NEW A vastly improved search engine helps you find the latest on companies, business leaders, and news more easily.<doc-sep>Text size Online craft marketplace Etsy (ETSY) will increase the fees it charges sellers for the first time in its history, the company said Thursday. The higher fees, Etsy says, will more than offset new plans to boost spending on marketing, tools for sellers, and customer service. The company says it expects profits margins to remain the same but Etsy expects an immediate boost to its revenue. Etsy says it now expects 2018 revenue to be up 32% to 34%, up from its previous forecast of 22% to 24%. The represents about $44 million in new revenue. Etsy’s shares, which jumped in premarket trading Thursday following the announcement, rose nearly 30% after the open. Over time, the community’s reaction should help investors get a better sense of how vital the company has become to buyers and sellers of homemade goods under CEO Josh Silverman. Newsletter Sign-up Barron's Tech A weekly guide to our best stories on technology, disruption, and the people and stocks in the middle of it all. PREVIEW Shares of Etsy have soared since Silverman took over in April 2017. Up approximately 60% this year as of Wednesday’s close, they recaptured their post-IPO highs this spring. Silverman has confronted the 13-year-old company’s legacy as a feel-good enterprise, cutting costs (and employees) while shedding the B Corp designation that denotes high standards of corporate ethics and accountability. Amid the changes, however, Etsy has maintained seller fees lower than those of eBay (EBAY) or Amazon.com’s (AMZN) Handmade unit. Etsy’s fees will remain comparatively low even after the increase, which is scheduled to take effect in mid-July. Even so, the new fees will surely test relationships between the company and its sellers, who now number some 2 million. In an interview with Barron’s Next, Silverman said he expects “some turbulence” in the seller community” as a result of the changes. But the CEO said they will allow the company to accelerate spending on marketing and customer service, including chat and phone support for both sellers and buyers. Etsy’s focus on “making the pie bigger” by driving more overall sales to the platform, hasn’t changed, according to Silverman. “We don’t have firsthand experience to know how it’s going to play out in the very near term,” Silverman said. “I’m highly confident that this is the right thing to do in the medium- and long-term.” The changes raise Etsy’s transaction fee, levied on each sale, from 3.5% to 5%; Etsy will also now include the cost of shipping when calculating that commission. The 20 cent fee charged to list an item, and a separate payment processing fee, are unchanged. Etsy, confident the changes will be a net positive, upped its guidance for the second time this year. The last guidance change was announced in May. Meanwhile, the company maintained its projected Ebitda margin of 21%-23%, indicating its intent to reinvest the money the fees generate, and boosted its high-end gross merchandise sales guidance—“GMS” represents the total value of merchandise sold through Etsy—by 1% to 19%. Etsy planned to communicate the changes via email, a blog post, a new landing page on its site, and other messaging; some of the investments in marketing are seen as a backstop against the aforementioned “turbulence.” (Among other efforts, Silverman said, it will advertise during NBC’s upcoming “Making It” contest show, which has cast Etsy’s “resident trend expert” Dayna Isom Johnson as a judge.) Some Etsy sellers have wondered aloud whether changes might be coming. In March, on Etsy’s seller forums, one poster considered them inevitable—“At some point they most likely WILL raise fees,” they wrote—while another thought changes might drive some sellers away. Asked about the possibility of fee changesduring a May interview with Barron’s Next, Silverman said there were “no sacred cows.” Investors will be watching how the changes affect marketplace revenue and seller count over time. Marketplace revenue per seller reached approximately $93 in 2017, though its growth has slowed over the last several years. New fees could re-energize that measure. Most of the near-term revenue increase Etsy expects is expected to come from the new fees, but the company also announced new seller services on Thursday. (Etsy says its updated guidance reflects “negligible” effects from those new services.) While the company’s standard free service offering will remain unchanged, Etsy Plus, when it launches in July, will include branding and customization tools and listing credits. It will initially sell for $10 a month before doubling next year. “The point at which you’re ready for Etsy Plus is the point at which you’ve really decided that this is going to be a real business for you, and in particular you really want to start having more control over the brand,” Silverman said. The company said it’s still developing Etsy Premium, meant for businesses with employees and more-developed customer service needs. It is scheduled to launch next year; No pricing information was available. About three-quarters of Etsy sellers are one-person businesses, according to the company. Silverman said the company isn’t targeting a specific balance of marketplace and seller services revenue. Over the last 5 years, the majority of Etsy’s revenue has shifted from marketplace fees to the services offered to sellers. Services represented nearly 60% of revenue in 2017, up from 34% in 2013. Investors cheered the news Thursday, and management hopes its community will be amenable, too. While KeyBanc analysts suggested earlier this year that Etsy increase the 20 cent listing fee, Silverman told Barron’s Next that the company intentionally chose to tie its fee increase to actual sales rather than all listings. “We believe it’s critical that our success is 100% aligned with the success of our sellers,” he said. “This change is very consistent with that.” This story was updated after it was first published to reflect the shares’ move in premarket and morning trading Thursday. Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron’s next at @barronsnext.<doc-sep>An employee walks past a quilt displaying Etsy Inc. signage at the company's headquarters in the Brooklyn. Online crafts marketplace Etsy's shares soared Thursday after announcing it'll take a larger percentage of each sale and raising its full-year guidance to reflect the higher revenue. The stock gained 26 percent by the end of trading, after rising as much as 35 percent to $44.78 earlier in the day. The company said Thursday it was raising the base take rate — or the percentage of a sale that Etsy keeps for itself — from 3.5 percent to 5 percent, effective July 16. It now expects full-year revenue growth between 32 percent and 34 percent, up from its previous guidance of 22 percent to 24 percent. Etsy, whose platform connects artisans and crafters with online shoppers, also announced new subscription plans and tools for its independent vendors. As of Thursday's close the stock was up 100 percent year to date and more than 200 percent in the 12-month period.<doc-sep>A year into Josh Silverman’s tenure as CEO, Etsy is on the mend. The online marketplace finally crossed $1 billion in sales during the last quarter of 2017 , bolstered by holiday sales and Silverman’s laser focus on Etsy’s core marketplace. That means Silverman has done away with Etsy Studio, a craft supplies marketplace whose launch I covered last year , along with Etsy Wholesale , which connected sellers with brick-and-mortar retailers interested in their wares. Today, Etsy is announcing new subscription packages for sellers who want more customization–an additional investment in its marketplace and a new revenue stream. Included in Etsy Plus, which launches in July at a monthly rate of $10, is a suite of new tools for sellers who are looking to scale their business. With the subscription, a seller could purchase a custom domain that points to their Etsy store, customize the “featured items” section of their shop, or purchase discounted custom packaging specific to their brand. Next year, Etsy will roll out its Premium subscription tier, which is aimed at more established businesses–cases where a shop owner may have multiple employees. The subscriptions are opt-in: Sellers who don’t want to upgrade can remain on Etsy free of charge (now called “Etsy Standard”) and still have access to existing services. But Etsy is making another change that will affect all 2 million of its active sellers. Starting mid-July, the transaction fee charged to sellers when they make a sale will increase for the first time, from 3.5% to 5%. (Silverman says that even with a 5% transaction fee, Etsy is cheaper for sellers than any other marketplace; Amazon, for example, charges 15%, while eBay’s fee is 10%.) The windfall will go toward marketing spend, which will swell by 40% in 2018–an investment of more than $100 million–and is intended to bring new people to the platform. Etsy plans to do this through digital advertising, of course, though some people may also be introduced to Etsy through a new NBC reality competition show for makers called–what else?–Making It. Amy Poehler and Nick Offerman are the hosts, but Etsy trend expert Dayna Isom Johnson is one of two judges. “We’ve talked to more than 3,000 sellers in the past few months, doing intensive research on what they care about, what they value, and how they value it,” Silverman says, assuring me that sellers will understand the increased fee. “We’ve heard over and over again that they want us to be investing more to bring them more buyers.”<doc-sep>
What happened Shares of online marketplace Etsy (NASDAQ:ETSY) are surging on Thursday, rising as much as 35.7%. At the time of this writing, the stock is up about 34%. The stock's rise follows Etsy's announcement on Thursday that it is raising its transaction fee from 3.5% of sales to 5% of sales. Reflecting the higher fee, Etsy revised its revenue guidance for the year upward. So what Etsy will raise its transaction fee on sales beginning July 16, 2018. "This revised fee structure will enable Etsy to make further investments in marketing to attract buyers, enhance customer support, and drive product innovation," it said in its press release on Thursday. The company also announced new tools and packages for sales, including two new subscription tiers of seller tools called Etsy Plus and Etsy Premium. Etsy Plus will launch mid-July for $10 a month and Etsy Premium, "which will be geared toward larger, more established creative businesses" will launch in 2019, Etsy said. New services and tools for Etsy Plus and Etsy Premium will be incremental to what's available on Etsy's platform today. "Sellers who do not opt into Etsy Plus or Etsy Premium will have access to the same tools and services that are currently available on Etsy without an additional monthly fee as part of Etsy Standard," Etsy explained. Now what Etsy is optimistic about how these changes will impact its business in 2018. The company is now guiding for full-year gross merchandise sales (GMS) to increase 16%-19% and revenue to rise 32%-34% year over year, respectively. This is up from a previous forecast for GMS and revenue growth of 16%-18% and 22%-24%, respectively. Notably, revenue growth this steep would mean Etsy's year-over-year revenue growth rates continue to accelerate. Management is keeping its forecast for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 21% to 23% the same, despite the expectation for more rapid revenue growth. This reflects the company's plans for more substantial reinvestment plans.