All right. Good morning, everybody. Thank you for joining. My name is Nikhil Devnani. I'm Bernstein's U.S. Emerging Internet Analyst, covering Etsy, and it is my pleasure today to have with me, Josh Silverman on stage, CEO of Etsy. Josh, welcome back to the STC. Thanks for having me. Before we get started, just a programming note, you can submit questions for this session via the QR code in your agendas, or you can go to pigeonhole.at and use the passcode, STC2024. Also, please refer to Etsy's investor relations website for the safe harbor. With that, let's get it underway. So Josh, a lot has changed in your tenure as CEO at Etsy in terms of how the marketplace has evolved. Can you just kind of take stock of, you know, what some of those major changes have been, and how the business has kind of improved from, you know, when you stepped into the role, you know, in 2017? Sure. So when I joined in 2017, there were kind of two conversations about Etsy. One, we think it's about as big as it can be. GMS growth had slowed. And two, there's a lot of competition. In particular, there was this thing called Amazon Handmade that was gonna kill Etsy. And fast-forward to today, and, you know, a lot of people are asking, is Etsy as big as it can be, and can we survive competition? So it seems like déjà vu all over again. To put that in numbers, though, in 2017, when everyone thought Etsy was about as big as it could be, we were doing about $3.3 billion of gross merchandise sales. Last year, we did $12 billion. We were doing, in 2017, about $440 million of revenue. Last year, we did $2.6 billion. In 2017, we were doing about $80 million of EBITDA. Last year, we did $750 million. So to the doubters who thought Etsy was about as big as it could be and couldn't withstand the competition, we were proud to prove those doubters wrong. Nothing gets our team more motivated than proving the doubters wrong, and we're bound and determined again in this moment to show that we're at the early days of where Etsy can be, and the fact that we can be a much bigger company, continuing to grow profitably, as we have done all along. We've been through, obviously, historically unprecedented times. But if we think about the macro, when one fast-forwards to today, obviously, you know, we are seeing a lot of pressure on consumer discretionary, where there's a tremendous focus on value, and Etsy has much more difficult comps than most. Starting with comps, our CAGR from pre-pandemic, our five-year CAGR is, on GMS is 25%. Amazon is 11, Wayfair is five, eBay is - 5. So we're just in a completely different zip code. Said differently, tens of millions of people came to Etsy during the pandemic, because they had very few other places that they were able to shop. And all of... You know, virtually, all of them are still shopping with Etsy today. We had about 92 million active buyers last quarter on a trailing twelve basis, which was at or slightly above our pandemic peaks. And those active buyers are spending about 25% more with Etsy today than they were before the pandemic. So we've been able to retain the buyers that we gained through the pandemic and grow GMS per active buyer. Now, GMS per active buyer is down slightly from where it was during our pandemic peaks, as people have felt macro pressure. But, but we're proud of the fact that people who came to Etsy during a time of scarcity continue to come back now, when they have so many other choices. And we're at a point where macro pressure is tough, where, grocery is taking up a much larger part of people's wallet than it has been in a long time. Gasoline prices are up, and of course, rent or your mortgage costs are much higher. That leaves a much smaller share of the pie for discretionary purchases. And so what we're seeing growing in e-commerce right now are everyday essentials, and particularly, everyday essentials at bargain prices. So when you look at, you know, for example, Walmart, who's posting, you know, good growth overall, is saying the growth is coming from their grocery segment, and discretionary goods are actually down in the low single digits. We're seeing that across the industry. We are bound and determined in this time to focus on the things, not to compete in a race to the bottom on price, 'cause that's not where Etsy wins, and it's not where Etsy should win, but rather to lean into what really makes Etsy different, and to lean into creating an even more engaging experience on Etsy. I'm sure we'll talk more about it, but I think there's tremendous value for us to unpack from that. Josh, the macro point's well noted. From factors you can control on the product side, what are the top few buckets that you're excited about that helps GMS growth get back on track? Because obviously, investors are always asking the question of, of what's next, right? Yeah ... Looking ahead. Absolutely. So we're very focused on consideration, we're very focused on reliability, we're very focused on providing a more engaging and, and an exciting, experience. And so on consideration, for example, what are the moments in your day that should cause you to think, Etsy is the right answer for that? People love Etsy. Ask someone, "Have you heard of Etsy?" And now in the U.S. and the U.K., nearly universally, people will say, "Of course." And if you ask, "What do you think of Etsy?" Virtually everyone you talk to is going to say, "I love Etsy." That's incredibly precious and very rare. But when you think, when's the last time you shopped on Etsy and why, what makes you come to Etsy, they're usually gonna say, "I can't remember exactly, and I come for..." And then they're gonna name a very specific thing. "I come for my son's birthday," or for, you know, "I come every year, at this one, date."... So giving people more reasons where we are top of mind, to think of Etsy, we think is important. Gift Mode is a great example. We think that the average American spends about $1,600 per year on gifts. That's a $400 billion TAM for gifting alone. We think Etsy participates in about half of those categories, so part of that is dining out or cash gifts, or entertainment. That's not us. But the other half are physical gifts that Etsy competes in, and that's about a $200 billion market. We think we have only 1% of that market share today, and we think Etsy is uniquely well-positioned to win in gifting. When you give a gift to someone else, it's high stakes. You know, it expresses your sense of care for that other person, and saying, "I bought it on Gift on Etsy," is something you can be really proud of. It's also true that with 115 million things for sale on Etsy, we almost guaranteed have that perfect special thing that speaks exactly to the person. So the opportunity is, how do we create a search experience that's easy to buy for someone else? Inevitably, you know that person less well than you know yourself. Often, you're buying for someone where you only know one or two things about what they like. So creating a discovery experience, that's good, but also creating a fulfillment experience that's specifically designed around the needs of gifters, we think is important. And so Gift Mode is something we just launched in February. We're very encouraged by early results. We shared in the first quarter that gifting grew at Etsy faster than the rate of overall GMS at Etsy, and significantly faster than our pure-play gifting peers, and we're just starting. Reliability is another opportunity on Etsy. We said we're gonna shorten the time it takes packages to arrive on Etsy by at least two days this year, and we're off to a very good start. And we can do that without making the experience on Etsy any less special. How are we doing that? We're getting even more precise in estimating shipping times. Exactly how long is it taking right now to get a postal, a package from this zip code to that zip code? Prioritizing in search, things that are located closer to you, that are gonna arrive faster and be cheaper to ship, as an example. And most importantly, elevating on Etsy, the things that are most unique, most special, curating Etsy to show you really interesting views of different types of inventory. And something we haven't leaned into a lot over the past years, that I think there's a huge opportunity for us to lean into more, is lateral discovery. Showing you things you didn't ask for, and in fact, didn't even know to ask for, never thought to ask for. I think there's a huge opportunity for us to do that in Etsy in a way that is uniquely entertaining and engaging and inspiring, that's fun for you, that triggers you to think of, Oh, I didn't even think of Etsy for these categories. It leaves us breadcrumbs to know, oh, this person's actually interested in this and that and the other, which allows us to make the experience more personalized each time you visit. Just on the concept of specialness, this is probably a throwback to the type of question you would have gotten in 2017 or 2018, but do you think that that specialness can, in some ways, limit how big the business gets over time? And I think you said it before, and I agree with you, consumers don't start a shopping decision thinking I necessarily want something handmade, right? They're shopping for an occasion. And at certain points in time, you might end up competing with more branded product, non-handmade products. Are consumers in some ways, or is there a challenge in some ways, where consumers are saying the commoditized product, the branded product is good enough before it shows that trade-off? Yeah. So, first, thank you for that question. I love that question because it speaks to... It's difficult for us to size the TAM on Etsy, because what is special? So, a purchase I bought very recently on Etsy is a dog food scoop. So my dog, Bonnie, is overweight and she's, poor girl, not just been put on a diet. And I could go to Amazon, and I would buy a utilitarian metal, three-quarter cup scoop. But I went on Etsy, where I got a scoop that is, says Bonnie on it, and we get to pick the color schemes, so it's color schemes that matches our kitchen, and we think it's cute. Is dog food scoop, scoop special? It depends. Some people could give a hoot, and they just want a cheap scoop, and some people love the idea that the scoop has the dog's name on it and feels personalized, you know. And that, times 115 million, is Etsy. Any item could be special if you want it to be. And so for many people, when they're out in public, they love the fact that they're wearing earrings that no one else has ever seen before, and they get compliments on them. When they go into your home, you've got a throw pillow that no one else has seen before, that isn't for sale on West Elm or Wayfair, and your friends compliment you. And when they compliment you, you say, "You know what? I bought that from a seller in Turkey, and her family's been making this textile for three generations. And let me tell you a little bit about the fabric that she uses." The fact that everything comes with a story is compelling, it is special, is exciting. So what we've got to do is elevate the parts of Etsy that are the most special, the most different, to make sure that the best inventory gets to the top, and that people understand that story and do more storytelling with it. And I think with all the advances in AI and more video in our experiences now, I think there's a huge opportunity to do that better. One of the things we're doing right now that I am very especially excited about is we're evolving the way the search works. We've been very focused on search over the past number of years to focus on relevance. So when you ask for something, we give you what you meant, not what you said. Search for dog scoops on Etsy, you're gonna get dog scoops, not anything else. Search for, by the way, wedding dresses, you're gonna get wedding dresses, not wedding dress hangers... which is a really hard thing for a search engine to understand, and only using the power of things like GenAI, do we now understand the difference. But what we haven't had before is a real quality score to balance that. We have thousands of items that are so similar in relevance according to our search engine. So instead of having our sellers try to earn prominence through keyword stuffing, if you're a seller on Etsy and you Google, like, "How do I get higher ranked on Etsy?" You're gonna see 10 YouTube videos about keyword stuffing. That's not what we want. That doesn't make the buyer experience better. It actually makes the buyer experience worse. Ship on time. Have a fair shipping price. Always get five-star reviews. Respond to customer convos very quickly. Include a handwritten note. These are the things that customers care about, and when we can transparently surface quality scores to our sellers in their dashboard, "Here's how we rank the item quality of each of your items, and here's how we rank your service quality overall as a seller. And the better you do on these metrics, the more you earn your way to prominence in search," that's how we elevate the best of Etsy. That's how we make a uniquely human buying experience, and we create a race to the top that's not only better for sellers 'cause they have more agency, but it's better for buyers as well. That's something we're very hard at work on, and I'm very encouraged and optimistic by the opportunity there. How much of an undertaking is that? We have today a black box search engine, and so what it's trying to do is, for every search query, look at 115 million items, pull the, let's say, 6,000 or so that it thinks are most relevant, and then rank from 1- 6,000 your likelihood to purchase each one. That's at a very, very high level how Etsy works today. It's black box, it's magical, and it works pretty well. We've got to create an understandable and explainable search engine that works almost as well. So factors like, do you consistently ship on time, and do you consistently get five-star reviews, influence search in a really meaningful way. And it doesn't need to be as good as the black box model because as soon as we can start to explain and make sellers' scores transparent to them, they'll raise their game in the areas that they need to, and that will make the buying experience better, will drive more frequency, and that will offset any loss in the benefit of an explainable model versus black box model. But first, the model needs... the explainable model needs to get good enough, and we need to be able to start to explain to sellers how it works and train them. So it's gonna be a bit of a journey, but it's a journey we're very focused on right now, and you should expect to see progress this year. Does it roll out in phases and tests? How does that work? That is how we normally do things, is we roll things out in phases, we test things, we learn what works, and also we need to bring our sellers along, and we need to bring our buyers along, and so you usually see us, iterate. That has been very beneficial to Etsy 'cause we learn a lot, but there's also limits to it. So Etsy, over the course of six and 12 months, gets a lot better, but we do it usually in hundreds of small increments that aren't necessarily newsworthy or notable to sellers. We think that there's limits to that. So the launch of Gift Mode this year was an example of Etsy doing some things differently, saying, "We're gonna package together a number of big features." We normally would have taken Gift Mode and broken that out into 40 pieces, tested every single one of them, and launched them iteratively. Then we would have launched a marketing campaign where we could have tested every single piece of the marketing campaign. What you lose in that is having a big moment to buyers to tell them there's something about Etsy you didn't know. You think you know Etsy, and you know you love Etsy, but there's things that have happened since you've last been on Etsy that mean you should come back more often. This idea of more sort of big bang releases is something that we think is an opportunity for us, and Gift Mode was an example of that, and you should expect to see us do more of that. So, we're gonna continue to do some iterative releases where we think that makes sense, but we're gonna do some more big bang things as well. Maybe coming back to different vectors of competition or your competitive positioning, I think about Etsy as really emphasizing selection and assortment as one of the key value propositions. Other ways e-commerce players do this is leaning into convenience via quick delivery, leaning into pricing. Is there room to do more on some of those other vectors of value, of convenience? I think of, you know, the surfacing of the Deals tab. You're talking about shortening delivery windows. I mean, when you evaluate where to put money to work, does it make sense to, for example, subsidize expedited shipping for sellers or think outside the box a little bit on some of these other vectors that maybe historically have not been top-of-mind focus for Etsy? Yeah, what we said, you know, coming into this year actually, is reliability and convenience are a big focus this year. So for example, shortening times for packages to arrive by two days this year, where we're already making very good progress on that, as I've talked about. Shipping price is a big deal, and making sure that sellers set shipping prices that are acceptable to buyers is very important, and that is something that is a focus of ours, and you should continue to see us focus on and make progress on this year. Adding more shipping options, so things like Priority Mail and faster shipping options. We've actually been quite focused on that over the years, and there's a lot more shipping options on Etsy so that you can have packages arrive... You can pay for faster shipping if you so choose. That has been a big focus of ours as well. Getting you through checkout better, making sure that you feel comfortable in the return policy of Etsy, making sure you feel confident that if something goes wrong, we have your back. These have been very big focuses of Etsy. So, for example, we launched Etsy Purchase Protection about a year and a half ago, where we really have made it much faster. When something goes wrong, you get your money back much faster, much more easily, and we think that is important and builds confidence, builds reliability, and builds frequency on Etsy. So we definitely agree that those levers are very important. They are table stakes. We don't think we win. We don't win on shipping faster than Amazon. We don't win on shipping cheaper than Amazon. And in fact, Amazon's strategy, and everyone who's trying to chase Amazon, are built around warehousing their inventory. Most products on Etsy are not made until you buy them. That is different. We couldn't warehouse if we wanted to, but that's also incredibly cool. It means that you love that dress, but you want it short sleeve, but not long sleeve. The seller can do that for you. You want that dog scoop to be orange 'cause it's Etsy and you love Etsy. We, we can do that for you. So we have a unique set of advantages. It also means that Amazon's advantages or Walmart or pick your poison, don't work against us because they're not designed for made to order, customized and personalized. That's our space. So we've got to be uniquely good at sending packages from 7 million different points of presence, 7 million sellers' homes, to 92 million buyers. It's just a different set of capabilities that we've got to lean into. But as we get better and better and better at that, we think we build a moat. How do you move Etsy up the consideration set? One of the things I heard you say last week that stuck with me is that, you know, historically, the business has been more focused on in-session conversion. Consumers come to Etsy after they can't find something elsewhere. Again, is it, is it predominantly through branding and, and marketing? Is that the, the core strategy there? You know, marketing is certainly not a cure-all. It's got to be the product that delivers, and then marketing can amplify. So we've been very focused on in-session conversion at Etsy, and it's worked. It's brought a lot of gains. It's made the buying experience on Etsy a lot better, but there are limits to that. So every squad at Etsy is goal based on producing extra GMS. Almost every, not every. There are some that are goal on cost reduction, there are some that are goal on revenue, but most squads at Etsy have been goal on GMS. So every month, what have you shipped that drives more GMS on Etsy? And that's largely been a good thing. But if you think about what's gonna drive more GMS in this session, it's usually showing people versions of the thing they bought most recently. If the last thing I bought on Etsy is a dog scoop, you'd think the last thing I need is another dog scoop. I just bought one, right? But it turns out, statistically speaking, the most likely thing someone is gonna buy is the thing they bought last. What that might mean, just to use example numbers, is, let's say 2% of people normally buy something, 2.2% of people might buy the thing they bought last. So if you're trying to drive in-session conversion, show them lots of versions. But what does that mean to the other 97.8% of people? They think, "Oh, this is a site that only sells dog scoops," or, "Maybe this is a site that only sells pet products. Etsy is for pet products." And in fact, we have a big opportunity to show them, what about home furnishings? What about jewelry? What about baby goods? If you have a pet in the home, you very likely have a family, right? And so what else might we show you there? And we haven't been as focused on that because that hasn't been core to driving in-session GMS, but we actually have incredible strengths in that. We have 7 million creators who create things. We have so many interesting, unique items, things that are weird, things that are wonderful, things that are unbelievably value-priced at this moment because a seller's trying to clear out her inventory, or things that are really the hottest new item from the hottest new seller. And so the opportunities to surprise you, to entertain you, to engage you with things you didn't come to Etsy looking for, is a big opportunity for us, and it's not been a focus historically. Now, dedicating screen real estate to that may come at times at the expense of GMS. But in terms of lifetime value for a buyer, showing her things she wasn't expecting, seeing the things she might favorite from that, seeing things she might dwell over and learning, aha, this person does appear to be interested in home furnishings or in clothing or in jewelry, is a fantastic breadcrumb for us that's gonna allow us to then feed more of that and engage her more. So I'm incredibly optimistic about the opportunity for Etsy going on offense, in being, an entertainment site and not just a shopping site. Why hasn't there been more progress to date on that cross-sell? It's something I, I feel as a shopper on the site. I, again, as you said it, there's so much room to introduce me to categories I wasn't shopping in before. Is there a historical data hurdle? Is there a technical hurdle, just time and resource allocation? How do we think about why that hasn't been the experience to date? Yeah. First, we are a small and scrappy team. We are not a large team, and we've always embraced scarcity and efficiency in a way that I think is great. Pick a few things and try to be great at those, instead of trying to boil the ocean and try to do a lot of things. And I think that has led to very profitable growth and some of the highest profit margins in the industry, and we are very proud of that. And the operating model of Etsy has been very focused on driving GMS, and I think we've done a lot with that. I think it's yielded a lot of benefits. It's made Etsy a much better shopping experience, but I think we've reached the limits of that. I think there's a lot of opportunity for us to unlock new growth, and there have been data limitations. When someone comes to Etsy and they've only searched for one or two things, you know, we just don't have a lot of data, and so we got 115 million things for sale. So the needle in a haystack problem of—you know, you can guess, if, but if you're only gonna show someone 10 things and you know relatively little about them, what are you gonna choose? Is an interesting challenge. GenAI is making that a lot better. Advances to things like, you know, TikTok has been learning a lot about that, and they've published some things about what works in their recommendation algorithm. So what might you wanna show people in a world where you don't start. We have a cold start problem of we don't know that much. The industry has made a lot of advances in that. Understanding, you know, the inventory on Etsy, one of the coolest things about Etsy has been one of the challenges. There's 115 million things, and they don't map to a catalog. So what is this? What other items might it be related to? What does it say about your taste and style generally? The fact that you like this lampshade, what does it mean about what type of shirts you might like? That has been a computer science problem that had been beyond our reach five years ago, that I think is very attainable today. And so I think, you know, advances in search, and we've invested a lot in our data infrastructure and our search infrastructure over the past 5 years, 6 years, to be much more ready for that, I think, makes this now a problem we are very able to solve, where we were less well positioned three and five years ago. Are there more effective ways to push new things to the consumer, such that they're not, you know, actively pulling or searching themselves? Because they might not know to search that item in the first place. So how do you push it to them and create that demand before they even realize they need to be the ones looking for it? That's exactly it. And so, you know, if you think about... A lot of our focus has been on getting you to the thing that you want on Etsy, which seven years ago didn't work very well at all. You know, and it was just a really hard problem. We've made so much progress. What that means, though, is today, too often, consumers go everywhere else, and when they can't find it, they come to Etsy. When they come to Etsy, we're gonna have it. You're looking for coffee table that fits this exact space in your living room, that's a weird shape, we got you covered. But we want the beginning of your journey, not at the end of your journey. We wanna fight to win all of those purchases, to decorate the whole living room, not just do the one obscure piece. And by the way, when we complete the look and show you what else we can do, we can blow you away with the quality, the beauty, the originality, and the value of items for the whole living room. And so that's where dedicating real estate to engage you in things you didn't come already asking for, I think is a big opportunity for us. We are gonna need to dedicate more screen real estate to that at the expense of other things that are sort of tried and true, proven GMS drivers, but I think it is very likely to build, yield very significant fruit, not just in, in that session, but in, really driving a lot more frequency over time. That's a good segue, then, to how you think about the opportunity within frequency. Three times a year, which is the current threshold, is not a lot. You do get a lot of traffic, though, so clearly consumers are searching for things. How do you drive that up, and what does that look like in the future, in your mind? What, what would be, what's kind of the end goal on where frequency can get to? Yeah. So, I think when I first joined Etsy in 2017, I think about 60% of people shopped one time a year, and about 40% of people shopped more. I think we're more than half of people now shop more than once a year, but let's call it half of people now shop once a year. So a 10 percentage point improvement in one-time shopper is significant. But there's a lot. When you talk to those one-time shoppers, they really think of us for, sorry to pick on dog scoops, but dog... You're the place I go for pet products, right? And/or it's, You're the place I go for my mother's anniversary. They have one occasion each year. They think of us very narrowly. So exposing them to a lot broader view of Etsy, we think, is a big opportunity. For the half that buy more than once a year, they buy on average about five times a year. And when we compare ourselves to eBay or other companies that have a relatively broad selection of merchandise, we think 5x a year is too infrequent. We have a lot of opportunity to serve them better, and that's where, again, I think understanding more all of their different purchase categories and their tastes and preferences, and then doing things like getting them on the app. Our app penetration is lower than many of our competitors. We have an opportunity to drive more app utilization. Once they're on the app, expose them to a broader range of things, drive favorites, and have them... Once we understand what they favorite, that gives us a breadcrumb to drive push notifications, to tell them, "Hey, items from sellers you've favorited have recently gone on sale," or, "Sellers you've favorited have new items in their shop," or, you know, "We know you like this. Here's other things you might like." We've not really been focused on driving favorites in the past few years. We've been very focused on driving sales. Favorites compete with the buy button. When you get someone to favorite, it competes with the buy button, but it also gives you a lot of really good information we can use later. So that cycle of driving more people to use the app, expose them to a broader set of things, have them leave more breadcrumbs, use that to drive push notifications, to have people come back again and again and again, is a lifetime value cycle that we have not been as focused on over the past number of years, that we're very focused on now, and I think can drive a lot of, a lot of lifetime value. On active buyers, we've seen an interesting dynamic in the last couple of quarters, where the reactivated buyers are starting to outstrip the new buyers. It's a small difference, but it is a new trend. Are we at a tipping point now, where you think the buyer growth composition is driven more by reactivation of lapsed buyers versus new buyers? So Etsy acquired, I think, about 5.7 million new buyers last quarter, which is up actually 30% from before the pandemic. So even now, after all these people adopted Etsy during the pandemic, we're still acquiring more new buyers in a quarter than we were pre-pandemic, but I think we had about 6.3 million reactivated buyers last quarter. We've got a pool of about 100 million reactivated buyers. Now, when we reactivate a lapsed buyer, their spend over the next 12 months is about 40% higher than a new buyer. The tactics, though, are largely the same, to reactivate a lapsed buyer or to acquire a new buyer. What I focus on is only about one out of every three women in the U.S. and U.K. shopped on Etsy in the last year. Only one out of every ten men in the U.S. or the U.K. shopped on Etsy in the last year, and that's in our most penetrated markets of the U.S. and the U.K. We have a huge-- If we've got something for one out of every three women in the U.S. and the U.K., we've got something for the other two-thirds. They just haven't thought of us. So we think we've got a huge opportunity, be it new or reactivated. Frankly, I'm less concerned. The point is just get them on Etsy, get them shopping, and then get them shopping more. We think it's early days in our most penetrated markets of the U.S. and the U.K., and there's a long tail of many other valuable markets like Germany, like France, and the rest of Europe, Canada, where we think we can drive a lot more penetration as well. How do you think about buyer growth coming out of those more established markets, whether it's new or reactivated? What should the U.S. and U.K. businesses be doing from a buyer growth perspective, or is it increasingly about international now and just that user base growth? So Etsy is today the second most popular pure-play e-commerce site in America. If I'd said that in 2017, you would've thought I was crazy, that Etsy would be the second most popular, and now we are. For those who thought Etsy was about as big as it could be, and it's this sort of twee, niche-y Brooklyn thing, only Amazon had more active buyers of the last 12 months for a pure-play site. I think Walmart might have had more active shoppers than us, not a pure-play e-commerce. But, we are now more commonly known. We have a lot of opportunity to continue to drive penetration. As I said, even with those numbers, two out of three women in the U.S. in the last 12 months didn't shop on Etsy. Nine out of ten men didn't shop on Etsy, but we are a lot more popular. Our brand is a lot more known and loved. Why does that, and we have opportunity to drive frequency, but why does that matter? I believe e-commerce will consolidate over time. I do not think we're going to have thousands and thousands of independent, standalone e-commerce sites. Why? Because people can only remember so many brands, and if they can't remember you, they have to go to Google or Meta or whoever to find you, and all the economics are going to flow upstream. And so in order to drive a profitable, scalable, growing, sustainable business that means something for a long time, you've got to have a brand that stands for something truly different and does it often enough, as in important enough, for you to commit it to memory. How many brands can you really remember and commit to memory? Most people come to Etsy for free. We'll talk a lot about paid traffic, but most of our GMS comes from free traffic, from people who show up on Etsy because they think of us and love us. We stand for something truly different. That is incredibly precious real estate. So we are bound and determined in this moment, when everyone's talking about value, and they're deeply focused on promotions. We'll do some of it 'cause it's tone deaf not to. If you go to Etsy right now, the homepage says, "Etsy items 30% off." We have a lot of sellers who are willing to sell things for 30% off. We'll do a little bit, but that's not where we win. We're going to use this moment to lean into what makes Etsy even more different, what makes Etsy even more special, to bring the very best of Etsy to the top and be really engaging, because if you look forward five years and 10 years, I'd be willing to bet any amount of money there are fewer e-commerce brands, not more, of any level of scale. And if you are one of those few places, you've got something really, really valuable. Almost everyone in e-commerce is trying to sell you the exact same skill. They're just trying to ship it faster, sell it cheaper. So there's, whoever it is, trying to compete with Amazon, there will be a race to the bottom, and then there's Etsy, and we do something genuinely different. I think there's always going to be a role for Etsy, and I think that role is going to get bigger and bigger and bigger in time. Does the growth of your U.S. business dictate the pace of investment for some of the newer markets that you want to be in? Because you obviously have an excess margin that you could spend, but I guess it is always this balancing act. I'm just wondering if the U.S. is in a tougher spot or slower growing for a period of time, even if it's cyclical, to what degree do you want to spend through that? And, you know, 'cause you're earlier on the S-curve in some of these markets abroad, you could make the discretionary decision to spend through it. Obviously, that comes at a bit of margin expense, but how do you think about that? Yeah, I mean, first, we have a wonderful business model that's very asset light. So we have-- In the core business, we have EBITDA margins around 30%, and that EBITDA converts to free cash flow at about 90%. We're very capital light. We have chosen to-- We've never been a growth-at-all-costs company. We've chosen to always very much focus on profitable growth. And so as we've expanded in Europe, we have largely focused on leaning into performance marketing channels that have relatively short payback periods, where we can drive ROI almost right away. I think that the big opportunity right now for us in Europe is to make buying loc-- buying from across Europe feel like buying locally. So we have now a reasonable amount of supply in the U.K and in Germany. How do we make buying in France or buying in the Netherlands or buying in Spain feel like you're buying locally, even if it's coming from the U.K or if it's coming from Germany or if it's coming from Poland or other places? We're right now in active dialogue with a number of logistics partners, trying to find some partners that can make shipping cross-border faster and cheaper. We have a wonderful example in Turkey, where there is a logistics partner there that has been able to really get products from Turkey to the U.S. quickly and ship cheaply, and Turkey suddenly shot up as one of the top supply markets to the U.S.. They build beautiful product in Turkey. It's artisanal. There's a lot of heritage of craft there, and it's really compelling, the price for what you get. It's a great example. So we're taking that example and saying: How can we do that more across Europe? And I think by doing that, we can unlock a lot of growth there. Putting all these different initiatives together, when you think about what this business should be growing at in a more normal macro environment, I know you haven't given explicit guidance. I'm not trying to get that out of you beyond 2024, but my broader question to you is just: Would you be disappointed if this was not returning to a double-digit growth business as you look out? So without giving long-term guidance, I believe Etsy can and should grow faster than e-commerce over time. I think we can and should grow faster than e-commerce over time. Right now, that's not true. Now, when we look at e-commerce, what we're seeing is the categories that are growing in e-commerce are things like online groceries, things like travel, categories that we don't compete in. We have shown each quarter, Etsy versus our pure-play competitors in home furnishings, in jewelry, in apparel, and we believe we are holding or gaining share in most of our categories against our pure-play e-commerce. So the categories in which we are competing are under pressure right now. Cycles are just that, and I'm old enough to not have any hair anymore. I've been running businesses now through three significant macro cycles, and don't get too exuberant at the top, and I think we were very careful during the pandemic days to not get too exuberant and not start over-investing. Don't get too despondent at a tougher time in the cycle either. Keep your eye on the prize, and that's what we're going to do, keep building a business, which I think is going to be a much more valuable business and a much bigger business in the future. Switching gears to the margin side of things, the team drew a line in the sand this year on keeping margins flat versus 2023. Part of that was the cost program late last year. Does that margin ambition get tougher in a tougher growth scenario? If that plays out, what can you still lean on to, you know, abide by flat margins on a year-on-year basis? Yeah, you know, revenue's grown for each of the past three years, but GMS is not. And in conversations with shareholders, they said, "Hey, your GMS is not growing, and we see margins decelerating." Off of an inflated pandemic, I will say, during the pandemic, you know, the margin structure there, we had very little competition to market and advertise and set unique things. But they said, "Hey, we're, you know, we would like to see you hold the line on margins." And that did not seem unreasonable to me. I'm also a large shareholder in this company, and that didn't seem unreasonable to me. And so we've said this year that we expect margins in 2024 to be at least what they were in 2023 under many scenarios. We can't predict the macro, and there's obviously, potentially macro scenarios, but assuming macro stays relatively in line with where it was. Part of that was a cost action. We did reduce headcount by about 12% in December of 2023. That brought us back to the headcount we had at the beginning of 2022. So it brought us back to where we were coming out of the pandemic. Given that GMS has been roughly flat to that point, that felt like an appropriate way to think about things. We have a lot of levers at Etsy. We are a largely variable cost model, and we've always been very disciplined. One thing that's been a pet peeve of mine is the notion of a year of efficiency and that being applauded. It's fine, but, like, every year at Etsy has been a year of efficiency. Every quarter at Etsy has been a year of efficiency. There's not been a quarter where we've said, "To heck with it, let's just spend and hope for the best." Like, that's never been a thing with us. We are proud of the fact that we have some of the highest margins of... Frankly, I haven't seen a marketplace business of our size and scale with margins anything like our core margins, and we're proud of that. We think scarcity brings focus. What are the fewest things you need to do this year to drive value? Let's just do those things. It's true that we haven't leaned into engagement in prior years. Okay, we're going to lean into it now, and we're going to drive a ton of value now, and next year, you'll look back and say, "There's some things we wished we'd done this year." Okay, fair enough. Next year, we'll undoubtedly have some new things we want to focus on as well, and we'll stop doing some of the things we're doing this year. I'd much rather do that than try to boil the ocean and have too many people trying to do too many things and not see real drive to value like we see and experience every week and month at Etsy. I was actually going to ask you the complete opposite question as a follow-up, which is: Do you feel you have enough people? Because you're talking about a lot of product initiatives. It seems like it'd be easier with a bigger engineering team. Maybe if Etsy was private, would you be thinking about it differently in terms of resource allocation and growing that engineering headcount to wrestle with those different challenges? You know what? We have $1.3 million of revenue per headcount. We're proud of that. We think that benchmarks super well, and we love focus at Etsy, the vital few. What are the fewest things you need to do? And scarcity is a beautiful constraint. I'm not sure... When you look at many companies that launch a big initiative with sort of large amounts of resource, I'm not sure those initiatives go better for having ample resource. You know, I think that having scarcity forces ingenuity. What are the fewest things you need to do to drive value? And I like that. I think the team likes that. I think the team embraces that, and I think morale right now in Etsy is very high. I think people are. We believe we're going to win. We believe this is another moment to prove the doubters wrong.... We believe we've got the right team and the right focus, and it's exciting. It's fun. No one ever pines to work for the bigger comp-- You know, like, I wish I worked at a big company with more bureaucracy and more people meddling in each other's decisions. And when you're small, you're scrappy. You can make decisions faster, you can ship things faster. There's a lot to be said for that as well. On the point of it being a very variable margin business, one of those elements is the customer acquisition cost, and it feels like it's been hit on a couple fronts. One is irrational spenders and performance marketing kind of ad auctions. At the same time, you are trying to build a brand, so there's more top-of-funnel marketing happening at the same time. How do investors get comfortable with the payback on the marketing spend, and how do we think about that? Yeah. So Q1, you know, we did a big launch around Gift Mode that included a Super Bowl ad, included creative TV cost, included some influencers and some things to really get the word out about Gift Mode, and we're happy with how that went. That was never designed to be a in-quarter GMS driver. So that, we, you know, we said was gonna make our Q1 marketing costs a little higher. As you know, we're very focused on rigor in our marketing spend, and how do we make sure that every dollar we spend delivers, you know, substantially more than a dollar of return for us? And we're always very focused on driving that. We have become a pretty mature marketer on Google, and I think that, you know, we're pretty good at Google Marketing. Considering with the theme of this talk, if you know exactly what you're looking for, you might put that in Google. You're gonna then see an Etsy result that, "Oh, that's exactly what I want." It's a very high intent search, drives you to Etsy, you buy something. It makes sense that that's the place that we would be best at. Things like Meta, things like YouTube, are much lower intent. Someone hasn't given us a keyword. We just know they own pets, or we know that they are participating in a wedding right now. That's an opportunity for us to get a lot better, where I think this idea of leaning more into engagement and saying, people are generally interested in this, and frankly, where GenAI can help us a lot. Organizing landing pages on Etsy, infinite numbers of landing pages. You're someone who's recently had a baby, so you're looking for onesies, and we need to organize that into zero and three months, 3-6 months, 6-9 months. You know, like, how-what is the taxonomy, times tens of thousands of categories, and how should we organize 115 million items on Etsy against that, would require a literal army of people if we wanted to do it manually, thousands of people. It's not been something we've invested in. This is an area where GenAI can help us, I think, immensely. To org- How would a human look at this inventory, and how would a human organize this inventory in a way that makes sense, is the kind of task GenAI is really good at, that we weren't able to solve before. That application against Etsy, I think, is uniquely powerful, and it can make the shopping experience on Etsy a lot better. I think it's also gonna help us become a better advertiser on places like Meta and on places like YouTube, that I think can open up whole new channels for us. Just on that baby onesie example, I mean, do you wanna just... Do you wanna reorganize, like, how listings show up in a very material way? Like, does that need to evolve and change? I think there's a real opportunity for search results to evolve. Right now, we just show you 30 items. You search for something, and you see 30 items, and they are ranked from 1- 30. The way our search engine does it, is it literally ranks from 1- 30. What are you most likely to buy? What that can show is too much redundancy. For example, too many things that look very, very similar, which is a huge cognitive load. Thinking about things like what would be a more diverse set of search results, and if we've got three things that are substantially similar, which is the best, and let's only show this. Or these three are different in this way, you know, and this one is cheaper, but this one is got a higher quality metal in it or... What would be a way a human would look at this and make sense of that? This is another area where GenAI can really help to explain why we're showing what we're showing in a way that reduces the cognitive load to people, increase the diversity of search. We may also want to organize search, so it's not just 30 listings, but maybe you're seeing, for example, carousels of, "These items are all digital, these items are all particularly artisanal, these items are print on demand," or different ways of organizing things and things that might make more sense to customers. Those are active experiments that are happening now in the business that are very top of mind? It's something we're very focused on, and you should expect to see us be making progress this year. Maybe in the closing couple minutes here, Josh, how would you just sum up the journey that Etsy is on? We covered a lot of ground today. What do you want to leave investors with? First, does anyone believe in e-commerce? Thousand brands people know, remember, and go to organically in the future or not? I think the human brain has room for, like, five, maybe 10. If you're one of those five brands, people really know, remember, and it stands for something different. Is that likely to be worth more or likely to be worth less in the future? I think we are going to become a much, much larger business in the future. I think when I look at the current macro environment, it's got headwinds. But when I look at the broader space, changes in AI, for example, changes in consumer shopping behavior, I think they benefit Etsy. I think they benefit Etsy more than most. So we are gonna be one of the brands that people remember. We stand for something truly different, and we're bound and determined to take this moment to lean into what makes us different, not to be the race to the bottom and do pricing and promotions like everyone else is doing right now. We'll do a little, but that's not what we're gonna do. We're gonna use this moment right now to create the next version of Etsy that you know and you love, and it stands for something different, and I think we're gonna unlock a ton of value. I get super motivated by this. This is the next chance to prove the doubters wrong. People that were at Etsy in 2017 and 2018 will always be able to be proud of the fact that very few people believed in us, and we're multiples the size we were back then. This is the next moment. Everyone who works for Etsy is gonna get to cover themselves in glory in this moment. Great. Josh, thank you so much for the time today. Thank you. We will leave it there. Thank you, everybody. Thank you. Thanks. Appreciate it so much. That's great. Thank you.