Etsy, Inc. (NASDAQ:ETSY) Q4 2019 Earnings Conference Call - Final Transcript
Feb 26, 2020 • 05:00 pm ET
[Operator Instructions] The first question comes from Edward Yruma of KeyBanc Capital Markets. Please go ahead. Your line is open.
Hey, good afternoon, and congratulations on a great quarter. Lots to unpack here. I guess first on Etsy Ads. I know one of the thought processes behind the legacy product was that you'd be able to pull back on SCM and spend more to top of funnel. I know that's part of the objective with the retool program, but help us understand. Do you think that you'll fund all of the SCM marketing today using the 15% you're charging in the new program? Or are you still expecting to kick some in as well?
Yes, great question. So the overall philosophy remains the same. That overall, sellers will take on primary funding for advertising their individual listing off-site, and that will allow Etsy to invest more in upper funnel things that only Etsy can do, like advertising the Etsy brand on TV or getting people to download the app or driving people to the homepage. In terms of the structure of the off-site advertising program in particular, we do anticipate that there will continue to be some subsidy of Etsy to the program. So the 15% and 12% fee will cover much, but not all, of the cost. And for example, if somebody clicks on a listing and doesn't buy, there's cost in that, and Etsy might absorb better that. And if they land on one seller's page and they end up buying from another seller. Those are things. But we think that, that's appropriate because if you think about it, it's the case that the seller makes an incremental sale, which is great and gets a happy customer that they might be able to resell to. But Etsy also has gained a customer. And so the idea that we are chipping in together with sellers to make this a great program, we think, is important. And we're really proud of this program. I do want to say that a 6% to 8% ROAS, we think, relative to what sellers would get if they had their own stand-alone shop is a really strong ROAS, and we take on the risk that the money they invest might not convert to a sale. And that's exactly the kind of thing that a platform can do, is pool the resources of the sellers together to deliver something that they each individually could never get on their own. So we're excited about this. We think it does deliver great value for sellers, and we think it's going to be really good for Etsy.
Great. And one follow-up, if I may. You hinted at some innovations or some work you're doing around Promoted Listings, or I guess, what you're now calling Etsy Ads. And then also we've obviously been impressed that you've grown as strong as you have over the past 10 quarters. I guess with these innovations, do you think it's likely that you continue