1. Business
March 6, 2020

Etsy share price jump bucks market coronavirus fears

By MarketLine

Etsy had a strong end to the financial year which resulted in a big jump in share price. This was despite current market fears surrounding the coronavirus. Revenue for FY19 increased 35.6% year on year from $604m in 2018 to $818m in 2019, having increased from $441m in 2017.

Q4 figures were equally as healthy, with Etsy’s $275m acquisition of Reverb.com, a predominantly music-related online marketplace.. Revenue in the H2 increased as a result of the acquisition. This saw Q4 revenue rising to $270m from $200m year on year.

There was a 30% increase in ‘holiday’ gross merchandising sales (GMS) value over 2018. The total is generated through customer-to-customer exchanges as a means to quantify sales. The company generated $20,000 per minute in GMS through Cyber Monday and the following Tuesday.

In Q4 2019, GMS was $1.7bn, up 32.8% year on year. Adjusted EBITDA was also up 20.2% to $54.6m in the quarter, with gross profit up from $142.9m to $179.2m. However, as a result of the Reverb acquisition and company reinvestment, net income dropped from $41.25m to $31.29m in Q4 2019.

Migration into the cloud has proven vital

Over the last two years, Etsy has migrated its systems to Google’s cloud service. This has meant that during busy holiday periods, the ability to add server capacity when needed has kept the website functioning.

Tech improvements helped the company avoid losing out on sales due to high demand and lack of sufficient supply attributed to physical servers. CEO Josh Silverman said, “heavy investments in hardware were required in advance to get us through the holiday season”.

Effective marketing has paid off for Etsy

Etsy has changed fundamental parts of its business over the last two years. There has been increased spending on marketing which has helped to increase revenue.

The company is constantly looking to improve its GMS, with work being done by its engineering and experimenting teams to convert page views into sales. A major focus is in shipping – its recent free shipping initiative found that around 65% of items in the US were listed and viewed offered free shipping, compared with 24% the previous year.

The company also changed the way in which it uses advertising. The latest iteration of Etsy Ads works with the likes of Google Shopping and other “off-site ads” services.

Ads was initially rolled out whereby stores on the platform would have to pay for traffic being driven to their store. This was regardless of whether any purchases were made. However, feedback from sellers made Etsy reverse this and sellers now only pay when orders have been made.