Thank you.
Sure, great. So, um, uh, we are starting in Q3 to really accelerate our investment in the, in deep pop. So I'd expect our Q3 guide incorporates, an accelerated investment in depop in Q2, I would say that the investment between depop and and the core Etsy Marketplace was more of a, a more normalized. Um, so the Step Up in marketing spend, uh, in in Q2 was a function of really 2 things 1. Uh, there were some weeks when Amazon Teemu or shien some combination of them, pulled out of the Google auction either partially or almost entirely. And in fact, I think there were a few weeks when all 3 of them were out of the auction and the way that our
Performance Marketing Systems work. They're highly automated. And so we just naturally if there's a visit, we can buy profitably and it's available, we will buy it. So our marketing spend just expanded to fill that space. What we saw was that our cpcs during that period were roughly constant but our add coverage. We were getting more visibility on Google and that was helpful and that was profitable for Etsy. So there was some stepped up marketing spend as a result of that, I also want to add that we just made our March better for Google and so we're able to invest more profitably in Google what our mtech team is rewarded. By is pushing up the ROI curve in.
How do they create better technology so that we get better Roi across our spend, um, and they made some progress there as well, and then it paid social, you know, we we, we're making progress the way we always work. Is we have an R&D budget where we test in new channels. And once we figure out how to unlock performance in that channel, we will naturally scale, uh, to the point where we meet our own Roi threshold, and we're making progress in some of the paid social areas as well. So, we're seeing a little bit of elevated spend, uh, in those areas. That's good news. That means we're diversifying our marketing, spend even further. And in particular, we're showing up earlier where people are just starting to discover and seek inspiration and when we talk about Etsy building consideration, which is our big challenge in the US and in the UK, this is the perfect way for Etsy to, I think really do more to build consideration earlier in people's Journeys, Nathan with respect to the
Deep Depot spending. The 1 thing I just add is that, um, at that
Earlier stage.
Of development. So the marketing spending that we're doing there, that Josh talked about, that will step up its it's really more around driving awareness than it is. Kind of near-term conversion driving spend. So, um, we're we have a confidence that that investment will generate returns for us user growth and and GMS growth for dop down the road, but it won't be quite as as quick. I, I don't anticipate.
Paid in terms of the responsiveness on the top line to the spending that we're doing to drive awareness. Yeah we're super excited about depop and well Etsy has high awareness in the US and the UK and a couple of other markets and the opportunity for Etsy is to build consideration 1 of the things. We're so encouraged about with depop is it's growing, you know, very well, especially in the US, but awareness is still quite low across many parts of the of the population and that we think is a fantastic opportunity. As we grow awareness, we think we can see really strong growth. The payback period may not be as fast but, uh, we, we, we think it's, uh, there's a lot of opportunity. The Tam is very big and we still see a lot of runway for for Depot
Okay, cool. Thanks, Nathan. Let's go to the next 1.
Our next question will come from Trevor young with sparkles.
Great, thanks for the questions. Uh, first 1, just as you've shifted squads, you know, at the start of the Year back to more near-term GMS wins, can you size any of those early GMS wins both in terms of 2 Q, as well as what's baked in for 3 q and then relatedly, how much of the hundreds of millions that was kind of, you know, foregone last year? Do you think you can claw back by later in the year or into next year?
Is back in very like historically consistent ranges that we've seen before. So um, you know, I think we're we're back in that game at a larger size. We're not going to break out the individual size of those. We have enumerated some of the bigger you know, successes the pla segmentation was it was a big 1 and ongoing progress in improving our efficacy on paid social is another area where where those teams are iterating quickly and producing really exciting short short, short term win results.
Great. Thank you. Thanks. Trevor
Our next question will come from Naveed Khan with B. Riley.
Great. Um, thank you very much. Um, so uh, could you talk talked about uh expanding the XT Insider uh benefits?
Um, how should you be thinking about? Uh,
The the cost of those benefits, would it be funded self-funded, or are you thinking about changing the pricing, on the offering, just give us your thoughts on on that. And then, um, in terms of just the just the mobile GMS, it's uh, it's great to see the numbers here, and I'm trying to figure out how much of that is driven by new app downloads that have happened. Over the, let's call it trading, 12 months versus improving conversions with the existing, uh, mobile app. Users, if you can pass that out, that would be great. Thank you.
But on the first 1 uh you know, with with uh, Etsy Insider we're acting very typically Etsy. You know, we tend to not like throw caution to the wind and do a big launch and just hope for the best, we tend to test and learn. And so we're testing and learning and what we've discovered in the first version of at The Insider is we're really encouraged actually buy the impact. It's having on consideration and frequency people who subscribe to the program are coming back to Etsy. A lot more often we're seeing real incremental gains in their purchase activity. The next thing we've got to figure out is how do we do that under an economic architecture that works? And how do we do it in a way that that can serve all of our customers including our already most loyal customers? Where we think there's a big opportunity to get often times. The place to get the most incremental activity, is from the people who already know you and use you the most. Um, and so, uh, you know, we have already been bearing a little bit of cost for Etsy Insider, um, in these last couple of quarters and
And it has not been material to our margins, um, because we're careful about how we test and learn things. We think we have a new version of the program that can lean into things. People care about like, free shipping on millions of listings, but do that with a few more guard rails. That can actually provide a ton of benefit, but also manage the cost a little bit better, and expand through things like rewards on every purchase and some really exciting ways and make that available to even our best customers and what
1 of the things truth. He talked about is really leaning into retaining and rewarding our best buyers and sellers and we want to make sure that's The Insider is really fit for purpose to serve our best buyers. Um and so I'm really encouraged by this next iteration, like everything we're going to be careful. We're going to test it and learn it. And and you know, when we look at
Rewards programs are loyalty programs, that succeed and scale. What I observe is most of them you iterate and incubate over a period of of, of time. And then you, you, you figure out how to make it all work, and then it scales and most of the most successful programs have followed that trajectory. I'm encouraged by the path that we're on.
And on the app, uh, you know, I think the key message on the app is that, as Josh said, it's it's a better experience, it's more personalized. It allows their different surfaces in it. That allow us to communicate at a much richer, very targeted level and there's a different use case for the app. That is just, that sort of Habitual shopping starting out inspiration on the app that we think is really essential to the long term positioning of etsy in the minds and in the wallets of our customers. And so in the long term, the Etsy app I think is a better more productive platform for our consumer relationships, for all those reasons in the near term. Why would while we're driving people into it, uh in their first arrival, they're going to be spending a little bit less than those who have already.
Adopted the, the, the app sort of in the course of a quarter as you think about timing there. So, right now we're driving growth in app users, those new app users are not spending as much as the established app users. So um but in the long term as we get more and more the users in the in the app we think we have a great opportunity. There to drive GMS per buyer and more loyalty and more retention.
Thank you.
Our next question will come from Jason hollstein with Oppenheimer.
Please unmute your line Json.
Thanks every 2, quick questions. So um, I guess Lanning have. We reached the point where it is worth leaning into app, acquisition on an incremental basis. And then number 2, can you just be a little more specific with the guide? We're getting a bunch of questions. Are you expecting pro-forma? Marketplace GMS X depop to improve on a year-over-year basis in 3Q versus 2q and can you maybe give us like 100 basis points, 200 basis points, just a little more help. Thanks.
Sure. Um, on the, let's see, the first question. Remind me.
Leaning into, like, oh, we’re at that point, it’s really worth it. Yeah, I, I.
I I I what I would say is, we are going to continue to lean more in, but I don't think you're going to see us like, go from 0 to 60 overnight, it'll be gradual. Uh, we'll test we'll iterate, we'll learn the vast majority. I think of the app downloads are still going to come organically. And that's how we'd really prefer to drive as much as we can. Um, but but yes, we will be, we will be leaning in there, but no big like acquisition campaign that will really change financials expenses in the percentage of our marketing. Yeah, yeah. It's a very small percentage of our marketing day. Yeah. Um,
But yes, we like the ltvs that we're seeing there. Um, and then on the, on the Outlook, uh, I think the way to frame it is at the midpoint of our outlook for the third quarter, the year-to-year, uh, GMS comparisons would improve from, you know, on a Apple's apples basis down about 2.6% in the second quarter to down about 1.9% in the third quarter. And that's with that's better comparisons on both Etsy and and and continued very strong momentum on depop which is a, you know, growing a lot faster and a growing portion. So there's kind of a mix shift issue and the benefit there as well.
Okay, thanks. Great. Thanks. You want to get to one more if we can.
Michael. Our next question will come from Michael Morton with Moffett Nathanson.
Thank you. Uh, good morning.
I wanted to talk a little bit. Uh, slide 8, you talk about Etsy as being the top recipient of agentic, um, chatbot traffic. And a question we get a lot from investors is how are these house this new source of traffic behaving once it lands on site? Are you seeing greater intent? Higher conversion, maybe less browsing. I know we're really early days but just anything you can comment when you isolate that behavior and then while we're on the thread of AI,
another investor question is what opportunities Josh, you talked about this in the 1q prepared remarks, but maybe a little bit more on
AI copy and how that is making paid social or better, uh, source for you for traffic, due to the fact that you might have had some structural limitations due to like depth of product, right? You have like a handmade product where there's only 20 of them. You can't do a huge campaign on paid social but now at the barrier to entry, come down is this helping to unlock paid social for you? Yeah, great. Okay. Uh, thank you. I'm glad we get to, I get to talk about these um, agentic shopping. So we quote a similar web study which said that Etsy is 1 of the top, recipients today of chatbot uh s shopping traffic. You know what I'd say is that the traffic numbers are still so small. That it's really hard to parse it out and talk in any with any confidence about things like conversion rate.
But when I really pull back, I think Etsy is really well positioned to be a winner in this. And the reason is that when you give your agent a mission, it's going to want to come back to you with a few choices and what that what the agent is going to discover is that that same SKU is being sold in a 100 different places and it's going to help you pick the place that sells at the cheapest and ships at the fastest and then it's going to want to provide you Alternatives and the reason why the big model Builders are so interested in working closely with Etsy is I think primarily to
Seat at the table at many of these. The second reason is we have a strong engineering culture and our Engineers can really partner engineer to engineer with some of this really top talent and other companies and keep up with them. And I think that's been really important and I'm grateful to our wonderful engineering team for doing that to your second question around paid social Jenny I can be very helpful for that and your point around personalizing, the copy is 1, important piece of that. Another important piece, you know. Michael and what you talked about is like we we are incredibly broad but not very deep. You can't usually sell 100 or a thousand of anything because our sellers sold out by that time. So what we need is a landing experience. That said, you were generally interested in this here is a range of inventory on Etsy that meets your need and being able to understand a consumer's mindset and then generate on the fly, a really personalized. Landing experience is an important part of that gen AI is going to help.
Us enormously to do that. And so, we're, we're really excited to go from what today are going to feel like very rudimentary listing to listing. This is a listing. Here's other listings like that to understanding really the context of, oh, you're in a wedding mode. And here's where in the process of the wedding you are, and here's a range of inventory to Delight you. That's a kind of new. Frontier jai's only beginning to unlock that's just going to. I think a crew particularly to etsy's Advantage
Thank you and Mike, thanks for the question. We are at time, operator.
Thank you all. There are no further questions at this time. I'll turn the call over to Deb for any closing remarks. All right, we're good. Thank you. We'll talk to you all soon. Thanks for your time. Thank you.