Hopefully better? Okay. All right. Good afternoon, everybody. Thank you for joining. My name is Nikhil Devnani. I'm Bernstein's US Midcap Internet Analyst, and it's a pleasure today to have Etsy CEO Josh Silverman and Etsy CFO Lanny Baker on stage with us. Gentlemen, welcome to the Etsy.
Thanks for having us.
Etsy is a global e-commerce marketplace. It supports close to 90 million active buyers, five and a half million sellers, and over $11 billion in GMS. Alongside this, it also owns and operates Depop, the fashion resale marketplace. We're gonna get into all of that in the conversation today. Before we get started, I just wanted to remind folks, please refer to the Etsy Investor Relations website for the safe harbor. If you would like to submit questions, please do so via the pigeonhole QR code and link. Josh, a lot has changed since you took over as CEO in 2017, so I guess you're approaching eight-year anniversary now. Congratulations. The marketplace is significantly bigger today, more profitable, but a lot of the questions you get today are focused on how does Etsy get back to consistent growth.
So maybe just to kick us off, can you spend a moment in talking about the journey that Etsy has been on up until this point, and what your main strategic priorities are at this juncture?
Sure. Thanks for having us. Appreciate it. Yeah. When I joined the company eight years ago, Etsy was doing about $2 billion of gross merchandise sales, I think less than $400 million of revenue, and was a break-even business. The question at the time was, people thought that Etsy was about as big as it could be, that the market for handmade was small, and $2 billion of GMS we'd maxed out. By the way, growth had stalled at the time. People thought, well, I guess you're about as big as you can be. If you fast for—oh, and, and there was a ton of concern about competition. Amazon had just launched Amazon Handmade, and everyone was very concerned that Amazon Handmade was gonna put Etsy out of business.
If I fast forward to today, Etsy's doing, you know, more than $11 billion of gross merchandise sales, over $2.5 billion of revenue, $750 million of free cash flow, and the world is concerned that Etsy is about as big as it can be and that we can't handle competition from Temu and Shein. I guess what is old is new again. If I'm gonna trace the journey a little bit along the way, in 2017, we had a lot of opportunity to just make search work better. You can think of Etsy as this massive collection of unstructured data, millions and millions of listings from sellers that are just, you know, unbranded sellers with unbranded items, and we don't have a lot of structured data about them.
There is a big opportunity to help make search work a lot better and make the purchase path work a lot better on Etsy. It was easier to find the thing you wanted and easier to buy the thing that you found. We did a lot of really good work such that if you know what you want and you get to Etsy, we're gonna do a good job getting you there. That re-accelerated growth. By the time the pandemic hit, we were doing, you know, closer to $5 billion of GMS. Suddenly, during the pandemic, and we had about 45 million active buyers, suddenly during the pandemic, the whole world needed things, knew exactly what they needed, and couldn't really find them almost anywhere else.
By the way, people had money burning a hole in their pocket 'cause the government's feeding you a ton of money. You're stuck at home. You can't eat in restaurants. You can't shop in retail. Amazon and Walmart are out of stock. If it's not, you know, toilet paper or hand sanitizer, they're not shipping it at the time. Etsy was one of the few places you could go where everything was working flawlessly. Whatever you needed, we had it. We, in about a year, went from 45 million buyers to about 90 million buyers and from $5 billion of GMS to close to $11 billion of GMS. Suddenly everybody needed things. They knew what they needed. They didn't know where else to find it. They had to go to Etsy.
I would say maybe 40-45 million people showed up at Etsy feeling like they shopped there 'cause they had to, not necessarily because they wanted to. Here we are a few years later, and, you know, virtually all of those buyers and all of that GMS is still on Etsy. If you'd asked me at the end of 2020 how much of this we would retain coming out of the pandemic, I would've said, and I said in earnings call after earnings call, I think a lot of this is gonna go away after the pandemic. Yet here we are having kept virtually all the buyers and virtually all the GMS. We're about 88 million active buyers at the end of last year, and again, over $11 billion of GMS.
While people came to us maybe because they felt they needed to during the pandemic, they've come back every, over and over since because they really love what we have to offer, and they've realized that it truly is something new and different. We've been at a time where people's pocketbooks feel incredibly tight. When they're shopping online, mostly what they're looking for is everyday essentials at very low prices. Places like Amazon and Walmart have been doing great 'cause they can sell you groceries or diapers at really low prices. Most of the growth in e-commerce over the past couple of years has been everyday essentials at very low prices. That's really not our sweet spot. Etsy items are highly discretionary items, and we're not always the lowest price. These are things made just for you or designed just for you.
They may cost a little more, take a little longer, but they really are special. Where we are today, I think we're proud of the fact that we've been able to retain so much of the growth, but we see a huge opportunity for us to grow on top of this base, by not just selling you the thing you already knew you wanted when you arrived, but by helping you understand, sparking new missions, all the new things we can do for you, and helping you in every visit realize there's, yes, we can sell you what you already know you need, but realize that there's a lot more that we have on offer as well. In doing so, to get to know you a lot better, make Etsy much more personalized.
Etsy is still not nearly as personalized as it should be, and it's not nearly as browsable as it should be. Really making Etsy a much more browsable site that feels much more personalized, we feel tremendous opportunity. The last element of that is making Etsy much more app-based. It's still the case that more than half of shoppers on Etsy are shopping on mobile web or the desktop, and we see a huge opportunity to drive more app penetration as well.
I wanna come back to all the things you're doing on the product front, but maybe before getting to that, Lanny, you've talked about you haven't given official full year 2025 guidance, but you've talked about how the year on year dynamics and GMS growth should get a little bit better as the year plays out. Can you just speak to why you believe that to be the case? I know product is part of it, but your overall thought process there.
Sure. Thank you for the question. As we look at the layout for this year, there really are three things that I would point to that give us reason to be optimistic about the ability to improve the year-to-year comparisons as we go through the year. Number one is the comparisons get easier as we move later into the year, certainly in the second half relative to the first half. The second quarter is our most difficult year-to-year comparison, and then things get a little bit easier, on that basis. That's kinda thin. And more substantial are really two major things happening on the product side.
Number one, last year we decided to take some of our squads who are normally working on driving the conversion and the discovery that Josh talked about a moment ago and put them on some more long-term holistic product experience infrastructure projects across the second half of last year. That came at some short-term GMS cost by rotating those teams from some of that quicker twitch growth hacking activity to some of that longer-term foundational work. Now, two things are happening as we play forward across this year. Number one, the benefit of that work on the infrastructure will gradually start to accrue into our product experience, into the product capabilities that we can tap into. That, we believe, will help enable us to drive improving GMS comparisons as we go forward.
Secondly, the teams that were diverted from that conversion work went back onto that shorter-term growth hacking work across the course of the first quarter. Between the start of the first quarter and the end of the first quarter, the sort of velocity of the experimentation and product release on those teams picked back up to the level that we normally have seen and maintained over the years. As we move across this year, you'll get a benefit of that work in the second quarter, stacking on top of it in the third and in the fourth quarter with some underlying benefit in that longer-term product work.
That longer-term product work is projects like our data project to synthesize the data stream coming off of search and recommendations and our advertising product and use that to better inform how we design high-converting personalized pages. The product work that we did is also on some of the app infrastructure to be able to manage the space available on the app page that does not necessarily drive conversion but gives us insight about personalizing the experience to that consumer to help drive conversion, not necessarily in that session, but over the longer term, driving loyalty and consideration. Those are probably the three primary things that set us up for the course of this year.
All that is to say, in the context of an economic environment that we have said those assumptions are assuming that the economic backdrop remains relatively consistent with where it's been through the time that we reported the first quarter.
On that last point around macro backdrop, everyone's seen the dip in consumer confidence in the U.S. consumer, at least the data points and surveys that have gone around. Have you seen any noticeable difference in how your customer base is engaging with your marketplace through this time?
What we said at the time of our earnings call is what I'll repeat today, and that is we haven't seen any market diversion, any break-in trends that's really notable, based on the economic conditions. I think one of the things you have to remember is that Etsy is a discretionary purchase in many, many instances, as Josh talked about a moment ago. And discretionary purchases have been under pressure for a couple years now, honestly. You know, while other parts of the economy might have seen, you know, some reaction in the shorter term, we've been under pressure for a while, and our trends have, at least through the time that we reported earnings, been pretty consistent.
April was all about tariffs. How do we think about the implications that tariffs might have on your business? I think you've talked about how the vast majority of Etsy is a local seller engaging with a local buyer, so you're somewhat more insulated than the average retail or e-commerce business. How do we think about maybe some of the indirect exposure that might be prevalent where a seller might be sourcing materials or merchandise from, you know, a foreign country? Do we have a sense for what that indirect exposure looks like at large?
You know, as you think about the impact of tariffs, I would start with two concepts, which is number one, our seller community is very, very broad, very, very deep, and has a lot of creative ingenuity behind what they are delivering to their stores and to their buyers. And we've seen this in the past in times of global e-shocks, whether it's pandemic or supply chain. The Etsy seller community has been really remarkably resilient and creative and flexible. That's kind of a really natural and wonderful characteristic of our marketplace. We're not inventorying, we're not making big purchasing decisions. We're a marketplace that tends to be really, really nimble. We have some fiat over how we can help the market adjust to those shocks. We're doing things proactively.
We have a small group of Etsy employees who are on top of everything that's happening at the forefront of the tariff news and everything that's changing almost day to day, week to week. We're then taking that intelligence out to our sellers and getting really good feedback from Etsy sellers about Etsy's efforts to enlighten them and inform them and to help them prepare for changes that are happening in the marketplace. On the consumer side, on the buyer side, we're doing things like where it's relevant, surfacing inventory that isn't subject to the tariffs or alerting people to modifying, you know, creating pathways within search to say, these are locally sourced items. These are in your home country. These are things that are not gonna be across some of those tariffed trade routes.
There's, we have control that we can exert on top of a marketplace that has some really great historical, you know, flexibility and sort of ability to self-heal in these shocks. Your question then went to, you know, thinking about our supply, our sellers and their sourcing and their exposure. I think that's a really difficult question for us to answer. Most of our sellers tell us that they source their raw materials locally, within a, you know, within 100 mi of where they are. You know, it's hard to say whether those locally purchased items, before they got into that 100 mi radius, did they start in China and come to that place, and will they be tariffed at? It's hard for us to have visibility down to that level.
What we have said is that about 1% of our GMS is American buyers buying from sellers in China. You know, that has been, if, impacted, but there's such a depth of sellers out there with, you know, replaceable items that can service into that. As I talked about, the flexibility of our marketplace, there you have about 25% of our total GMS is outside of U.S. to U.S. sellers. That would be people in the U.S. buying from Europe or elsewhere, or sellers in the United States shipping to Europe. The de minimis limits are not, haven't been changed for that European sale, and the vast, vast majority of our transaction activity is below the thresholds of the de minimis. I think you're putting your finger on the right thing, which is that secondary impact.
It's hard to, it's hard to call, but I think we have this flexibility I talked about to start.
One thing I would just add is we have some recent experience. I mean, in 2021, we all remember everyone became an expert on global supply chains, and we could all talk about what was happening in the Suez Canal and the Panama Canal, and we were tracking boats and cargo containers and all sorts of things. That was actually a tremendous tailwind to Etsy. There was about six months when things just could not move from the Pacific to the United States. It really was very helpful to our business, and we did not see any level of sort of out of stock on Etsy, nor did we see real price inflation.
In fact, in 2023, when the inflationary shocks hit the U.S., we also did not see Etsy sellers raising their prices at anything like the rate that others were raising their price. We do not have perfect visibility into our sellers' supply chain, but we have recent experience to suggest that they are likely to be much more resilient than the market to this. That is going to be, if tariffs stay, particularly tariffs against China, I think that is likely to be a real tailwind for Etsy, unlike almost all of our competitors. We saw when inflation spiked in 2023, that was a real problem for Etsy because when people feel like they cannot afford groceries, then they are hard-pressed to spend money on Etsy, on what they perceive to be highly discretionary items.
It's really hard to balance out the first-order effects of these tariffs on Etsy, which I think are likely to be helpful, and the potential second-order effect on does the consumer feel wealthy or poor and how that's gonna play out. It's just difficult for us to know how those are gonna balance.
Maybe a quick follow-up there. Have you seen any benefits? De minimis rules on Chinese imports have changed as of May. Have you seen any impact or benefits from that hitting your competition harder than it hits you?
You know, what I would say is the, maybe the first place one might feel it is in the auctions in Google PLAs, for example. And what I would say about that is it's a pretty robust and dynamic auction. There are many players in it. If one player leaves, Temu has pulled out of the auction. I think that's pretty well established. That's gonna leave a void that will be filled. Etsy will get some of that share, and others will get some of that share. Then you've got other big players that are moving in and out. You know, it's important to recognize that Temu or Temu and Shein are not the only players. These are very dynamic markets.
Other people, you know, for example, Amazon, Walmart, you know, come in and out of those auctions too in pretty big ways, and they're pretty meaningful. What I'd say is it's very dynamic, and it changes week to week. I do think that, you know, Etsy's value prop relative to the market will get stronger if we have tariffs against China. I think China has been abusing the spirit of the de minimis exemption, and a crackdown on that I think would be helpful not just for Etsy, but for many people. The de minimis exemptions were put in place for a very good reason. I mean, the spirit of the de minimis exemption is to help exactly Etsy sellers and people like Etsy sellers.
We are active in Washington, and actually I'll be in Europe just next week on something of a trade mission talking about de minimis as one thing I'll be talking about, but we do think it would be good policy for the U.S. and Europe to keep that.
Let's switch gears to product efforts. Josh, you've been talking about changes you've been making to search on the platform, improvements you've been making to that. Can you walk us through where we are on that journey and what some of those improvements have been? If you're starting to see any green shoots emerge and how consumers are engaging with the platform, retaining on the platform because of these efforts?
Yeah, absolutely. You know, as we entered, as we started to move through last year, we realized that the growth hackings, we came out of the pandemic, the team went into heavy, heavy growth hacking mode in 2022 and 2023. Part of how we were able to retain so much of our GMS is because of, I think, the very good work that the team did, growth hacking to just make sure that it was super easy to find and buy what you wanted on Etsy. As we entered 2024, we saw another year of growth hacking. We just didn't think was gonna be the thing that was gonna set Etsy up for success. Instead, laying some of the foundations of what most differentiates Etsy and leaning into what makes Etsy truly different was gonna be a better use of our collective efforts.
We really leaned into a few things. One, making sure we're elevating the very best of Etsy, the highest quality things on Etsy. Two, getting much better at laying the foundations so we could get much better at solving not just the mission you arrived for, but sparking new missions. In doing so, getting to know you better and teaching you more about Etsy so Etsy can become more personalized every time you visit. Three, driving a lot more people to the app. What I'd say is we spent the entire second half of last year laying the foundation for those things, and we were building the car. Now as we're entering 2024, as we're moving towards halfway through 2025, we're really starting to learn to drive the car.
On each of those, we built a quality score into Etsy search. It is Etsy, I am gonna talk about quality, I am gonna talk about personalization and app. On quality, you know, the search engine at Etsy has always tried to just figure out the thing you are most likely to buy. We built a quality score that says not just what are you likely to buy, but what is gonna be a delightful purchase. How do we elevate the items that ship on time where they consistently get five-star reviews? In doing so, how do we expose to sellers very transparently how they rank against the most important customer service metrics? The way for a seller to earn prominence in search is not just to stuff keywords into titles, but to deliver a delightful customer experience.
We introduced that quality score towards the end of 2024. It took a lot of work to re-engineer the search engine, and now as we move through 2025, we're making that quality score better and better and more robust. We've learned, you know, a lot about how to expose that to sellers. They're really changing their behavior and improving their game, and we're seeing encouraging signs. The percentage of post-purchase issues is, you know, going down. The percentage of five-star reviews is going up. The percentage of refunds is going down. All of these more delightful customer experiences, we think the best way to make sure you come back is to make sure that every single purchase is even better than you expected. We're certainly encouraged, and we're seeing green shoots on quality.
On personalization, we spent the second half of last year figuring out how to collapse a lot of our recommendations that were very backward-looking. Our recommendations were largely keyed off of the last thing you bought or the last thing you favorited. When you show up on Etsy, we're just showing you more of what you already know about Etsy. We spent a lot of time collapsing that screen real estate to free up a lot more screen real estate for really inspirational, here's what's cool, here's what's hot, here's what's trending, here's things you didn't ask for, but we think you're gonna like, making Etsy a lot more browsable. If you launch the Etsy app today, and I would really encourage you to do that, look at it compared to what it looked like six months ago, you'll see it's markedly different.
We now have a shop tab that's entirely focused towards browse, and about half of the home screen is really interesting browsable experiences. In particular there, we're leveraging Gen AI to do what we call, you know, curation, Gen AI curation. We'll have our merchandising team pick trends and then pick just 50 listings that represent the best of those trends. Then we can actually find several thousand more listings that have that same style and quality level. We can have many, many, many different browsable journeys. We're now, we've launched those experiences. Now we've gotta learn how to drive that car. What are the most engaging experiences of the ones that we've launched? What are the data they're generating that are most powerful for personalization?
How do we capture those data, put them into models, and make sure that every time you interact with Etsy, Etsy's becoming more and more personalized? I think this can be transformational for the frequency and scale of Etsy. It's not rocket science that no one else has solved. These are problems that TikTok and Instagram and Pinterest, for example, are very good at solving. Our opportunity is just to catch up to where they are. I think in doing that, we can make Etsy a much more engaging experience. Last but certainly not least, making the app the centerpiece of that. Less than half of our active buyers are using the app right now. We are underpenetrated in the app relative to our peers.
A big focus of ours over the past 12 months has been putting a lot more energy into driving people to the app. How are we doing that? For example, using mobile web, which has been a very common way people interface with Etsy, largely to become a billboard to drive you to the app. That has created friction in the experience. It has been a headwind to GMS in the near term, but doing it in a way that drives people to download the app, we know when people download the app, they become more engaged and the lifetime value goes up. We are doing it in a very thoughtful way, but we are really leaning into driving more people to the app. We are also starting to experiment a lot more with paid app download campaigns and other things, and we are encouraged by the result.
About 44.5% of our GMS on Etsy last quarter was on the app, our highest quarter ever. GMS growth on the app is significantly outstripping GMS growth off of the app. We had our highest levels of MAUs on the app. We are seeing encouraging signs of progress there as well and a lot more to come. I think, you know, we are in the early stages on all three of those, are really learning how to unlock the benefits, and I think over time they can compound in a very significant way.
A couple of follow-ups there, more around the timing of these initiatives coming to bear. If we start with the, the search dynamic, if you learn, you know, started building the car last year, learning to drive the car this year, when does the car start to, you know, go on cruise control, I guess? Like when, when do you feel like these improvements in search will drive an uplift in GMS for buyer or greater frequency? Do you think about that taking several months, several quarters? Just what's your expectation around that?
I mean, our philosophy on Etsy tends to be, we wanna get things in front of the customers as fast as possible and start to learn. We tend not to do sort of science projects where we go away for 18 months, we build something, and then we have a big bang launch. Rather, we break everything down into the smallest possible component, get it in front of customers. Speed to learn is the language we use inside of Etsy. All of these experiences now exist, and we are iterating. We have teams that are literally shipping every single week and learning from that.
I expect what we're gonna see is that these benefits will compound over time, but we're very focused on both getting as much growth as we can as quickly as we can, but also building the right infrastructure for these so that we do it in a way that's really scalable. Do we have the right data infrastructure, for example, to capture all the right data? What are the right models we should be using? Investing in getting more out of this generation of our data and our models, but also investing in the second generation. An example of some of the infrastructure we're building there, we're currently combining our search, ads, and recommendation teams and stacks into one technology stack.
What we're seeing is by combining those three stacks, we already have 33% more data to use to make both search and ads more powerful. It's taking some time and effort for the teams to combine those stacks, but we know that the benefits are gonna be well worth it. We always think about a balanced portfolio of how can we drive some near-term results, but also make sure we're investing in for the medium term.
To clarify around the data collection within the app or otherwise, you're obviously collecting a lot more data, as you talked about. Is that already layered into the recommendation engine, or is that still to come?
Still to come largely. If you look at, so first of all, if you go to the home screen on Etsy today, we've got really cool, I think, you know, again, I really encourage you, pull out the app, check it out, and you'll see there's about 250 different trends and inspirations, things that are hot and cool right now. Japan Core being one that, you know, is a hot trend right now, one of 250. If you go into that trend, what you'll be able to do is a relatively infinite scroll. There's thousands of items you can scroll. And it's really cool.
We've now gotta learn how to actually capture the data from that so that, you know, for every single person in this room and listening on the webcast, you would have a different experience because as you're browsing it, it's actually updating in real time based on what you're doing. That is not totally novel. I mean, TikTok and Instagram and Pinterest, for example, already do that, but we've got work to do to catch up. I think as we learn to do that, it's going to get better and then even better. The next time you visit Etsy, we've learned more about you and we've learned to make Etsy more and more curated.
The job of a retail boutique, if you go to Soho and you walk into a boutique, the job of that boutique is to have a point of view and say there are literally millions of pieces of clothing in the world you can buy, but here's just 50 that represent a particular point of view. If that point of view resonates with you, you're gonna love this little boutique. The job is curation. Etsy has 120 million things for sale. If you ask an Etsy buyer to describe Etsy, give us adjectives, love is almost always gonna be one, which is very nice, but overwhelming is almost always gonna be an adjective buyers use to describe Etsy.
The more we can take Etsy and turn it into a boutique that feels curated just for you, just in this moment, I think we have a tremendous amount to gain from this. The advances we're seeing in AI and particularly Gen AI, a lot of people have a lot to gain from that, but I think Etsy more to gain than almost anyone because we have such a massive amount of unstructured data. Gen AI is really great at putting context and structure around things that are unstructured.
One of the, I think, upshots of this could be and should be over time that the average customer buys from more categories because they discover more categories. Have you seen any change in that dynamic just yet, or is that something you even orient the business around trying to solve for?
It's something that we definitely focus on, and it's been a learning journey for us because historically we've thought of categories like home furnishings and jewelry and clothing. What we discover when we talk to our customers is they tend to think more in terms of occasions. Sometimes they're thinking in terms of categories, but oftentimes they're thinking in terms of occasions. I was talking to someone just yesterday, he was telling me about the amazing purchase he just made. It's his friend's 50th birthday and his friend loves golf. He came to Etsy just saying, "I'm looking for a gift and my friends love golf." He found a seller that hand paints on golf balls scenes from their life together. He got six golf balls that each golf ball is a different scene from something they've experienced together.
He's, you know, so excited about that. Technically, we probably considered that a sporting goods purchase, but I'm not sure that this person really thought of that as sporting goods, you know? Understanding there's a lot of different life events that people come on and how do we make sure that we get you from one life event to another. You know, gifting, for example, is a big push that we kicked into last year. We think Etsy is exceptionally well positioned to really win at gifting. We think we have only maybe 2% of the market for online gift buying in our largest market. Tons of room to grow. We built a bunch of features like a gift finder on Etsy and a gift teaser on Etsy to make the gift buying experience better.
That's an example, one example of us leaning into a particular occasion. Now I think the opportunity is not just to make those experiences better, but when you come to help you not just solve the need you have, I'm looking for a gift for my friend's 50th birthday, but to also inspire you with other occasions you can come to Etsy for. Father's Day is just around the corner. Have you gotten anything for your father yet? Or, you know, Labor Day, or you may be sending your kid back to school. This is, you know, a time to start thinking about back to school. And that's something where I think we are just such early innings and have a tremendous amount of upside.
I think that the product market fit with occasion-based shopping is quite intuitive with Etsy because you can customize things. Something we wonder about is how do you go from three purchase days a year to five to six purchase days a year and whether certain categories might require a different objective to solve for. What I'm hearing from you is it's a lot of product discovery and exposure, but I'm wondering if you think at some points in certain categories maybe something a bit more drastic might have to be done about the nature of inventory on Etsy. Is that even something to think about? You know, in my mind, when I think of home goods, which is a category you do very well in, people shop unbranded items in home goods all the time. The Etsy merchandise shines through.
When you think about apparel and a monthly use case for apparel shopping, people tend to buy branded merchandise. It's kind of a different set of inventory that people look for. I mean, do you think that what you have on the platform can service all those needs, or is there a role for a category-level approach where maybe certain things need to be a departure from what Etsy has done until this point in terms of just the nature of the inventory itself?
If the question is, would we consider bringing branded or mass-produced items onto Etsy? I don't think so. You know, never say never, but it's really important that brands stand for something. And there's a lot of places you can go if you wanna buy branded mass-produced merchandise. We're not gonna win and we're not trying to win in that. We wanna make sure that Etsy is truly an alternative to that. In clothing, I would agree with you. I would frame it slightly differently. I think Etsy is very good at loose-fitting clothing, and we are not particularly good at form-fitting clothing. You know, when you buy a Levi's size 33, you know exactly what it is.
We have sellers who make jeans on Etsy, and they do a great job, but, you know, it's harder to trust exactly how their measurements are gonna be. I understand that can be a challenge for some people. We're gonna stick with, you know, where we are truly different and special. There are just, you know, so many use cases in any given week. There are so many use cases to come to Etsy. Even with the inventory we have on Etsy, we can do so well.
If you, you know, own Etsy stock or, or if you're thinking about owning Etsy stock, I would really encourage just go look at everything you bought over the last 90 days and look at, go to Etsy and look at what percentage of those things we had something really compelling on offer that you just didn't think of. I'd be willing to bet that at least 60-80% of those purchases, we had an alternative on Etsy that now that you look for it, you find really compelling and you think to yourself, gosh, I really wish I would've considered Etsy for that. I don't think we lack for really compelling occasions and opportunities to shop on Etsy. Our challenge is consideration. I should have had a VA. You know, you don't think of us in the moment until it's too late.
That's where making the, yes, we can do more with advertising and marketing to help solve that. The main thing is the product can work a lot harder. Every time you visit, we do a better job inspiring the next visit.
In terms of getting active buyers back to growth, how do you think about the opportunity with newer demographics and newer international markets where you're less prevalent? Is this something where you could be more aggressive, or is the investment around it maybe constrained by what the core business or the core demographic and market is doing? Just trying to think about, could you be more front-footed in terms of expanding into newer parts of the world or newer demos, looking ahead to get that to grow again?
If we just look broadly, about one out of every three women in the U.S. and the U.K., our most penetrated markets are the U.S. and the U.K., about one out of every three women in the U.S. and the U.K. has bought something on Etsy in the last 12 months. If we have something for one out of every three women, we certainly have something for the other two-thirds. We just need to do a better job getting them, you know, on, onto Etsy. About one out of every 10 men in the U.S. and the U.K. have bought something on Etsy. I would make the same argument. We think there's an enormous opportunity to grow even in our most penetrated markets. We are still lightly penetrated. Much of that is lapsed users. We have about 100 million lapsed users.
These are people who have not shopped on Etsy in the past 12 months, but they have shopped on Etsy at some point in the past. The great thing about this population of lapsed users is they already know Etsy. They already love Etsy. The vast majority of our lapsed user base loves Etsy. When we ask them why you have not shopped recently, the answer is, "I just did not think of it," or, "I did not have a need." What they mean by that is there was not something I could think of that was so specific that I could not find it anywhere else. Our opportunity is to help them understand that we have something for you, even if you can find it somewhere else. The version we have on Etsy is better and more interesting, and you should consider us for that.
We think there's a huge opportunity continuing to re-engage this lapsed buyer base. By the way, it's very easy for you to do your own market research on this. You don't have to take my word for it. Just in any public space you're in, say the word Etsy out loud. I was just on Etsy, or what do you think of Etsy? I guarantee you that whoever's standing to your right or left will say, "Etsy, oh, I love Etsy," and will then go on to tell you some story of something they bought on Etsy and why they love it. We have a lot of love out there. Our opportunity now is they just don't think of us in the moment.
When we think about other markets beyond just the U.S. and the U.K., we see real green shoots and reasons to believe. For example, in Germany, Etsy is now a top 10 e-commerce site, and most of the trade in Germany is local. Most of the trade in the U.S. and the U.K., by the way, is local. It is a U.S. buyer buying from a U.S. seller. That is true in Germany as well, where we have quite a lot of supply. There is now an opportunity through the rest of Europe to drive more scale. We have been doing things like driving more local search, evolving our search engine so it prioritizes local items, and particularly investing in cross-border shipping.
It gets easier to ship from the U.K. and Germany, for example, to other parts of Europe where we have supply to have the supply meet demand. We have been very, very ROI-focused in all of our investments. We tend to look for marketing investments that we think are gonna pay off in a relatively near term. There might be opportunity in international to lean further into that in time and maybe lean in a little ahead of the curve, but it's not something we've done much of of late.
Lanny, maybe we could spend a minute on margins here. How are you thinking about the margin cadence for this year or overall? You have made some comments recently about, you know, a low 70s gross margin profile. Is that something you're still comfortable with? Some of the other puts and takes on that front.
Sure. Let me start by saying that, one of the, I think, great attributes of this business model is it is inherently a very high profitability business. The core Etsy business has operating margins or EBITDA margins that are several points higher than the overall number that we're showing right now. The overall corporate average is blended down by the lower margins that we're currently running at our Depop, and Reverb that has been consolidated, although we could talk about that business, which we are in contract to sell. The business has great inherent operating leverage in it. When revenue is growing, we have demonstrated over and over and over again, the flow-through of revenue growth down to the bottom line in our business model is great. It's an asset-light business with very low variable costs tied to the revenue growth.
Right now, GMS is not growing. We have done, I think, a really sound job in maintaining discipline around our operating margins and maintained great margin strength over the last couple of years while GMS has been under pressure from sort of after COVID and through this period of softer consumer discretionary spending. We have done that through some growth in our take rate and a lot of cost discipline. I think you should expect from us continued cost discipline. We are very, as I came into the company as a new CFO, I sort of did the natural walk the trap lines and understand where all the expenses are in the business. There are not big pockets of untended, unmeasured, undisciplined spending going on in this company.
We have all of our major contracts that should be centrally managed and provisioned and bidded out are like the state-of-the-art processes there. I feel really good about that. As we go through this year, what we've said is in the first half of the year, margins typically in our business are a little bit lower in the first half of the year than they are in the second half of the year. That relates somewhat to the seasonality of GMS with the holiday season at the back half of the year. What we expect for this year is that we will keep our, our intention is to keep our marketing expenditures as a percentage of GMS fairly constant with where they've been in the past.
If opportunistically, if we see room to spend more on marketing at an attractive return on ad spending, we will step it up. We expect to keep the marketing spending overall consistent with GMS from where it was last year. We expect a little bit of deleverage on the product side as we pursue so much of what you and Josh have just been talking about in terms of the investments in infrastructure and in our teams and our expertise and the product delivery pace that we have right now. On the cost of revenue side, we got a great step up last year in our gross margins. I think as we look at this year, we anticipate being able to maintain the progress that we made on gross margins last year throughout this year.
Think of our gross margins this year in the low 70% range. G&A is an area where we're always trying to keep the expenses under tight wraps and yield what leverage we can on that side of the business.
I thought the Reverb deal recently was interesting. When I first saw it, my thought was, is this something you would contemplate doing with Depop as well, which is a faster-growing asset that I think there would be a lot of interest in given just the appeal of the re-commerce sector as a whole. I'm wondering if that's something that you contemplate as an opportunity to free up capital or if this is an asset you would much rather retain for strategic reasons and long-term reasons. We'd love to just hear your thinking about how Depop fits into the Etsy vision going forward.
Yeah. Reverb, you know, really good management team doing a good job, but it was not a tailwind to growth and it was not a tailwind to margins. We did not really see that changing in the coming years. You know, someone approached us and it seemed worth more to them than us. We were willing to part with it. We measure each of our businesses differently. Depop is doing great. It is a significant tailwind to growth. I think that the diversification of our portfolio is paying off in this moment.
Where Etsy's been under pressure because there is, you know, consumers feeling like they don't have money to spend on discretionary income, the chance to buy branded clothing at a really deep discount on Depop or to make a little extra money by cleaning out your closet and selling clothing is a really great proposition right now. Depop is doing fantastic. You know, we're very happy with Depop and we consider each of these things on a case-by-case basis.
Yeah. I would just add to your question about freeing up capital. That's not a super high priority for us right now. Our business is generating a very strong free cash flow on a fairly consistent basis. And we think, you know, we see a good runway to continue to produce a strong amount of free cash flow. And we've been using that free cash in the near term to buy back stock. We have about $800 million left on our current share repurchase authorization. I believe we bought back almost $190 million of stock last quarter and close to $3 billion worth of stock over the last few years. We're, and we feel like we've got ample within our P&L, ample room within the P&L to continue to fund the investments we talked about here today, and keep the business going.
We would not look at Depop just as like a free-up capital exercise. It is more about the opportunity that we see there, the momentum that we have there. It is great momentum. The one other thing I would add is that is a business where more than 90% of the GMS is coming from the mobile app. It is really a mobile app-centric business. We have two top executives coming to Etsy who have spent the last three, four years at Depop and are coming back into the Etsy corporate leadership, in Kruti Patel Goyal and in Rafe Colburn, Kruti leading our growth efforts and Rafe as Chief Technology Officer. There has been a wonderful knowledge transfer first from Etsy into Depop and now Depop coming back into Etsy.
Are there any other additional synergies we should be thinking about besides the knowledge transfer component of it?
I think that's the primary one, but it's a huge one. I mean, you know, everything I've been talking about, making Etsy a lot more app-centric, a lot more personalized, a lot more browse-based, a lot more driving engagement. Depop's fantastic at that. You know, the turnaround in Depop and the growth we've seen from Depop comes from the fact that they're so good at recommendations and personalization. When we first bought Depop, we really helped them get their search to be a lot better. Now the knowledge transfer back to Etsy is very significant. I'm quite pleased with it.
Maybe switching gears a bit, Josh, you were, Etsy was named as one of the partners to OpenAI recently. And as you think about where online shopping is going and just engagement with the internet is going, it seems like Agentic AI could be a, you know, massive disruptive force to how we, how we use some of these services. So what is the opportunity you see with a partnership like that?
I am really excited about Agentive Commerce and what it means for Etsy. I will just note that OpenAI, Microsoft as operator, Microsoft Copilot, and Google Gemini have all featured Etsy prominently in recent launches as like one of their alpha partners. Why is it that some of the most important frontier companies are partnering with Etsy so early? We have a really interesting data set that is large. We have a really compelling brand, and we offer something truly unique and different. Because of that, I think the most important players in the world see Etsy as an essential part of any early commerce experience. It gives us a real seat at the table to help shape what the future looks like. I think it's gonna be great for Etsy for a couple of reasons. One, it's going to flatten the world.
When you put this agent out on a mission, you ask it to go buy something for you, what that agent is gonna quickly discover is while there's a hundred websites that sell some version of that thing, most of them are selling the exact same product produced in the exact same factory. All it's about is which one will sell it to you cheapest. You're gonna give that agent a mission. It's gonna go out in the world and it's gonna say, here's the very cheapest place to buy this product. All you're picking is your fulfillment chain from that, right? It's then gonna wanna provide you with choice and options. In addition to the very cheapest, here's something that can be personalized just for you or customized.
Here's something that would actually be unique where you're the only person at the party wearing this thing or the only person in, when you walk into this person's home, the only one who has it, right? I think there's gonna be real demand and desire for that. The job of the agent, bless you, the job of the agent is gonna be to offer alternatives. Etsy very often is gonna be, I think, a very compelling alternative and candidly one of the few unique alternatives out there. I, I'm incredibly excited about this world and we are, I think, well positioned to help to shape and steer it, not just be a passenger.
Any risks you see from disintermediation of traffic?
I think that what's gonna matter more and more in that world is brand. Etsy sellers already federate, you know, when an Etsy seller becomes big, she already puts her listings on, you know, eBay and Amazon and other places. Almost all of our large sellers already list in other places. They simply don't succeed there. They don't succeed there because there's no way for them to really stand out and differentiate themselves versus all of the other products they're competing with, which are almost all mass-produced overseas. The Etsy brand is what signifies to customers, aha, this is actually something that's gonna be made or designed by the seller themselves where I can have a really human experience. I think what this agentive world is gonna do is it's gonna give us so much more context.
Right now, most of the time people come to, to Etsy, they type in three or four keywords. If we get five keywords, we're incredibly lucky, right? We've got to deal with white pants. That's all I get. Now, when you talk to ChatGPT and often now you're talking, you're talking in paragraphs, right? I'm gonna go to a party in the Hamptons and I'm going to a white party. And so I need something that's kind of light and, and, you know, I'm thinking about white, but, you know, maybe linen and maybe it's this and, you know, or I'm going to a, a 70s party and I need something that's like, you know, John Travolta themed. Like those are two totally different use cases, right? Oh my gosh, I wish I had that context, but all you told me was white pants, right?
When you're talking in paragraphs into ChatGPT instead of just giving me two words, man, can we knock it out of the park for you? Etsy, more than anyone, I think is really well positioned to benefit from that.
Great. With that, we are right at time, so we'll leave it there. Thank you so much.
Thank you.