You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 26, 2021 (the "Annual Report"). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors." For more information regarding key factors affecting our performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Factors Affecting our Performance" in our Annual Report, which we incorporate by reference.




Overview

Business

Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers. Our mission is to "Keep Commerce Human," and we're committed to using the power of business and technology to strengthen communities and empower people around the world. Our primary marketplace, Etsy.com, is the global destination for unique and creative goods. The Etsy marketplace connects creative artisans and entrepreneurs with thoughtful consumers looking for items that are intended to be special, reflect their sense of style, or represent a meaningful occasion. Our sellers are the heart and soul of Etsy, and our technology platform allows our sellers to turn their creative passions into economic opportunity. We have a seller-aligned business model: we make money when our sellers make money. We offer Etsy sellers a marketplace with millions of buyers along with a range of seller tools and services that are specifically designed to help our creative entrepreneurs generate more sales and scale their businesses.


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We are focused on attracting potential buyers to the Etsy marketplace for everyday items that have meaning and those "special" purchase occasions that happen throughout the year. We are focused on deepening our engagement with our existing buyers by inspiring purchases across our many retail categories and special occasions. Purchases for use in the everyday include handmade or vintage unique clothing, accessories, household items, or furniture that the buyer wants to reflect her sense of style. Special purchase occasions can occur many times throughout the year and include shopping for occasions that reflects an individual's unique style; gifting that demonstrates thought and care; and celebrations that express creativity and fun. Buyers tell us that they come to Etsy because Etsy sellers offer items that they can't find anywhere else.


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The Reverb marketplace is a leading global online marketplace dedicated to buying and selling new, used, and vintage musical instruments, with a vibrant community of buyers and sellers all over the world. Reverb, a wholly-owned subsidiary of Etsy, Inc., is included in all financial and other metrics, unless otherwise noted.


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Our revenue is diversified, generated from a mix of marketplace activities and
other optional services we provide to sellers.
Marketplace revenue is comprised of the fees a seller pays us for marketplace
activities. Marketplace activities primarily include listing an item for sale;
completing transactions between a buyer and a seller, which includes, beginning
in the second quarter of 2020, an additional transaction fee related to offsite
advertising; and using our payments services to process payments, including
foreign currency transactions. Etsy fees include the $0.20 listing fee for each
item listed (for up to four months); the 5% transaction fee that an Etsy seller
pays for each completed transaction, inclusive of shipping fees charged; where
applicable, an additional transaction fee of 12% or 15% related to offsite
advertising; and fees for Etsy Payments, our payment processing product.
Services revenue is comprised of the fees a seller pays us for our optional
other services ("Services"). Services primarily include on-site advertising
services, which allow sellers to pay for prominent placement of their listings
in search results; and shipping labels, which allow sellers in the United
States, Canada, United Kingdom, and Australia to purchase discounted shipping
labels.
Our strategy is focused on growing the Etsy marketplace in our seven core
geographies and building a sustainable competitive advantage around four
elements of our business that we believe differentiate us from our competitors,
or what we call our "Right to Win." The foundation of Etsy's competitive
advantage is our collection of our sellers' unique items, which, we believe,
when combined with best-in-class search and discovery, human connections, and a
trusted brand, will enable us to continue to stand out among other e-commerce
platforms and marketplaces. Our investments in product, marketing, and talent
will be focused on capitalizing on these four elements of our business.
Ultimately, the goal of our long-term strategy is to drive more new buyers to
the website, give existing buyers reasons to come back more often, encourage
buyers to spend more per order, and fuel success for our sellers. We see a
number of similarities between the levers of growth for the Etsy and Reverb
marketplaces, including improving search and discovery, making selling and
buying easier, and building a global brand and user community.
While current macroeconomic conditions have had a dramatic effect on the global
economy and on our business, these impacts have led us to reaffirm our long-term
strategy and strengthen our commitment to it.
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