Etsy files for an IPO.
March 4, 2015 9:17 PM   Subscribe

Online craft marketplace Etsy has filed for an initial public offering. Etsy "announced that it has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission relating to a proposed initial public offering of its common stock. The number of shares to be offered and the price range for the proposed offering have not yet been determined."

The e-mail that Etsy users received in the mail was a bit .... circumspect.
SEC rules require a "quiet period" around IPOs, meaning we are limited in what we can say on the topic, even to Etsy employees and the Etsy community. Most of the time, we'll have to say "no comment" to your questions, and I understand that may not be satisfying.

However, this article on Fortune makes it sound like this might not be the world's best idea?
"Last year, Etsy took in $195 million in revenue, with just over half coming from transaction fees. The rest came from services the sites offers to sellers like promoted listings, payment processing and shipping labels.
The company posted a loss of $15 million in 2014, up from $800,000 in the prior year. In a potentially worrisome sign to potential investors, it said that operating expenses are expected to “increase substantially.”
Etsy is also worried about losing its authenticity after lifting its previous stricter sales requirements. Previously, Chad Dickerson, Etsy's CEO, has "long hinted that Etsy might try to avoid the traditional IPO route." And sure enough, here's Wired's headline: Etsy Lost Its Soul, But That Doesn't Matter To Its IPO.
posted by jenfullmoon (31 comments total) 11 users marked this as a favorite
 
Did people think that somehow etsy wasn't an enormous moneymaking tool before?
posted by Ferreous at 9:22 PM on March 4, 2015 [1 favorite]


There was a period of time when Etsy was super awesome sauce. That time passed.

I fucking LOVE handmade goods. I love art and artists. I love supporting artists that make me the things.

I do not love all of the mass produced crap that is hard to avoid on etsy now.
posted by fluffy battle kitten at 9:34 PM on March 4, 2015 [9 favorites]


Ferreous: "Did people think that somehow etsy wasn't an enormous moneymaking tool before?"

As best I can tell, they're not?

The company posted a loss of $15 million in 2014, up from $800,000 in the prior year.

That's a huge and surprising swerve. Especially for a company intending to go public, by founders who previously indicated they wished to avoid that route. Investors will have to decide whether this is caused by some large up front investments, or if Etsy is a simply a junkie looking for cash injections every 1-2 years.
posted by pwnguin at 10:32 PM on March 4, 2015 [3 favorites]


I kind of saw this coming. A friend of mine who does gigantic amounts of business on there(like, if it was ebay, they'd be way up in the power seller ranks) has been complaining a lot lately about the categories getting more and more vague, and obscure categories disappearing. Just general crappy simplification, like what happened when soundcloud wanted more investors and ruined their app.

IPOs like this seem to consistently ruin sites.
posted by emptythought at 11:08 PM on March 4, 2015 [2 favorites]


"Last year, Etsy took in $195 million in revenue

And they spent $200M. Is it just me or is that a just totally unreal number for what they do? I think I've looked at Etsy like four times ever so maybe I'm totally unacquainted with how much reach they have? It just seems so huge somehow.
posted by feckless fecal fear mongering at 11:12 PM on March 4, 2015


If you go on the forums on etsy a lot of people are complaining that something changed in 2013 and sales/views dropped (this reflects my experience) many people have left.

I used to sell about $2500 a month a couple of years ago but did about $40 last month. I can't really get my head around what is going on but it would seem that views are getting funneled selectively , perhaps to get the sellers to pay for adds instead of getting views for relevancy, or it might be that people are just buried under piles of factory crap.
posted by boilermonster at 11:45 PM on March 4, 2015 [2 favorites]


feckless fecal fear mongering: "And they spent $200M. Is it just me or is that a just totally unreal number for what they do? I think I've looked at Etsy like four times ever so maybe I'm totally unacquainted with how much reach they have? It just seems so huge somehow."

I know they're highly renowned in the DevOps space with their "10 deploys a day," and based on their staff, you'd think the company name was /etc: they have Rasmus Lerdorf, author of PHP, and Allspaw, who came from Flickr, appears to have brought a lot of the Flickr Ops team with him.

It's too late at night to bother reading the prospectus, but I bet their expenses fall into three big categories:

1. Salary and stock options. If you pay employees in stock or options, it must show up on the balance sheets
2. AWS bills and Rent. They're an NYC company that rents its datacenter from Amazon. Elastic MapReduce isn't cheap when you're running 10 A/B analysis tests a day.
3. Affiliate fees. If you're giving away half your commission to an affiliate, that's 100 million right there.
posted by pwnguin at 11:57 PM on March 4, 2015 [4 favorites]


I sort of want to see a prospectus that features those dinosaur penises.
posted by pompomtom at 12:11 AM on March 5, 2015 [1 favorite]


"They're an NYC company that rents its datacenter from Amazon."

Etsy runs its own hardware now.
posted by zippy at 12:13 AM on March 5, 2015


Finally, Etsy can become the flea market to Amazon's mall.
posted by The River Ivel at 2:56 AM on March 5, 2015 [8 favorites]


3. Affiliate fees. If you're giving away half your commission to an affiliate, that's 100 million right there.

Thats only true if every sale goes through an affiliate link. I don't think I've ever seen an affiliate link to etsy. I'd be amazed if thats even 10% of their sales.
posted by Lanark at 3:00 AM on March 5, 2015


So should I go thru with posting some of my blockprint Cthulhu/UFO stuff for sale or continue to waffle?
posted by robocop is bleeding at 3:35 AM on March 5, 2015


The big jump in losses is probably non-cash related to costs related to the IPO run through the P&L. Depending in how complex the Capital structure was it can be any number of things. Most likely tho stock grant related.
posted by JPD at 4:25 AM on March 5, 2015 [1 favorite]


Finally, Etsy can become the flea market to Amazon's mall.

eBay is the flea market to Amazon's mall. Etsy is that one little corner of the flea market where a couple of nice old ladies are selling stuff they actually made, except one of them is feeling a little under the weather so her ne'er-do-well would-be-MBA nephew is running the booth this weekend, and he gets a glint in his eye as he sees that there's real money to be made...
posted by Etrigan at 4:31 AM on March 5, 2015 [17 favorites]


I got the email Etsy sent-out to members yesterday. I kind of get why they're doing it, but I can't see it working well for Etsy, as far as that warm-and-fuzzy craft sale image they've tried to cultivate goes. They'll be beholden to the vagaries of Wall Street's prognosticators, and the pressure to post ever-expanding profits (and cut costs, naturally) will be on.

I'm not sure what kind of future that will hold for Etsy. Or, maybe they'll be given a pass by Wall Street, in the same way Amazon has been allowed to go year-after-year without posting a profit with nary a peep from the investment gods? Somehow, I doubt it.
posted by Thorzdad at 5:28 AM on March 5, 2015


Stock certificates will be hand-woven and trimmed with a crochet stitch.
posted by leotrotsky at 6:04 AM on March 5, 2015 [2 favorites]


If you take funding from big investors, eventually you need to do something to return that money to them. Either IPO or selling the company. You can't really just hang around and grow slowly.
posted by smackfu at 6:15 AM on March 5, 2015 [1 favorite]


I am go glad I no longer sell on Etsy. I started out there (I make indie nail polish as a side hobby) because ultimately it still is one of the best places to start out and be seen by customers. It turned out I was pretty good, so after only a year I left.

Etsy's fees equal that of paypal, so over that one year I ending up paying Etsy thousands (those .20 listing fee and 3.5% transaction fees really add up, even if you're only selling a $9 bottle of polish). Etsy kept changing the layout. The support. The search algorithms. Paid ads are a joke on Etsy.

So I struck out on Big Cartel, which allows customization and only charges a monthly flat rate, no matter your sales volume. I think many, many successful Etsy sellers have done the same as me, never looking back. The catch is, of course, that you need to have a following and visibility to do so. If you're a small seller on Etsy, you're pretty much lost in the void with no other feasible choice but to stay.
posted by Windigo at 6:30 AM on March 5, 2015 [6 favorites]


I have an Etsy shop and it's by no means successful, but I do get the occasional sale that helps me pay for my crafting addiction. I don't like using Etsy since they loosened up the rules about mass produced stuff, because people now feel like they're getting hoodwinked about what and whom they are buying from - and they're often right.

Still, I don't make enough to go to Big Cartel or some of the other Maker sites, so I guess it's Etsy for me until I find something better.
posted by custardfairy at 7:38 AM on March 5, 2015 [1 favorite]


My story is identical to Windigo's. I joined Etsy in 2005, was one of their featured artists even, and then found my shop's contents getting lost in the flood of Dreck and Knockoffs-from-China. I loved Regretsy less for her mockery of dreck, and more for her railing against Etsy admins for not protecting the people who actually made stuff by hand in favor of vendors who off-shored their labor, or bought stuff on Ali-Baba and claimed it as their own.
I now use the Squarespace embedded store on my own website, but honestly, I get more sales in my brick and mortar shop, and I don't have to jump all the listing hoops. It takes time to get nice photos of your work, and if you're making unique one-offs, that is time down the tubes.
posted by ikahime at 8:06 AM on March 5, 2015 [2 favorites]


I'm curious about how Etsy's stance as a B Corporation is going to affect the IPO. My guess is not at all, but we'll see. The B Corp isn't (usually) a formal structure like an LLC or an S-Corp, it's legally structured like any other for profit company. But they have extra social principles that guide the business, "certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency."

My read on it is being a B Corp is a well meaning gesture that ends up having little practical consequence. (I'm fairly cynical about "fair trade" and "organic" designations, too.) Certainly Etsy's reputation as the friendly little kooky company for the crafter has suffered these past couple of years, and I think will suffer more through the IPO process. But maybe the B Corp promise will let them stay true to some of what everyone loved about early Etsy.

Possibly related; it would sure be a nice gesture to let early Etsy sellers participate in a friends and family round as part of the IPO. There's precedent for that in a lot of companies that explicitly acknowledge their relationship with their community. (I lucked in to a few Red Hat shares back in 1999.)
posted by Nelson at 8:43 AM on March 5, 2015 [2 favorites]


My girlfriend's first words when she got the IPO email were, "That's it, I'm moving to StoreEnvy."
posted by GrapeApiary at 10:16 AM on March 5, 2015


Why did the IPO news make her want to move to a different site?
posted by the jam at 10:35 AM on March 5, 2015


We've been discussing shareholder activism strategies on Twitter all morning (finally! That miserable year+ I spent working as a Salomon Smith Barney broker is paying off!). One suggestion is to get as many sellers as possible to buy a single share (either outright or via something like Sharebuilder) and really let loose on them collectively.
posted by bitter-girl.com at 12:29 PM on March 5, 2015 [1 favorite]


Shareholder resolution #1: stop letting Three Birds Nest resell Alibaba shit on Etsy.
posted by bitter-girl.com at 12:30 PM on March 5, 2015 [5 favorites]


Etsy was timed right for the crafting boom. They had a great team--especially engineering and marketing. They honed the site like crazy trying changes to their pages--looking for any way to improve performance. Their marketing was able to create (and get published widely) the story of the Etsy seller who handmade some item and was able to quit their day job and focus on it solely. It was great work.

I think a lot of things have changed over the last few years. Honing to maximize sales and profits doesn't always favor the smaller shop. Google advertising and indexing has changed in ways that don't favor sites like Etsy, and most Etsy items for sale are too cheap to advertise. They have to relax the rules to allow more items onto their site and keep growing. And, I'm sure investors were about ready to cash and began applying pressure there.

If you're looking for a new home, look for something like Etsy--a marketplace. A larger (but not too large) site will help people find you. It's very hard to set up a store front on your own and bring in traffic without a lot of time invested in learning online marketing. Oh, and repeat buyers are core to surviving.
posted by joelr at 12:58 PM on March 5, 2015


I love the idea of small sellers buying a share each. It's the only thing I can think of that might help. I'm not social-media savvy and I'm still trying to build my following, so the way Etsy is being run makes me feel rather trapped. This was supposed to be a platform that helped me foster community and customers through good tools and better traffic. Instead, it's a sloppily run slot machine. The last several rounds of changes have not improved things; they have simply cost me time as I try to re-learn the site. Meanwhile, there are other changes I need that are not in the works. I'll be checking out the other markets people mentioned.
posted by heinouslizard at 3:34 PM on March 5, 2015 [1 favorite]


I've done well (better than I ever would have expected, really) on Etsy but without any real change in my own listing habits, I've seen a marked decline in sales since the 2013 "handmade in spirit" policy changes and crapflood of mass-produced stuff. I know correlation does not equal causation and there could certainly be other factors affecting my own results, but... from what I've read it's a trend.
Why did the IPO news make her want to move to a different site?
For me it's knowing that every single decision the company makes is henceforth going to revolve around how to squeeze every last hundredth of a cent of profit per share out of the company for its stockholders, most of whom aren't going to be interested in results beyond the next quarter. I'm pretty sure that low-volume sellers are going to get the short end of that stick.

For those of you who have left Etsy, what other marketplace sites are out there? Big Cartel and Storenvy have already been mentioned, and I'm looking hard at ArtFire (Flat $20/month with no listing or commission fees) but I'd love to learn about more. It's been a while since I looked at alternatives and it seems like some of them are catching up to (maybe even passing) Etsy's boutique feel.
posted by usonian at 4:34 PM on March 5, 2015


If you go on the forums on etsy a lot of people are complaining that something changed in 2013 and sales/views dropped (this reflects my experience) many people have left.

+

My story is identical to Windigo's. I joined Etsy in 2005, was one of their featured artists even, and then found my shop's contents getting lost in the flood of Dreck and Knockoffs-from-China

There's an interesting pulling the ladder up sort of thing going on here. I know several people who branched out in to having actual B&M vintage shops, selling enough online to rent an office and make their crafted thingamabobs, etc. But this change is absolutely real.

Someone, somewhere on some board made the decision to allow that kind of crap and reap the massive amounts they'd make in fees while lowering the overall quality and usefulness of the site, and at this point it's actually made it close to impossible to start out the way you guys, and my friends did.

The IPO makes it seem like this was their logical exit. It's dumb in the same way that facebook splitting the main app and messenger in to two things so they can double their number of recorded installs and seem bigger. It's destroying your product to seem more successful, but in this case it fucked over actual people trying to start(or run) a business.

Now there's this awkward middle gap between being truly small, where only something like etsy makes sense, and being big enough that you have enough of a following/a big enough instagram/etc that you can branch out on to your own page. That gap is turning in to a chasm.
posted by emptythought at 5:16 PM on March 5, 2015


Why did the IPO news make her want to move to a different site?
posted by the jam at 1:35 PM on March 5 [+] [!]


I think she's worried about more changes along the lines of when they let non-crafters start selling things. She's worried about ads and annoyances and whatever else is in store now that their will be shareholders to appease.
posted by GrapeApiary at 9:42 AM on March 6, 2015


I've had a shop since 2009, and while I don't make a ton of money with it, I've found it to be a valuable outlet for my work. I don't fit in to many craft fair environments, and there is a dearth of actual B&M space for artists locally. At least in my experience, the Etsy name provides some degree of authenticity/legitimacy.
posted by k_nemesis at 8:29 AM on March 9, 2015


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