This morning, Etsy announced a new advertising service called Offsite Ads, which forces many sellers to participate without an option to opt-out.
Etsy will pay the advertising costs to promote listings on multiple internet platforms such as Google, Facebook, Instagram, Pinterest, and Bing.
When a shopper clicks on an online offsite ad featuring a seller’s listing and purchases from their shop, the seller will pay Etsy an advertising fee.
The fee will either be 12 or 15 percent, depending on the seller’s yearly revenue on the platform. Sellers with more than $10,000 in annual sales on Etsy will pay the 12 percent fee, while sellers with revenue under $10,000 annually will pay the 15 percent fee.
The benefit Etsy is suggesting is that sellers don’t have upfront costs for this program and only will pay Etsy an advertising fee when the item sells.
Etsy Forced Participation
Sellers that reach the $10,000 threshold in annual sales, will be enrolled in the program for the lifetime of the store and do not have an option to opt-out of the program.
Lower volume sellers, those with annual sales of under $10,000 on Etsy, have the choice to opt-out of the program but are being automatically enrolled.
To determine the advertising tier for each seller, Etsy calculated sales based on the past 12 months as of February 18, 2020.
What is a bit unclear from Etsy’s announcement is what happens if a seller is over $10,000 threshold, but then falls below that number.
Going strictly by Etsy’s wording, it seems once a seller reaches the $10K threshold; they are in the program for life and no longer can opt-out.
“If you’ve made more than $10,000 USD in sales on Etsy in a 12-month period you’ll benefit most from offsite advertising. So, you’ll be required to participate for the lifetime of your shop and you’ll get a discounted advertising fee.”
Etsy estimates most sellers will pay the advertising fee on fewer than 10 percent of their sales or 1 out of 10 sales. But the company provides no backup for this assumption.
Mixed Reaction from Sellers
Based on feedback in the Etsy community forum, there is a mixed reaction to this program. Some sellers seem okay with it because it simplifies their off-platform or offsite marketing, but others worry about a significant impact to their bottom line.
Etsy is trying to sell this program as “risk-free,” but that seems a bit of a stretch.
Sellers have no idea what to expect from this program and how it will impact their sales. They will need to run the program for a few months and try different product mixes with different gross margins to really understand what it means to them.
Etsy says it expects the program to impact 1 out of 10 sales, but that is an average across the entire platform. Some sellers may see more sales from the offsite ad program, and what if those sales are on lower gross margin items?
The company is not providing an opportunity for sellers to do A/B testing or exempt lower gross margin products from the program. It is also not phasing in the program. Instead, it is doing the exact opposite, placing every seller into the program.
Eligible low volume sellers have to actively opt out!
Anytime a platform makes drastic changes that may impact a sellers’ bottom line, it entices sellers to look elsewhere.
When Etsy pressed sellers to offer more items with free shipping, it did so because that is what online consumers demand. It was a competitive issue they had to tackle.
Sellers can still charge shipping, but Etsy favors listings in search results that offer free shipping. Key point, it still is the seller’s decision how to deal with today’s consumer behavior.
Marketing is Important, but…
The intention of allowing Etsy sellers to gain more sales from offsite advertising is sound. Marketing is important, and often marketplace sellers overlook the opportunities that may exist beyond the marketplace platform. Offsite marketing also has complexities some sellers don’t want to tackle.
But it seems the implementation of this program is clumsy and a bit eBayesque. Look no further than eBay’s Managed Payments, sound idea, terrible execution.
Tonight Etsy will discuss its fourth-quarter earnings report for 2019 in a conference call, let’s see what they’ll say about this advertising program.
The Offsite Ads program will go into effect on March 27, 2020.
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