Lessons in doing it right from Etsy
Yesterday Etsy did it again.
The revenue keeps growing and the stock soars.
In their earning call they talked about their Promoted Listing business and how they make it works.
This is an important reading for any marketplace who is offering Sponsored Products (or promoted listings).
Here are the highlights:
2018 revenue growth was driven primarily by GMS growth, changes to our pricing model and growth in Promoted Listings.
Promoted Listings first, in terms of supply and demand, sellers give us more funds than we are currently able to spend by a fairly meaningful amount. So it’s about having the right inventory on the site, which is for right number of visits and how much real estate per visit.
And then as importantly, picking the right listing to show for any given visitor, and then optimizing the bidding algorithms for how much people are going to bid for each of those. Those are kind of the three components, right. So views times, click-through rate times cost per click.
And on those, I think we’ve talked about in the past how we’ve expanded the amount of inventory fairly significantly. There can be probably some more inventory that’s given over to Promoted Listings in time, but for now, we think we’ve probably mind that reasonably well. We are at the early stages of having really good relevancy algorithms to make exactly the right listing per visitor and that’s a very similar journey to search in general.
So there’s a lot more we think we can do around personalization and understanding item quality and all kinds of things to pick the right listing for the right visitor at the right time, and then as we do that, we’ll get more ability to raise CPCs. It’s all really about delivering quality traffic that converts sales for buyers.
I think we’re still in relatively early innings on Promoted Listings, but it’s going to be more and more about how good our algorithms. And then the opportunity to help our sellers invest in their growth, not just on Etsy, but off Etsy, and we know that there is a significant appetite from sellers to invest, to buy traffic from other sources, driving it to their Etsy shops, and thinking about ways to help them with that we think is also a rich opportunity going forward.
the percentage of sellers who are now using Promoted Listings, if you’re able to speak of that?
So it’s 16% of sellers have adopted Promoted Listings. I would call out that not all sellers are equal in terms of their sales on Etsy. And so one thing we’ve talked about in the past is that some of our largest sellers are disproportionately represented on Pro List.
I just want to caution us away from thinking that the number one way to grow Pro List is to grow the percentage of sellers that are currently adopting it. We’ve shared that the amount of investment capacity they have given us is well in excess of our ability to spend it. So that gives you some sense of adding more sellers may not directly translate into driving more Pro List sales, it’s more around improving the relevance of our algorithms and bidding engines and things like that.
But it’s actually up from – I think it ended 2017 at 15%. So, it did improve so that…?
Yes, we are very focused internally on thinking about stages of growth. Somebody who is brand new to Etsy, who is listing their first listing, Promoted Listings isn’t necessarily the first thing that we would encourage them to do.
You want to see them get some success, really learn how Etsy works, have high quality listings, high quality photos, get some feedback and once they have really not a bit of a track record and understand it works, then they might be ready to go to Promoted Listings. And so thinking about speaking to the right audience with the different tools, including Promoted Listings is something we’re very much moving in that direction.
Because active sellers grew by 9%, the denominator got bigger. So the actual counts of sellers to Promoted Listings grew by more than 16%.
If you have a marketplace and you want to boost your Promoted Listing Program or introduce a new one – Check out our suit first. We would love to give you a live demo.
For etsy’s full transcript: https://seekingalpha.com/article/4244085-etsy-inc-etsy-ceo-joshua-silverman-q4-2018-results-earnings-call-transcript?part=single