Josh Silverman
Chief Executive Officer at Etsy
Thanks Deb. We're pleased to speak with you today about our recent performance, but more importantly, to preview some of our exciting initiatives for 2024. We've built an ambitious portfolio of growth initiatives, what we consider some very bold moves while staying focused on protecting or expanding our overall profitability. We've done a lot to set Etsy up for success, making some difficult choices last year to be able to invest in our vital few, with an eye to getting Etsy back to growth. We enter 2024 energized with the right team, a highly relevant and differentiated right to win strategy, a disciplined investment approach, and a resilient business model.
Our focus will be to make Etsy even more Etsy, leaning into our core strengths to get even better at what we do. That is unlike anyone else in e-commerce. We had a strong finish to 2023 in the core Etsy marketplace, as well as at our subsidiaries, which collectively brought Q4 in a bit better than expected as Rachel will review shortly. The Etsy marketplace performed well during the holiday season, with our highest ever Cyber 5 GMS, up about 4% year-over-year. Both Cyber Monday and Giving Tuesday set new records. We know Etsy is a great place to shop for gifts, and our focus on this message paid off. More to come on gifting in a moment.
With this strong finish to 2023, consolidated GMS was $13.2 billion, roughly flat with 2022; revenue was a record $2.7 billion, up about 7%; adjusted EBITDA was about $754 million and free cash flow was very strong at about $666 million. Etsy's ability to deliver healthy revenue growth and strong levels of profit and cash flow gives us great confidence in the power of our special financial model and our ability to invest in long term, sustainable growth.
2023 was a banner year for our Etsy marketplace product development teams, who delivered our highest ever level of incremental annualized GMS. We dramatically improved experiences for buyers, making it easier to find what you're looking for, better at highlighting the best stuff, using new signals and nudges to drive conversion rate, improving reviews and recommendations, and developing new category purchase pathways and experiences. We built entirely new ways to feature handcrafted, high quality listings at great value.
Our marketing team was also extremely productive, with memorable, above the line campaigns contributing to our highest ever level for buyer intent to purchase on Etsy in our top three countries, increased visibility for seller funded promotions, scaled social spend and new tools for buyer engagement. All in all, a respectable year in a tough environment.
By any measure, Etsy starts 2024, a much more meaningful e-commerce company than we were just a few years ago. We've doubled our buyer base, which has now grown on a year-over-year basis for four consecutive quarters. And buyers, on average, are still shopping more frequently and spending much more on Etsy now than they were before the pandemic. Our $12 billion in 2023 Etsy marketplace GMS was roughly $3 billion more than we outlined in the three to five year target we set in 2019. As you can see on this chart, after many years of overperforming our sector, it's been difficult to outgrow during the past few years, particularly given the tepid macro climate for consumer discretionary products. But this just means we have to work even harder and more efficiently to deliver accelerated top line growth.
So where do we go from here? Let's start with the size of the prize. We all know that e-commerce is a massive business, still taking share from traditional retail. We estimate that the TAM in our core geographies and categories is $500 billion just online, with our market share sitting at just about 2%, so we still have a very long runway for growth. Most other players are competing head to head to sell the exact same merchandise focused on selling it $0.02 cheaper or shipping it 2 hours faster. And this has resulted in the commoditization of the entire experience, but that's just not Etsy. While we have an opportunity to continue to enhance our offering to deliver on the table stakes e-commerce expectations, we also stand for something more. We offer something different in a sea of sameness, which is why highlighting the best stuff remains one of our top focus areas and we're confident that we can get back to growing faster and taking share more broadly,
We believe Etsy's differentiation is partially why, based on Consumer Edge's US e-commerce retail data, we largely continued to gain share throughout 2023 when compared to our pure play competitors in most of our top categories. Competition is indeed fierce, yet we're up for the challenge. I'm excited to tell you how and why we believe we can win. As we built our plans to reaccelerate growth this year, we've been very clear eyed about where we are today, where our competitors are, and where our strengths lie.
Some of what makes us special is also what's historically held us back from being thought of for everyday purchase needs. Buyers too often think of Etsy only for very specific needs or at the end of their shopping journey or it simply takes too much time and effort to find the best things among our now over 100 million items or buyers worry about the post purchase experience. And because of that, the number of times buyers purchase from Etsy per year, as well as what they spend with us, are both still much lower than for some of our peers. We know Etsy has many millions of high quality listings that offer great value. We also know that if we can provide these in a way that's both reliable and dependable, we should be able to earn both more frequency and higher AOVs while also still having significant room to continue expanding our active buyer base.
As we work to gain share in 2024 and beyond, we'll stay focused on our vital few, making some bold moves to break down brand barriers so that buyers will think to shop with us even more often across a wider range of purchase occasions, leading to significantly improved consideration and ultimately increased frequency, which we believe is one of the keys to unlocking growth for Etsy.
So while we'll continue to focus on adding more buyers around the globe, expanding seller services and revenue streams and so on, today I'll focus primarily on this consideration opportunity. In fact, we've got a portfolio of compelling initiatives lined up designed to move the needle on consideration and frequency. In addition to gift mode, which I'll tell you more about in a moment, we're also hard at work researching options for a buyer loyalty program to give buyers explicit reasons to come back and shop more often. We'll do a lot more on the value and the reliability front, for example, with innovation planned to improve the predictability of shipping costs for both buyers and sellers, as well as work to improve shipping timeliness. For example, shortening our estimated delivery dates this year by at least two days. While we've made great progress in both of these areas, we have significantly more room to go to make sure we can meet buyers expectations and drive significant GMS, while doing it in a way that remain very Etsy.
We've also seen some really strong growth in international markets over the last few years and are particularly excited about plans we have to not only concentrate on building domestic vibrancy in our core markets, but also some new initiatives to drive cross border transactions and further growth and vibrancy across key geographies, especially in Europe. We've got a lot in store, but for today, the one bold move I'm thrilled to tell you about is Gift Mode.
As you've likely seen over the last few weeks, Etsy is all in on gifting. Our goal is to evolve Etsy from being one of the places you can go to find a gift to being the indispensable partner for all of your gifting missions. Not only is Gift Mode an important product launch, it represents a significant deviation from our normal approach, where we historically launch a series of measurable, incremental product improvements with minimal fanfare. With Gift Mode, we've meaningfully augmented our playbook to not only create a great new product experience, but also to create consumer buzz about the product in a way we've never done before, with unmissable stories, content and moments to build excitement.
Why gifting for Etsy? Gifting can be stressful and fundamentally different than buying for yourself in multiple ways, knowing what to buy, the logistics of how, when, and where your gift will arrive, what if the gift recipient doesn't like it? And so on. A gift can be perceived as a representation of yourself or how much you care for the recipient, all of which makes it important and stressful. Given we're known for that special item made and sent with a human touch, we believe we're uniquely positioned to take the stress out of gift buying.
Data supports that buyers crave help here. Two-thirds of Americans struggle to find the perfect present, and the vast majority, 71%, have felt anxiety about gift shopping in the past year. We believe gifting is an ideal use case for Etsy. We have an enormous conviction that this is a space we can and should own. And if done well, can lead to market share gains across our core categories. After all, do you really want to buy that special gift at a mass retailer whose brand primarily stands for commoditized and cheap.
Not only is gifting the perfect Etsy use case, it's an always on opportunity for us to add value. Gifting is not just a seasonal buyer need. There are reasons to give gifts near every day of the year. According to our survey work, about 45% of gifts are purchased for personal occasions such as birthdays, births, weddings. Another 45% of all gifting happens for holidays, both seasonal and secular holidays, Valentine's Day, Mother's and Father's Day, and more. And the remaining 10% are just because gifting occasions missing a loved one or sending a thoughtful item to a sick relative.
Further, our data shows that US consumers spend an average of $1,600 a year on gifts. We estimate that on average, Etsy's US buyers spent about 2% of that, just $38, for gifts on Etsy. There are literally millions of high quality items on Etsy made and designed by real people that make great gifts for every occasion, budget and interest. Yet because we sell so many things for such a vast variety of purposes, it's difficult for people to know when to turn to us. And we often aren't the first place people think of or come to when they're on a gifting journey. Only about 10% of US shoppers name Etsy top of mind as the place to shop for gifts, and there's no single brand that really owns gifting. So we see this as an early stage opportunity.
Another way to look at this opportunity. We estimate that only 43 million of our global Etsy buyers bought a gift from our sellers last year, which means that over half of our active buyers didn't. And that's not even counting the tens of millions of other shoppers for whom gifting can be a compelling reason to start shopping on Etsy. Gifting represents a huge TAM. We estimate the relevant opportunity to be about $200 billion in the US alone. We believe our market share is about 1%, so even moving up to 2% would be a $2 billion growth opportunity for us. Obviously, that $2 billion is already captured in the very large TAM mentioned earlier. But by defining this space and investing with focus in gifting, we believe we can move the needle on growth.
So what's Gift Mode? It's a whole new shopping experience where gifters simply enter a few quick details about the person they're shopping for, and we use the power of artificial intelligence and machine learning to match them with unique gifts from Etsy sellers. Creating a separate experience helps us know immediately if you're shopping for yourself or someone else hugely beneficial information to help our search engines solve for your needs. Within gift mode, we've identified more than 200 recipient personas, everything from rock climber to the crossword genius to the sandwich specialist. I've already told my family that when shopping for me, go straight to the music lover, the adventurer, or the pet parent.
We've incorporated some great new ways to help the procrastinator or alleviate the general concern that Etsy gifts won't arrive in time. Let's show you how it works.
Early indications are that Gift Mode is off to a good start, including positive sentiment from buyers and sellers in our social channels, very strong earned media coverage, and nearly 6 million visits in the first two weeks. As you test and shop in Gift Mode, keep in mind that this is just the beginning. We have an exciting roadmap planned for gifting discovery, journeys, logistics and experiences to make Gift Mode easier and more delightful for both the gifter and the giftee, and to get both coming to us more often.
Before closing, I'll comment on the solid recent contributions from our subsidiaries. Depop's performance significantly improved in 2023, returning to healthy year-over-year GMS growth, with very strong double digit growth in the US and strong growth in revenue. The US is a large opportunity for Deepop, with the resale market forecasted to be over $40 billion by 2027, growing nine times faster than the broader retail clothing sector. For the full-year, Reverb significantly outperformed the musical instruments industry, and while GMS was about flat, revenue increased on a year-over-year basis. Reverb returned to GMS growth in the fourth quarter, primarily attributable to their focus on used and outlet inventory. The Reverb team made some organizational changes late in the year, which we currently expect will help the business achieve adjusted EBITDA profitability this year.
We believe the best is still ahead for Etsy. Right now is the moment when many consumers are feeling stretched with low confidence in the economy and less money to spend on discretionary items, but it's a moment that we believe will pass. Etsy's mission and compelling right to win remain relevant and sound. I'd like to officially welcome Marc Steinberg to Etsy's Board of Directors and believe he'll bring unique and valuable experience as an investor and board member in the technology, digital media, in e-commerce industries. And most importantly, he shares our passion for Etsy's mission and excitement about our future growth opportunities. I want to thank the Etsy, Reverb and Depop teams, you've all worked with incredible heart, creativity and determination to delight our buyers and help our sellers grow. We're going to lean in hard to our differentiation and believe we have the financial strength to do so in a sustainable way. We've started the year off with a bang with Gift Mode, and that's just the beginning. I'm confident we can get back to the kind of growth that we and all of our stakeholders can be proud of.
With that, I'll turn it over to Rachel.
