Josh Silverman
Chief Executive Officer at Etsy
Thanks, Deb. And good evening everyone. We're pleased to be reporting another quarter of healthy performance to start the year. Etsy's consolidated GMS was $3.1 billion. Revenue grew nearly 11% to $641 million and our adjusted EBITDA margin was again strong at 26.6%. Etsy marketplace GMS was $2.7 billion this past quarter, down about 3% on a currency-neutral basis as we've once again maintained the vast majority of our pandemic gains in the face of stiff macroeconomic headwinds.
As Rachel will review, some of the volatility and headwinds the Etsy marketplace experienced in February, eased in March, enabling our consolidated GMS to come in above the midpoint of guidance. The Etsy marketplace is starting to see some green shoots in our buyer metrics as we move past pandemic period comparisons, including the first year-over-year increase in active buyers in five quarters.
In the last few years, we've all faced continued uncertainty, which frankly is feeling like the new normal. But despite the ups and downs, Etsy has thrived. I believe this has everything to do with our agility and resilience, both in our business model and the way we run our company. We stand apart because we offer something different, something we believe is evergreen and enduring.
Summing up our core Etsy marketplace plans for 2023, we will work hard to knock down barriers that have historically made Etsy your once in a while, rather than your everyday. These barriers can be summarized in three main areas; first, buyers too often think of us only for very specific needs, or at the end of their shopping journey, when they can't find the items somewhere else. Second, it simply takes too much time and effort to find the best things among our over 100 million items and third, buyers worry about the post-purchase experience.
Given our breadth and depth of merchandise, we're confident that we should be more relevant, more often to many more millions of buyers around the world. And if there is anyone who doubts this point, I challenge you to review your recent purchases and search on Etsy, to see whether you might have found something similar yet more special and possibly better value if you purchased it from a creative entrepreneur on Etsy. I bet you'll be surprised how often the answer to that question is yes.
As we lessen these barriers to purchasing more frequently. We believe we can earn the right to gain a far greater share of our buyers' wallets, and to reach our aspiration to become the starting point for many more of their e-commerce journeys.
This year our product roadmap is focused on welcoming new buyers to the joy of Etsy, deepening buyer curiosity and engagement, instilling trust when transacting with us and being the platform sellers love to sell on, where they can most effectively and efficiently grow. We're doubling down on initiatives from our core female buyers, building awareness among male buyers, and driving the two-sided marketplace flywheel in more of our seven core markets. I'm excited to tell you more about some of our plans today.
Improvements to search technology are obviously central to this roadmap and you'll will see us invest here in a big way. Many of you ask what inning is Etsy in, in making search better. For the past six years, I've consistently answered very early innings. We've been at the cutting edge of search technology for the past several years, and while we use large language models today, we couldn't be more excited about the potential of new or large language models and generative AI to further accelerate the transformation of Etsy's user experience. Even with all our enhancements, Etsy search today is still keyword driven and text-based and essentially the result is a grid with many thousands of listings.
We've gotten better at reading the tea leaves, but it's still a repetitive cycle of query result reformulation. In the future, we expect search on Etsy to utilize more natural language and multimodal approaches. Rather than manipulating keywords, our search engines will enable us to ask the right question at the right time to show the buyer a curated set of results that can be so much better than it is today. We are investigating additional search engine technologies to identify attributes of an item, multi label learning models for instance search, graph neural networks and so much more, which will be used in combination with our other search engine technologies.
It's our belief that Etsy will benefit from Generative AI and other advances in search technology as much or perhaps even more so than others. Why, think about the way you shop, you don't walk into our store and yell blue shirt, cotton, the way you search on Etsy today. In a store, you walk-in, explain to a salesperson that you're going to a cocktail party at a Chic Place in Brooklyn and are looking for a shirt to fit the vibe, what do you recommend?
And you certainly don't expect the sales person to show you 90,000 options. They'll show you the best handful of items that match the vibe. What if we can bring the human aspect of retail boutiques to e-commerce, what-if buyers could tell us what they want in real-time and adjust their search results that way. What if they could show us images during the conversation and particularly intriguing for Etsy. What if buyers could better visualize products that might be similar to, but not exactly like the ones initially displayed in response to a search. Such as, I like that planter, but do you have it in the shape of a duck and not a cat. With over 100 million items, chances are, whatever you're imagining is already for sale on Etsy. We'll help you find it more easily.
While we're in the early days of thinking through how these advantages might impact Etsy, you could imagine how conversational search can help bring the human aspect even further into our marketplace or how visualization can enable more seamless product discovery. Summing it up, we're excited, combining human -- natural human language with progress on search is pretty on-brand for Etsy. Tying back into welcoming new buyers to the joy of Etsy and deepening buyer curiosity and engagement for those coming back to us. For every buyer, we should be able to show you the very best of Etsy for you.
We have the opportunity to be far more curated and organized to reduce the clutter in order to be the place you come to more often for your head queries and not just your tail queries. To that end, we have two very exciting cross-functional initiatives in 2023 that aim to unlock the best of Etsy. The first, we're calling curation at-scale. You may be familiar with our editors' picks features, items we select for editors' picks have traditionally fueled content for on and off-site merchandising and marketing strategies.
These features as well as the Etsy pick badges we use throughout the site are fueled by a dynamic library of a couple of hundred thousand listings curated by humans, Etsy merchandise experts. Etsy picks badged items that show meaningfully higher conversion rates than non-badged items. Why? Because our merch team knows how to select the very best inventory, items with true craftsmanship, those that are well photographed to display key features, and are from sellers who adhere to our policies and provide excellent customer service. Our experts also know how to incorporate market trends, localization, and diversity of merchandise into the experiences we're creating.
So, our search experience and merchandising teams are working together to feed the best of Etsy human curation into our ML and AL data sets in a highly scalable way, with a goal to train our algorithms to better detect the quality of items as perceived by humans such that we showcase the best of Etsy in every search. Over time, we believe this and other work streams will help make search more personalized for each type of buyer on Etsy, further, identify what quality means for you, enable us to make better recommendations, help buyers move more easily from inspiration to purchase, and enhance the brand perception of Etsy.
We'll also share insights with sellers on what being the best of Etsy looks like for their type of item. So over time, we can help lift our entire seller community. The second area we're working on to unlock the best of Etsy is related to creating shopping experiences that make Etsy feel more organized. To set the stage, it's worth taking a look at our brand awareness data. While Etsy's aided awareness is now quite high, particularly in the U.S., our largest market.
When we ask consumers the open-ended question, name the top places to shop for gifts. Only about 11% will name Etsy, and only about 3% name us for home furnishings or for style in spite of these being some of our most popular purchase occasions. This lack of top-of-mind awareness represents a tremendous opportunity for us. We believe we have both the merchandise and differentiated shopping experience to warrant significantly greater buyer consideration.
So this year, our product teams will create new pathways or wayfinding to give buyers easy ways to understand our sellers' inventory by surfacing category-specific information and removing friction in the purchase experience in order to surface high-quality items and provide inspiration. For example, a complete-the-look recommendation model is showing early promise to help home and living buyers shop more effectively. And in gifting, we're testing new ways to narrow broad gifting missions, such as a gift for mom, to filter by a hobby or other interest, or in jewelry, one of the most common gifts on Etsy to help a buyer more easily find a specific type of jewelry.
We'll also leverage our marketing channels and campaigns to associate Etsy with specific purchase occasions, starting with home & living, style & gifting. Here are a few of our new TV spots, which seek to raise awareness that Etsy has it for those purchase occasions.
Moving now to the ways we'll seek to instill more trust when transacting with us to build that peace of mind when shopping on Etsy, 90% of active buyers believe items on Etsy are unique, high quality, and handmade. That said, mass-produced items, which make up a very small percentage of items on Etsy do continue to find their way onto the marketplace. We know it weakens trust when a buyer or a seller encounters one of these items.
Utilizing state-of-the-art ML and AI technologies, we've been dialing up enforcement of our handmade and other listing policies even more in 2023 to remove items more quickly and accurately. Our 2022 transparency report was published two weeks ago. It's a great source of information regarding our efforts to take down listings that violate our policies. We removed 1.9 million listings for violating our policies in 2022, a 16% increase from 2021. This work is never done but I'm confident that we're taking the right steps to ensure that Etsy remains a safe and trusted place for our communities.
Another focus for us this year is to improve awareness of Etsy purchase protection. So buyers and sellers know when their orders qualify, feel confident in the process, and can more easily resolve any issues that arrive. For those buyers familiar with Etsy purchase protection, over half are likely to say that Etsy has their back if things go wrong compared to about 30% among buyers who are not familiar with the program.
As we track data from this program through the end of last year, we found that prepurchase messaging about purchase protection improved conversion rate and our post-purchase e-mails spurred by our frequency over a 90-day period. We have so much more to do to make sure buyers and sellers know we have their backs and that we consistently keep pace with expectations across the e-commerce landscape.
And while we've also made meaningful progress over the years on the cost and timeliness of shipping, we still see significant opportunity for improvement. In the first quarter, we saw a nice conversion rate win from making it easier for buyers to filter for free shipping items with no minimum purchase requirement. We could do even better on the timeliness of shipping. For example, by continuing to improve the accuracy of how Etsy sellers set their processing or make times versus their actual times, using ML to get even more precise in predicting point-to-point shipping times and prioritizing items and search results located closer to the buyer for time-sensitive purchases.
Our job is to create an ecosystem with the right incentives so sellers with the skill and will can be as successful as possible. Last year's transaction fee increase, where most of the incremental revenue was reinvested back into the marketplace, enabled us to increase investments in critical areas such as marketing, customer support, and making Etsy more trustworthy. 2022 was exactly the right time to do it when the world was reopening after the pandemic and sellers needed us to step up our efforts to engage and retain buyers. Given that seller growth continues unabated, up about 8% year-over-year, and our future intent to sell metric is consistently high, we believe we're on the right track.
Yet we know we can do even better. So this year, we've got a jam-packed to-do list, which includes investing in our seller growth suite, education, tools and the personalized insights they need to market their shops, improve their listings and grow sales on Etsy. We'll make it easier than ever to list items and will provide best practices on pricing strategies and discounting.
In addition, we've recently started testing a new make-an-offer feature that will give vintage shop owners the option to receive offers from buyers. Since launch, thousands of sellers have opted into the initial test with more than 1 million eligible listings included so far. And we're also planning our second virtual Etsy Upseller event this month and will try to outdo our wildly popular 2022 event.
We're proud of our marketing team, which continues to deliver great value, bringing buyers to our marketplace and keeping them coming back. We've never been a growth-at-all-cost company, and I'm confident that our disciplined approach has and will continue to serve us our communities, and our shareholders very well.
This slide shows just a small sampling of our team's creative work across on-site experiences, CRM tools, social media, and brand, including digital TV and out-of-home. And we love partnering with style influencers of all shapes and sizes who want to align their brand with ours. For example, Martha Stewart was our first celebrity collections curator in 2023, this time with a twist. Martha will curate not 1, but 20 collections over the year filled with items she deems worthy of her coveted good things stamp of approval.
Moving to our House of Brands. Reverb and Elo 7 kicked off the year with strategies to drive long-term engagement with their respective communities. Reverb has been focused on affordability, helping musicians find good deals through initiatives that have provided solid GMS wins such as showing more instruments with price drops and great value badging.
In addition, Reverb has been testing initiatives that could help sellers better understand pricing trends, and we also made it easier for them to engage with budget-conscious buyers interested in specific pieces of gear in order to negotiate prices. The Reverb team has had meaningful success with affordability and price discovery initiatives, so we'll be studying some of these for relevance to the Etsy marketplace.
The Elo7 team is making progress in search, such as improving app lifting page speed, implementing user search interpretation, such as did you mean interface that automatically corrects misspelled search terms, and introducing filtering capabilities to allow narrowing of search by category or other characteristics.
I'm really excited to report significant progress at Depop, the result of new leadership, new organizational structure, new experimentation tooling and better focus. In just the first quarter of 2023, Depop completed almost as many experiments as in all of 2022. Kruti and our team have not only launched many more experiments, Depop has also improved experimentation metrics and tracking to better align the work with customer outcomes. In fact, Depop's conversion rate is improving, which will be critical to accelerating Depop's GMS.
Longer-term efforts to improve product search using machine learning have started to really pay off. We're exposing buyers to more relevant and personalized content to browse and explore and we're making the seller listing process better to improve the quality and quantity of listings. We also launched an exciting new feature called Repop, which enables users to seamlessly relist a Depop purchased item, a good thing for GMS and the planet.
We're testing and leaning into new marketing formats, such as our I got it on Depop social campaign, and we're seeing better returns from digital marketing investments, and sellers are reacting well to the opportunity to boost their listing with adoption picking up steam.
With economic and geopolitical turbulence continuing to dominate the headlines, it's even more important for us to find space for the things that bring us joy, enter Etsy. We're built on joy, whether in the form of discovering that perfect gift for a loved one, talking directly with a maker who can craft an item just for you or turning a long-time hobby into a thriving online business. Our success to date fortifies our long-held belief that as the world shifts towards fewer, more commoditized online brands, the need for Etsy is even greater, and our disciplined investment approach can enable above e-commerce industry growth and best-in-class profitability on average and over time.
I want to take a moment to thank our team across our house of brands for continuing to drive innovation and bring more buyers to our millions of sellers around the globe in ways that are inherently human, special, and different. We believe people will crave an alternative to mass-produced products, and we feel well-positioned to continue to invest wisely for the future even in unstable times.
Thanks for your time. And with that, I'll turn it over to Rachel.
