The DIY Player Etsy Is Coming With An IPO Of $100 Million
Etsy, an online marketplace for hand-knit crafts, has filed for IPO. The company hopes to raise $100 million through its initial offering. There are certainly some challenges and opportunities that Etsy will meet as it comes to Wall Street.
Etsy is expected to list on the NASDAQ stock market under the ticker symbol “ETSY”. The details of the IPO are not firm yet at this point and also subject to changes as the planned listing date approaches.
Etsy is a place where people sell handmade items such as arts, crafts, jewelry and everything in between. The company, founded in 2005, currently boasts about 1.4 million users. Last year, Etsy generated $196 million in revenue and suffered a loss of $15 million. Revenue in 2014 was up more than 56% compared to the previous year.
The listing of Etsy is coming at a time when the company’s marketplace revenue is declining while revenue from services offered to sellers is increasing. The company takes a cut from each sale made on its website and also charges sellers to list on its site. Additionally, the company promotes listings for a fee and also offers payment and shipping solutions. It is the marketplace revenue that comes from cuts per sale on the website that is declining.
While marketplace revenue accounted for 74% of the total revenue in 2012, the contribution of the segment declined to 63% of sales in 2013 and further declined to 56% last year. At the same time, seller services revenue was up 21% in 2012, rose to 34% in 2013 and reached 42% in 2014.
The seller services revenue comes from providing selling ads, processing payment and shipping items. These services allow sellers to concentrate on their craft business while leaving the administrative tasks to Etsy.
However, reliance on seller services revenue means that Etsy will have to compete with companies such as Facebook Inc (NASDAQ:FB) for ads, FedEx Corporation (NYSE:FDX) for shipping and PayPal for payments. It remains to be seen how Etsy will balance between maintaining trust among its users while monetizing them at the same time.
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