Joshua G. Silverman
Chief Executive Officer at Etsy
Thanks, Deb, and good afternoon, everyone. Etsy's consolidated results, while within our guidance range, were not where we wanted them to be. GMS was just shy of $3 billion, down 3.7% from last year. Revenue grew a bit up 0.8% to $646 million, and we delivered $168 million in adjusted EBITDA, a very healthy adjusted EBITDA margin of approximately 26%.
Etsy marketplace GMS was down 5.3% year-over-year, a bit of a disappointment as March GMS trends did not improve as we had anticipated. That said, I'm encouraged that the Etsy marketplace's record-high level of 92 million active buyers held up very well in another challenging quarter for our type of goods, signaling to us that while buyers shopped a bit less with us than they did in the prior year period, we have some comfort that these trends are cyclical rather than structural.
To that point, while US unemployment is low and inflation data is mixed, consumer sentiment remains depressed, which some speculate can be attributed to the very high cost of money. Consumer wallets remain squeezed so there's often a little left after paying for food, gas, rent and child care. And there's significant data indicating that the largest e-commerce platforms have primarily been able to grow by selling everyday essentials at very low prices.
Macroeconomic conditions also continue to be quite challenging in our other top markets, the UK and Germany. These headwinds are real, do not appear to be abating and are impacting our sales. Stiff headwinds mean that our product and marketing initiatives have to work even harder to drive growth.
In the first quarter, we shipped meaningful improvements to the customer experience, positively impacting GMS. Just not enough to offset the headwinds to our baseline business performance.
I'm particularly pleased that our leaner and more nimble Etsy marketplace product development organization was off to the races. We had double-digit growth in the number of experiments per product engineer that utilize machine learning as well as in our annualized gross GMS from experiments. And the total number of experiments run per engineer increased 20%.
Some of this progress can be directly tied to what we told you about last year to democratize ML. These metrics give me confidence that the bold moves to improve customer experience can build over time and play a key role to get Etsy growing again. Our marketing team also kicked into high gear, in-sourcing Etsy paid search efforts and scaling mid-funnel channels. Expanding our product feed testing across PLA and paid social to improve the quality of inventory we're showing users and developing engaging and creative full-funnel activations across channels.
Our key focus for 2024 is to continue to build consideration for Etsy, to help buyers think of us more often by making it easier to find the best stuff, driving association that there are great deals on Etsy and making shopping on Etsy more convenient. We believe that changing buyer perceptions is eminently achievable, making us more of a go-to shopping destination and we've made excellent progress kicking off bold initiatives to do just that.
Thanks to the great work our product team did on the initial launch of Gift Mode, combined with creative and engaging marketing campaigns to raise awareness of Etsy as a key gifting destination, we're off to a good start evolving Etsy from being one of the places you can go to find a gift toward being the indispensable partner for all of your gifting missions.
Gift Mode is by far the most unique and varied subset of inventory we've ever curated and shown on Etsy. Organized around a set of gift ideas and not just items in order to help you feel like you're shopping for a person and not a thing. We are pleased to report that, Etsy total site wide gifting GMS in the first quarter grew in the low single digits year over year, significantly outpacing our site-wide performance and data we're tracking for select US online gifting-focused peers who all saw year-over-year declines.
We're seeing quarter-over-quarter increases in U.S. consumer perceptions that Etsy is making it easy to find great gifts, a key Gift Mode value problem. And importantly, our research tells you that Gift Mode expands buyer understanding of the breadth of our offering, very helpful as, of course, we're about so much more than just gifts. We utilized full final marketing strategies to tell the world there was something new at Etsy, such as securing the most visible advertising position in football's big game, making an estimated 100 million plus impressions. Gift Mode's launch generated over four times as many news articles as any of our prior consumer PR campaigns, and we had an over 200% increase in conversation volume around Etsy and gifting in our social channels compared to this time last year.
As we've said before, this was a kick off, not the mic drop, and we're in the early days of driving brand awareness to make Etsy more top of mind for gifts. We've got a robust road map for Gift Mode to improve the experience and get more buyers into the funnel, from recently optimized gift teasers to additional gifty profiles, reminders, video and audio message capabilities, and new occasion pages and much more.
Turning to our quality-focused initiatives, which we believe represent a tremendous unlock to drive buyer consideration. We stand for keeping commerce human. And believe that doing this in a way that no one else can is our most important competitive advantage. We're focused on creating cleaner shopping aisles for buyers. All too often, when you visit Etsy, your search is cluttered, showing you too many items that feel very similar, increasing cognitive load while failing to highlight the incredible diversity that is a towering strength for Etsy.
In addition, you might not be clear as to why each of these items belong on Etsy. For example, which are handmade by the seller themselves, which are designed by the seller, but produced in close collaboration with the production partner and/or which are personalized and customized by the seller. While there's demand on Etsy for each of these categories of items, it depends a great deal on the buyer's shopping mission. With the tremendous growth in sellers and inventory we've experienced over the last few years, this challenge has gotten all the more real and complex.
The great news about this challenge is that large language models and gen AI techniques provide so much opportunity for Etsy to better understand both the shopping mission you're on as well as our inventory. And show you the best stuff in ways we couldn't have imagined just a few years ago. This year, we're going on the offense in an even bigger way to make sure Etsy lives up to our promise from an inventory and quality perspective along these four key focus areas.
First, we're doing more than ever to suppress and remove listings that violate our policies. And advances in ML have been particularly powerful as enablers here. In the first quarter, we removed about 115% more listings for violating our handmade policy than in the prior year. And you've heard us talk about the violative view rate.
Buyer views of listings that violate our handmade policy are now just a few percentage points of total listing views. Our improved enforcement capabilities have resulted in the cumulative removal of millions of listings and tens of thousands of active sellers. While there's a strong replacement factor to fill in for any removal of seller listings on our marketplace, we estimate that the heightened level of takedowns we've initiated over the last six to nine months has represented about a 50 basis point headwind to our annualized GMS. We see this as a very important investment in our future with significant progress made but still more to do to keep making Etsy different and special and even more Etsy.
Second, we need to elevate listings that represent the best of Etsy. Over the past several years, we've dramatically improved our search relevance, ensuring that buyers can more easily find what they're looking for. We believe there's a huge opportunity to build on this work by factoring attributes such as the quality of the listing and photography, shipping price and reliability and customer reviews into our organic search algorithms.
All of this will help buyers find something that's not only relevant but will also lead to a purchase experience they're likely to love. We also want to empower sellers through transparency and education so they know exactly what actions they can take to improve their visibility creating opportunity for more sales on Etsy.
And the third and fourth items on this slide, curation and organization, work together to do an even better job showing the newest and best merchandise available from sellers on Etsy, whether through home and landing page experiences, category shopping, initiatives like Gift Mode, our Deals tab and more.
While we've made incredible strides in directed search on Etsy, we have a very significant opportunity to focus more on window shopping. Creating engaging buyer experiences to spark your imagination, capture impulse buys, get to know your tastes and preferences better and expand your understanding of the breadth of products available on Etsy. This is an area where we intend to fight much harder, making Etsy more fun, engaging, inspiring, surprising.
We want you to come to Etsy when you have five minutes to spare just to be entertained, so you'll come back to us again and again. And I'm confident that with our sellers' incredible merchandise, our large buyer base, brand strength and our team's creativity, we can make this happen.
It's imperative that we continue to widen the gap between Etsy's offering and that of the competition so that our site always feels inherently different, fresh, special and even more human. Better organizing our diverse listings into cleaner aisles will declutter our site enable buyers to find something they love with less friction and keep them coming back. We believe that supporting small business and shopping unique goods are our strongest levers to get buyers to think of Etsy more often.
We're planning to be quite loud with this message, reestablishing our point of differentiation in clear and compelling ways. We're also making great progress in our other key focus areas to drive by our consideration, highlighting great value and reliability. In keeping with the times, during the first quarter, we promoted special and hot deals from our sellers with discount-related signals continuing to drive significant GMS impact.
We also introduced new functionality for sellers, such as a growth page with customer insights they can use to inform actions to grow their business such as a new earnings calculator to assist sellers in understanding the various inputs that go into their profitability.
In terms of shipping timeliness, I'm pleased to report that our initiative to tighten estimated delivery dates, which we believe are an important effort to improve buyer perceptions of our reliability as well as to grow GMS are already paying off. Our fulfillment team recently launched a new machine learning model, which reduced our estimate of USPS transit times by greater than one day, resulting in a nearly tripling of the percentage of eligible orders for which Etsy is now able to show an estimated delivery date of seven days or less.
Driving consideration is all about inflecting the curve, to capture more new buyers and to help browsers convert to sales, to engage our existing active buyers, half of whom still only shop on Etsy one-time per year and to retain and reactivate more buyers every year, working to get another bite at the apple with our more than 100 million lapsed buyers.
Within this framework sits a very compelling opportunity to further expand usage of our Buy on Etsy app. Since purchasing days per app user are 75% higher than our non-app users, and only 45% of active buyers use our app, we've set some ambitious goals for 2024 to increase user penetration of our app and drive incremental downloads, including strategies to improve how and where we show the app download prompts, increasing the reach and effectiveness of our push messages and improving the experience for first-time app users.
We have massive pools of buyers to fuel these strategies and are excited about the road ahead. Owning our own destiny, particularly as some top search engines have lost a bit of their potency to drive traffic for e-commerce players is an important priority for us.
In closing, while so far, 2024 is still proving to be a cyclically challenging period for us. Rest assured that we are clear-eyed about what we need to accomplish to set Etsy back on a growth path. We're confident we're working on areas that will positively impact Etsy in the months and years ahead. We're leaning in more than ever to what makes Etsy, Etsy. We are not deterred. And as I've said to some of you, proving doubters wrong is frankly quite energizing for us. Even as I celebrate my seventh Etsyversary this month, I remain encouraged that we still have so many opportunities to grow.
I'll now turn the call over to Rachel.
