By Abby Glassenberg
As I’m sure you’ve heard (it’s caused quite a stir) Etsy launched a new ad program yesterday. Called Offsite Ads, it’s mandatory for shops with $10,000 in sales or more. Listings will be advertised on Facebook, Google, Instagram, Pinterest, and Bing (why Bing?) and, when a listing sells, the shop owner will pay Etsy a 12% fee. Shops with less than $10,000 in sales can opt-out, but if they do choose to participate, their fee will be 15%.
When I received the email saying that my shop was “a success story” so my participation would be mandatory (such flattery!) I’ll admit to getting hot under the collar. I’ve worked hard to tweak my SEO, writing titles and tags so each listing gets found in search organically. I take pride in the fact that I’ve never spent a dime on advertising to earn that $10K! I don’t want Etsy forcing me into business decisions. How patronizing and condescending to assume that I don’t know what I’m doing.
Then, I spent some time reading and thinking, and listening to the earnings report that was released last night. I can’t say that I’ve come around exactly, but I think I’ve come to a deeper understanding of the new program. And I’m mostly on board now. Here’s why.
There might be an untapped market of customers out there
Etsy sees a huge untapped market out there of potential buyers. They feel the customer base currently shopping on Etsy is a small fraction of what’s out there, and they feel that the frequency with which Etsy shoppers are making purchases could be greatly increased. I agree with them here.
In Etsy’s opinion, reaching these new customers, and increasing this frequency, is best done through advertising. Is this true? I’m not sure, but I’m willing to take their word for it. This advertising takes two forms. One is “top of the funnel” which includes things like cable TV ads that reach brand new people who may have never heard of Etsy. Another type of advertising is retargeting ads. These are ads on platforms like Facebook or Instagram that show someone a picture of something they were recently looking at on Etsy, reminding them to come back and complete their purchase. (These are super effective! When I get a retargeted ad I end up back on the site shopping all the time.)
With the old Google ads program sellers assumed the risk
Of course, Etsy already had two ad programs sellers could opt into paying for. One was on Etsy itself (what was once called Promoted Listings and is now called Etsy Ads). The other was on Google Shopping. Since the summer, these were combined and Etsy was spending sellers’ budgets between the two.
But when it came to advertising on Google, Etsy felt the program was underperforming. They thought managing everything for sellers might help, but it didn’t help enough. There was more untapped potential out there and Etsy wanted to figure out how to get it so they came up with a new plan: take away all the risk.
On the Q4 earnings call last night CEO Josh Silverman explained, “Many sellers view offsite advertising as risky.” Here’s why. When you pay for an ad on Google, you might use up your whole budget just on clicks and never make a sale. That’s how online advertising works: pay per click. You could pay $10 to get sixteen clicks and then…nothing. The visitor might click through and never buy. Or they might buy from someone else’s shop. What a waste of money! Many sellers simply say no thanks (myself included).
“We heard from sellers a fear that they’re going to spend money upfront and not have it convert to a sale,” Silverman said. “And not just a fear, that’s a reality. It may not convert to a sale.”
Now Etsy assumes the risk
With the new Offsite Ads program, Etsy assumes all of that risk. When someone visits your shop and then, later, sees an image of your product as an ad on Facebook and clicks on it, Etsy pays for that click. If that customer never buys, Etsy doesn’t charge you. Let’s say it happens again on Instagram. Again, Etsy foots the bill for the click. Marketers say that a consumer needs to see something seven times before they buy it. So Etsy might be paying for a whole lot of clicks. You, the shop owner, will never see that.
Setting up an effective ads program on 5 platforms requires expertise
Here’s the other thing: setting up a retargeting ad program for your business on Google, Facebook, Instagram, Pinterest , and Bing (why Bing?) take both time and expertise. Now, granted, maybe you’re not interested in doing this. (I get it, I’m not all that interested myself!) But if you were, you’d have a pretty steep learning curve in order to figure it out. With Etsy’s Offsite Ads, sellers don’t have to learn anything. Etsy’s ads team has all the expertise and they’re taking care of it. That’s pretty valuable and worth paying for.
This new ad program is also more efficient. If you think about it, the previous ad program on Etsy was actually hundreds of thousands of tiny ads programs. Each seller who chose to pay for Google Ads set their own budget and Etsy managed it. Now, with Offsite Ads, we’re all in a single ad campaign together. It’s one big retargeting campaign. That means Etsy can pool the data from Google and Facebook and use it to learn. “That’s exactly the kind of thing that a platform can do is pool the resources of the sellers together to get something that individual sellers could never get on their own,” Silverman said in the call last night.
Etsy says that with Offsite Ads being paid for in this new way, they’ll be able to use its marketing budget to fund top of the funnel ad programs such as television advertising that brings in new buyers. (Granted, they said the same thing when they increased the fees from 3.5% to 5%. Too many fees and it starts to feel like squeezing sellers to increase value for shareholders for sure.)
Okay, so why are small sellers (those under $10,000 in sales) able to opt-out of the program? According to Silverman, Etsy heard from a good chunk of small sellers that they don’t want to grow any larger. Maybe they’re brand new to Etsy, or maybe they’re selling on Etsy as a hobby, and an increase in sales volume would be super stressful for them. So these sellers don’t have to be in the new ad program unless they want to. Once you hit $10,000 in sales Etsy feels you’ve demonstrated a seriousness of purpose and a willingness to commit to growth. Then your fee drops permanently.
Wait and see (and make adjustments)
Sellers don’t begin paying for the Offsite Ads until April 14. Until then we’ll have a month and a half to let it run and watch the impact on our sales volume. I think that’s a good time to evaluate our margins. If Etsy is correct and 1 in 10 sales come in through Offsite Ads it may be that we, as sellers, need to implement a small price increase to make up for the 12-15% fee. (I realize that raising prices isn’t possible for everyone for a whole variety of reasons. Competition is tight. Maybe the additional sales volume will make up for it, but maybe not.)
It doesn’t feel good to be told you’re involuntarily enrolled in a program with a 12-15% fee attached, and that you’re now an advertiser when you didn’t really choose to be one. I also don’t think this new policy (or any of Etsy’s policies since it went public) jives with the ethos of handmade, or the soul and purpose of why making things with your hands matters to us, to our customers, and to society.
Offsite Ads is about one thing and one thing only: selling more stuff. And Etsy isn’t pretending they want to sell more stuff so that makers can thrive. No. That’s not it. They want to sell more stuff in order to increase shareholder value.
I get all of that. But I also run a business which means I do want to sell more stuff. I have a suspicion Etsy may have figured out how to do that and, even if they’re wrong, I’m interested enough to hang in there and give it a try.
No. I’m horrified by etsy taking such liberties.
If your shop is that successful why should you now be compelled to hand over money for all sales made, even though they were previously shown to be through your own endeavours? If you paid just for extra sales – that maybe would not be realised without their ads, then maybe. All sales though?!
Sellers don’t need etsy; etsy is now too expensive for me as a buyer, (because of all the extras now being paid for by the seller and passed onto the buyer). It is cheaper to purchase the same product elsewhere – for instance Craftsy did not charge me vat where etsy does. (Vat which is collected by etsy for the UK, yet most sellers do not earn enough to register and pay it in their own right). Too high prices lead to less sales. I am saying no and sellers are saying no and setting up shop elsewhere- I see evidence of this every day.
I don’t need etsy and ultimately personally I don’t ‘need’ much of what I buy. I crochet, sew, knit, embroider and draw. I can design for all those things myself up to a lesser or greater degree. I buy patterns because I am charmed by the product and buy at a reasonable price only. I previously would buy not so much on the basis of what I needed but what I ‘must have’. No longer. I just say no to all those random purchases that seemed affordable, but now are out of range as being unjustifiable expenditure.
Prices too high for me? Well then I design myself, borrow library books, buy used magazines, buy books etc or go for free online. I used to buy lots of patterns on a whim, now at probably twice to three times the cost, I buy hardly at all. So a seller can sell more at a cheap price, or less (perhaps many less) when charging more. As long as they get the time investment/labour costs back at a profit it doesn’t matter which. It is a balance though. Something that the seller needs to be in charge of, and not be dictated to by the vendor market place.
Any more add-ons to prices and I would be be completely lost as a customer. I don’t see that prices would not go up and 12 percent is a lot to pass on to a buyer. I have already seen 20 percent vat go on to etsy prices for patterns – which is not something most craft sellers independently need to charge as they do not earn enough in most cases to register for vat. Sellers are now charging more to cover costs for ‘free postage’, vat, increased listing fees etc. and now this. It could dissuade a lot of buyers.
I
Hmm…I registered for VAT for my online shop. It wasn’t hard. I use a free app called Taxamo to help me figure it out each quarter, then I remit it to the EU. It’s not hard or expensive to do.
And Etsy isn’t exacting a new fee on every sale a seller makes. I think you’ve misunderstood.
Yes, I did misunderstand- after reading the etsy forum I realised my mistake. However, the point you make about Vat, is not connected to what I said about it, but I was speaking as someone from the UK buying from UK shops on etsy.
Sara, the VAT paid on digital products is a digital tax, regardless of how much you earn. Even if you sold digital patterns off Etsy you’d still be liable to this tax
At first I had an “I’ll wait and see” attitude. But now I feel it is just unfair. Because of the type of product that I have designed, I have a lot repeat customers. They are REPEAT customers on a monthly, sometimes twice monthly basis! If one of those customers just happens to click on one of the Etsy ads, then all of the purchases for the next 30 days will have the ad fee. That is unfair – I have worked really hard to build my customer base over the last 6 years and for Etsy to gain 12 or 15% from my hard work is just wrong. I am really disappointed in this move by Etsy.
I think it will be interesting to see how things go this month when the program begins for everyone, but we’re not paying for it yet. You’ll be able to see the purchases that are coming in through Offsite Ads and track whether they are indeed your returning customers or whether the ads are converting new customers. I hope you’ll report back!
I can’t wait to see either Abby. It will be fantastic if it brings new customers. I’ll be happy to report back!
I am going to go with the Etsy offsite ads for now. I am wondering if I still need to invest in regular Etsy ads? I pay $5.00 / day. Could I save some money there? Thank you for this great article.
Try turning it off for a week or two and see what happens. It may be that you no longer need it as much as you once did.
Thank you! I will do that.
My issue is that they are also charging that fee on TOP of transaction fees for shipping, so we are in fact going to be paying 17% on the shipping costs as well. I understand and really do not have an issue with the 12% on the product but adding it to the shipping is greedy and BS in my opinion…….They already get a piece of the shipping cost (we know they have negotiated a better rate and we get a lesser one), they get a piece of the credit card fees, hell I don’t even pay 3% for those on my website, and they charge their transaction fee on it ALL, even the taxes paid (thats BS too)…….These are (for the most part) tangibles we need to pay. But this ad fee on top of the shipping? Thats just crap……..
Thank you for adding all these “hidden” fee spot locations – after listening to the earnings call and hearing their take rate last quarter was 16.3% i was trying to remember all the potential places for this to be added up. I believe promoted listings might also be counted in that as well but I could be totally wrong.
I feel like since they became a publicly traded company they have become investor/stockholder centered and forgot that we the makers are fueling the sales. They are going to eventually cut off their noses to spite their face. I am working more diligently than before to move as many customers to my website as possible. Eventually I will remove anything that has to ship and have just downloads. I already moved all the fabric from my Etsy shop when they blackmailed us into offering free shipping, the algorithms have been way off ever since resulting in lower sales by up to 48% for me, so I put it all on my own website……..Part of me really wonders if they did something on their end to make this part of their plan more palatable to people. That may sound like a conspiracy theory but I trust no one and nothing these days, ethics have gone out the window when the bottom line is cash……
I’m in. (Well, not that I have a choice.) But I am for it. I pay affiliates 15% anyway, this is just like having a very experienced affiliate promoting for me.
I agree.
That’s a really interesting way to think about it.
This was actually my first thought when I saw the program announcement – it seems like an affiliate program!
$10,000 is a really arbitrary number- it’s not taking into account average cost of items. 10k for a sticker seller is a really successful shop. 10k in a year for someone who’s average item price is over a hundred isn’t necessarily the same. I make over 20k a year on Etsy, and I’m not a hobbyist. This has been my full time job for 16 years, and Etsy isn’t my only platform (I also do in-person shows). I absolutely do not want to grow any more on Etsy, especially with the new ODR system. It should be opt-in for everyone. Period.
I follow on Facebook someone who hand makes one of a kind gorgeous items. She shares photos in advance of listing her items on Etsy at an announced time. She always sells out in moments. She needs no additional advertising from anyone. She can’t make any more items than she currently does. Etsy does not deserve any more money from her.
Good healthy discussion here.
I’m under 10k but will opt in. I’ve never paid for advertising either as it seems such a hit and miss venture but I think this ..as a seller pays system is fair and should work. However, I don’t understand why I need to pay 15% rather than 12. My overheads are the same as a big seller, I think it should be a flat rate for all sales regardless.
Interesting perspective. Thank you for sharing this.
Hi Abby,
Back onto my comment regarding Repeat customers , I wish they would consider charging only on New customers that have not placed an order before with my shop. It just really doesn’t seem fair. Several of my customers have been with me for 6 years. I am sure if they see an ad with one of my products they will click on it thinking they are helping me when in fact, it will cost me an additional 15%.
Perhaps they’ll buy more frequently than they would have without the ad?
Its not set up that way. I only release a certain number each month and they buy them as they are released. If it brings new customers that would work, otherwise I will be paying the 15% on customers that are already repeat buyers if they click on an offsite ad. It should not be on previous customers. Any idea who I need to contact about this?
Well, if your repeat buyers are buying up your listings right away, as soon as you release them, then I guess there won’t be time for the ads to even be placed, right?
Hi Abby,
Most are on a fixed income and buy them as they get the funds. Some buy them right away, others have to wait until the first of the month. I can only produce so much during a 30 day period and I am not interested in the Etsy suggested “put your shop on vacation mode until you catch up your orders” response. The only time in 6 years when I have not shipped NEXT business day is on pre-orders. Great service like that is one of the ways that I stay competitive. Also, I have a very tight supply overhead. What happens if Etsy runs an ad , I get several new orders and then I do not have the goods to make product for my repeat customers? I keep a close watch on the comings and goings of my regular customers so I know how much to produce.
It may be that having a shop on a marketplace just isn’t right for you. It sounds like you have a strong connection with your core customer base. Why not set up your own ecommerce shop and ask them to shop with you there instead? That way you can have 100% control. You won’t be at the mercy of Etsy’s changing policies and won’t accidentally have them advertise your goods leading to you ending up busier than you want.
Indeed Abby that may be what I end up doing. Which is truly a shame after 6 years of building a business with Etsy as the base. If Etsy would consider giving shops the ability to monitor or approve what is advertised and what is not and/or have OA fees only apply to 1st time buyers or new customers it would probably be an easier pill to swallow not only to me but to a lot of other sellers.
I’m interested to see how this goes. At first I thought it didn’t apply to me, but I’ve just realised I have actually passed that magic number and will be automatically opted in.
The ad platform that was running at the beginning of 2019 work relatively well for me, but when they did the combined version I was paying more in advertising than I saw in sales each month from it, so pulled out.
I hope they’ve got their balance and algorithms right this time. I know they should be the experts, but my recent experience suggested otherwise.
Since now you’re not going to be paying for clicks I think it will be a different experience.
Yes, I’m hoping so. I don’t really mind that they’ve taken this approach, I’ll just be interested to see how effective it is.
Thanks for the background info – I always appreciate your writing.
Unfortunately, after many years of “compulsory” changes and fee increases (including having to pay fees on a shipping charge of $25 AUD from Australia to the US”), this was the last straw. I’ve closed my Etsy account today.
I’m glad you wrote this article. I saw that announcement, but it kind of blew by me that it was mandatory for my shop. So that was news to me until I saw your article. LOL. I know I can always count on you to get the skinny and I really appreciate your thoughtful analysis.
I’ve also never invested in ads. I kind of ignored the announcement because I figured it was a paid option. Now I know it’s mandatory, it’s got my attention. I’ll be waiting to see what kind of impact this has. Not sure if I’m for it or against it at this point. Looks like I don’t have much choice if I wish to continue selling on Etsy.
I really appreciate reading your perspective on this new change. My shop also has the dubious honor of being ‘opted-in’. It seems unfair that shops earning less than $10K will have to pay more for opting in. It’s a strange assumption that just because someone earns over $10K, they want to significantly grow their business. You can make more than that and be quite content with what you are earning. Outsourcing manufacturing certainly isn’t possible for a shop where every one-of-a-kind item is made, with love, one-at-a-time. I’ve made a living selling exclusively on Etsy for the past decade, without the need to promote my work elsewhere or purchase advertising. For me, that was the beauty of Etsy. I could stay focused on my art, and people could find it and purchase it through Etsy. I’ve rolled with all the changes that have taken place, and I will be rolling with this one as well, because I am curious how it will play out. But this recent announcement has finally motivated me to prioritize creating a stand alone website to promote and sell my work. I will probably continue to sell on Etsy, but will encourage my fans to buy directly from me, with the goal of leaving Etsy eventually. I want to be able to sell my work at a price that I choose, instead of having to constantly raise prices to cover new fees that will benefit anonymous investors who don’t even need the money. The number one thing that bothers me about Etsy, is that it no longer feels like a unique marketplace that promotes pride in, and appreciation of small businesses and things made by hand. It is just one more stifling online marketplace. There are still treasures to be found in the sea of garbage, if you are patient enough to dig for them, but who has time for that these days? If Etsy had held to the vision that the former CEO cultivated, I would care less about the continuous grabs for more of my hard-earned money. As it is now, the site is going downhill while the cost of doing business on there continues to rise. I just don’t believe it is sustainable, or a good fit for businesses like mine. But yes, it will certainly be interesting to see how this plays out.
Well said.
Etsy has increased one fee or another every year that I’ve been on Etsy since 2009. At this rate by 2024 we will be paying consignment shop prices (40%) or more to sell on their site.
Etsy is the Queen, we are the lowly peasant villagers, and the tax man is on his way to collect. We need to channel some Robin Hood… This is 2020. Why do I feel like I’m stuck in the dark ages?
The internet is the Wild West of e-commerce. Corporations are abusing small businesses left and right. Government regulation is going to need to be absolutely necessary. The only way small e-commerce businesses are ever going to have a voice to fight back is to ORGANIZE and/or LOBBY with the big dogs.
Right now Etsy is your Big Dog.
Etsy’s stance is your stance.
Etsy’s financial health and viability is your financial health and viability.
Yet Etsy owns your site, not you. Etsy makes all the decisions, not you. Etsy can close you down (if they wanted to) at the blink of an eye and there is absolutely zero that you can do about it.
Corporations DO NOT CARE ABOUT YOU AT ALL! When are people going to get it in their heads!
The idea that small handmade businesses are “partnering” with corporations to make them and their top share holders filthy rich is an oxymoron. These two terms (Corporations / Handmade) shouldn’t ever even be in the same sentence together lol. What is happening?
This whole thing is very strange to me. Why are small businesses allowing a Corporation to become their overlords? Come on guys…get with the program.
Go start a Weebly site. It’s the same amount of difficulty and time to work on Etsy that it is to work on your own site.
Etsy is a great site for newbies to help you get your feet wet and learn. It’s a myth that you can’t get sales on your own site. You just set up Google ads the same way you do for Etsy and optimize your SEO. Copy and paste your Etsy products right on over to your own website and spend more time on your website than you do on Etsy.
There’s nothing wrong with having both but there IS something wrong with ONLY being on Etsy. That’s too terrifying a concept to even imagine.
Vote with your wallets and your feet.
I have opted out. Aside from a few exceptions, my products are all under $10 with most in the $4-8 range. I have never advertised either on Etsy or eBay. After opting out I had my best week ever with nothing coming from left over clicks from ads. While the fees were being waived, the majority of the sales were coming from my most popular items.
Our customers are the ones that lose out with this program. I would have to raise my prices to cover the cost. I also could no longer afford to run a sale. I would rather five my customers 15% off rather than give it to Etsy. I feel that I pay them a fair amount of fees as it is and I expect them to advertise the site. If sellers want to opt in then it should be optional not mandatory.
Since I am about $700 away from the $10K mark I am already looking at going elsewhere. I am very disappointed. I only started on Etsy in March of last year and my sales this year have doubled with no advertising. I was really hoping that I had found a site where I could continue to grow my business. Sad.
I just opted out Etsy Off site ads as I consider that a 15% + 5% commission is quite prohibitive but it is not the sole reason.
Unlike many companies who started their business on Etsy and eventually created their own brand website, we started on Shopify and just lately started listing our products on Etsy. Hence we have been long time advertising on Google, Facebook, Instagram, Pinterest, etc. and I think that Etsy off site adds would directly compete with our other advertising programs, bringing the CPC higher to end up paying more commissions on sales which could have been made on our Website without having to give away nearly 20% of the income. And I think that if I had more than 10 000 USD of sales per year making the program mandatory, I would definitely leave Etsy.
I’d be happy to hear your opinions about mine and if there is something I’m missing.
This is from Etsy Help pages:
“If you made more than 10,000 USD on Etsy in the past 365 days, you’ll benefit most from offsite advertising. You’ll be required to participate for the lifetime of your shop and you’ll get a discounted advertising fee.”
For life? Really?? Wouldn’t this make people to close their shop and open a new one?
Etsy has had very little churn from the program among sellers whose shops are under the $10,000 limit and are able to opt out.
I used to run a shop on Etsy and had considered reopening, now I am honestly not sure, this is a ridiculous program to force people into if they are successful. If I want to run ads I want to be able to control them, I never needed them before, and honestly don’t need them now. This really just seems like a way for them to once again snag more fees. And really the people that it hits the hardest are the honest sellers that are running an actual handmade business as opposed to all the Chinese and Indian commercial sellers that try to hide what they are, but then you find 1000 listings for the same exact item from different sellers. They need to cut down on all that crap, actually just cut it out completely. But its clear that they want Etsy to become more Wish.com everyday.
When I first realized that my sales had gone over the $10,000 mark in a 12 month period, I was thrilled. I am a small-time seller who got carried away with listing and selling items that put me over the limit of $10,000. which then put me into the never-ending and FORCED requirement by Etsy that I will now be required to pay 12% more in fees on items that sell on an advertised site. What I don’t like is the FORCED aspect of this and that it is forever, I have no choice.
Most of my items are priced as low as possible, with me making a small amount, and this added 12% will put me in a losing position.
I have also put many items on sale, some greatly reduced. If I have to pay an additional 12%, I will virtually be giving my items away. Previously, I had told many friends to sell on Etsy as it was a great site for selling. Never again. I am disgusted at what Etsy has become.