Josh Silverman
Chief Executive Officer at Etsy
Thanks, Deb. And good afternoon, everyone. We're pleased that Etsy's consolidated results came in at the high end or ahead of our guidance. GMS was $2.9 billion, down about 2.1% year-over-year on a consolidated basis. Revenue grew 3% to $648 million, and we posted a very healthy adjusted EBITDA margin of approximately 28%. Etsy marketplace GMS was down about 3.2% year-over-year, a 210 basis point improvement from our Q1 performance of negative 5.3%.
Etsy marketplace's record high level of approximately 92 million active buyers held up very well in another challenging quarter for our type of goods. While we continue to face stiff macro headwinds, we're making meaningful improvements to the customer experience, which we believe are beginning to inflect the curve along our journey to get Etsy back to growth.
We also announced today that Rachel is planning to retire. She has been a strategic partner and a key to the tremendous success Etsy has achieved since 2017. I believe every CFO wants to be measured on results, and Rachel has so much to be proud of in that regard. Beyond the numbers, Rachel leads with optimism and heart, helping craft our culture and our team's operational excellence. She has built a strong team, and I'm grateful she chose Etsy to serve as the culmination of her impressive career. Our entire community will continue to benefit from the impact she has made. We're going to have some more time together, and we'll stay focused on driving Etsy's success. You'll all have ample time to chat with her over the coming months as we launch a search for her successor, and of course, we'll share updates with you at the appropriate time.
As a reminder, 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're working to make Etsy more of a go-to shopping destination, and in particular, to really lean into what makes Etsy different and special. And we're making excellent progress in our bold initiatives to do just that.
As you know, we've evolved our way of working in 2024 to shift some of our focus from building incrementally better customer experiences to investing in the creation of more big bang, truly-engaging experiences and moments onsite and off. Since 2017, Etsy's operating model has been quite unique, and that teams were tasked to bank GMS in a very disciplined way to drive valuable incremental improvements to the customer experience. This worked extremely well for us, and I believe, has been a key contributor to our remarkable success, including being able to maintain a very large part of our extraordinary pandemic gains.
Given our much larger scale and the increasingly crowded and promotional e-commerce landscape, we're now allocating a significant portion of our efforts to bold, integrated initiatives that combine product improvements and marketing in novel ways. We're working backwards from what great customer experiences look like and are laser-focused on driving buyer -- buyer engagement, not just conversion.
I'm really excited to update you about how this new way of working is driving the success of several key 2024 initiatives, including in gifting, our work to highlight quality on Etsy, plans for our new Etsy Insider Loyalty program, and work to make our Etsy app the center of our customer experience.
Starting with gifting, which is proving to be a winning theme. Better onsite gifting experiences, combined with clear and engaging marketing initiatives for seasonal and evergreen gifting, and specific campaigns for product innovations, such as our new gift teaser video messages, worked together to deliver excellent second quarter performance in this strategic investment area. Site-wide GMS for purchases identified as gifts grew 4% on a year-over-year basis and significantly outperformed the overall Etsy marketplace. Further, Etsy's gifting performance surpassed that of the pure-play competitors we've been tracking for benchmarking purposes, and our US Mother's Day, Father's Day, and graduation performance meaningfully outpaced the NRF's forecasted performance for these events.
Video gift teaser messages weren't our only product innovation in the second quarter. We launched gift lists and reminders, allowing you to track ideas you have for a loved one's special event, and then, of course, reminding you to make the purchase, and new occasion pages, curated for things like anniversaries, birthdays, and so on.
In addition to GMS growth, we're utilizing monthly US buyer surveys to gauge the impact of our gifting strategies, and this data shows a significant year-over-year increase in prompted consideration of Etsy for gifts. We're also tracking an increase in perceptions that Etsy makes it easy to find a great gift. Of course, gifting initiatives will remain front and center as we move into the all-important holiday season.
Moving on to bold initiatives we're making in quality to ensure we highlight the very best of Etsy, differentiating ourselves in a sea of commoditized merchandise. We stand for keeping commerce human, and we have an enormous conviction that doing this in a way that no one else can is our most important competitive advantage, and that these initiatives represent a tremendous unlock for buyer consideration.
We mentioned on our last call that we're using large language models and GenAI techniques to better understand both the shopping mission you're on, as well as our seller's inventory along these four key focus areas, suppressing and removing items that violate our policy, up-ranking better quality listings and search and recommendations, and better curating and organizing our marketplace.
I'm extremely proud to report on the fantastic progress our search team is making to move beyond our historical focus on solving for relevancy in search, when you know what you want and can't find it anywhere else, to new initiatives meant to also highlight the best of Etsy and feature the incredible diversity and uniqueness of our sellers' merchandise.
In the past, our search algorithms ranked each listing individually based on likelihood to convert, which often resulted in buyers seeing far too many similar items rather than a more -- more holistic set. Here's some powerful data. We roughly cut in half the percentage of searches where a high percentage of listings seen on Page 1 are from a single seller. We've reduced the percentage of searches that have two or more listings that may appear identical by over 70%. We're incredibly excited about what this might mean for the future visitation, as buyers see a more diverse and higher quality set of listings each time they visit Etsy.
In addition to helping buyers, these initiatives also support our sellers, given how important it is that we nurture the best of Etsy across our seller base. Our latest search experiments resulted in approximately 70% of shops having more visibility in search, with the share of search impressions from small and medium shops increasing by nearly 30%. Later this summer, we'll empower sellers by giving them more agency and actionable insights than ever before into factors like listing quality and completeness that can impact how they show up in the search.
Connected to this work and to further allow our sellers unique items to shine, we've made some bold changes to our marketplace to reinforce who Etsy is so that everyone who comes to Etsy understands why we're different and special. We know that people love what Etsy represents as a marketplace that offers original items made by real people, and that being a place that supports small businesses and offers original goods are Etsy's top drivers for consideration and relevance. Yet in the past, the label handmade was the default, applied to any listing, which wasn't vintage or craft supplied, even while our policies allow for the inclusion of items that were designed or personalized by the seller, but not made with their own hands. This lack of distinction could be confusing for both buyers and sellers.
So on July 9, we announced a series of updates to our listing labels to be clearer about why items belong on Etsy and elevating the role of the seller in the making process. We've labeled virtually all of Etsy's listings along four creativity standards. One, physical items made by a seller by hand, or using personal or computerized tools. Two, items designed by a seller using their own designs, yet produced by a production partner. Three, hand-picked items, which can include vintage items, items from nature, and certain collections of items that a seller personally curated for sale. And four, items sourced by a seller, specifically in the categories of craft supplies or party supplies, along with items that are personalized by the seller.
We've already seen lots of love from our sellers related to these new standards, with overall high engagement and positive sentiment in our community spaces. Many sellers even amplified the news and shared the campaign on their social media channels. In the spirit of moving boldly, as we make these meaningful changes to highlight the quality, diversity and differentiation of our sellers' most unique inventory, and feature the sellers' role in the creation of each item, we simultaneously launched a 360-degree marketing campaign touching owned, earned and paid channels to reinforce Etsy's quality, originality and humanity.
When you shop many of our competitors, you don't know who or where you're buying from. With Etsy, the sweater is stitched by Jessica. The glassware is handmade by Chad. And the table is built by Tiffany. Our new social creative tells a deeper story on the role of our sellers and their love for their craft. We've created dozens of assets that range in style based on the audience, platform and goal. Here's our new hero brand spot for TV streaming and YouTube, which shines a spotlight on what makes our sellers so magical.
[Video Presentation]
The team and I couldn't be more excited about the changes we've made and how we're telling the world about them. Note that this is just one, albeit large step in our quality journey, with much more to come. I firmly believe that we will look back at this initiative as one of the most important factors which reignited Etsy's growth. We mentioned last quarter that we're making significant investments in our app to engage our existing active buyers, capture more new buyers, and help encourage more engagement and browsing, which we believe will in turn convert into loyalty and sales.
Our app continues to lead both desktop and mobile web in terms of GMS growth and represented about 42% of the GMS in the second quarter, providing an excellent opportunity for low-cost, native traffic acquisition, particularly given it's our highest converting platform. We've launched and are leaning into optimizing our app store position, running paid ads for app downloads, featuring app download prompts on our mobile website, and utilizing our owned channels in CRM.
We're working to make the Etsy app our marquee customer experience, shifting most buyer usage to the app rather than mobile web or desktop, and drive frequency and engagement with lower intent shoppers who come just looking for ideas and inspiration, while continuing to convert buyers who are on a clear shopping mission.
And speaking of frequency and engagement, I'm excited to unveil some details of our new buyer loyalty program, another bold move for Etsy in 2024. Etsy Insider will be launched invitation-only to a highly targeted group of occasional US buyers in beta form in mid-September. We've accomplished a lot so far, including many rounds of research and competitive audits to inform our program and rollout. We've focused on developing key benefits for buyers that highlight both the emotional and the rational characteristics of Etsy's unique value proposition and are in the process of finalizing our pricing strategy for launch.
Our beta program is buyer fee based and will include free US domestic shipping on millions of items, item discounts, first access merchandise, and more. We'll test, learn and iterate, and are optimistic that over time, Etsy Insider can be a needle mover, driver of buyer frequency and Etsy love. I've said before that I believe Etsy has more to gain from advances in AI than most of our e-commerce peers, especially given the incredible breadth and uniqueness of our seller's inventory. And we've been investing to unlock this value across almost every area of our business.
This slide highlights 20-plus use cases in product development alone. We're fortunate to be building upon a strong base with many years of investment in leading-edge ML and data infrastructure talent and systems allowing us to move quickly. A key foundation of the discovery and engagement work I've discussed today has been powered by our investments in AI.
For example, to better curate merchandise to improve the buyer experience and drive GMS, we're making it easier for buyers to find quality listings for mid-price jewelry, known as Demi-fine, by having human experts determine what jewelry attributes are most important to a buyer's search, think material, gold purity or hot trends, then utilizing GenAI to infer those attributes to create new search discovery modules and pathways, and incorporate this into onsite experiences such as landing pages. While this search is very much in progress, these better on-site shopping experiences, combined with targeted marketing initiatives, such as tailored social media content, CRM efforts and improved data feed curation for paid and organic search, contributed to a 9% year-over-year increase in GMS for Demi-fine jewelry in the quarter.
I'm really proud of the strides our team is making so far in 2024. We're confident we're working on the areas that will meaningfully impact Etsy in the months and years to come. We're leaning in more than ever to what makes Etsy, Etsy. We're nowhere near being as big or as successful as I believe we can be, nowhere near achieving our full potential. This is inspiring and motivating to us all.
I'll now turn the call over to Rachel.
