Etsy 2015 Annual Report Download - page 22

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Maintaining and promoting awareness of our marketplace and broader platform is important to our ability to attract and retain Etsy sellers and Etsy buyers.
We believe that much of the historical growth in the number of Etsy sellers and Etsy buyers has originated from word-of-mouth referrals and other organic
means, as our historical marketing efforts and expenditures have been relatively limited. We intend to continue to invest significant resources in marketing,
with a particular focus on bringing more Etsy buyers to our platform. We anticipate that our marketing initiatives may become increasingly expensive as
competition increases, and generating a meaningful return on those initiatives may be difficult. Even if we successfully increase revenue as a result of these
efforts, that additional revenue may not offset the expenses we incur.
The marketing efforts we implement may not succeed for a variety of reasons, including our inability to execute and implement our plans. External factors
beyond our control may also impact the success of our marketing initiatives. Our marketing efforts currently include search engine marketing, affiliate
marketing, and display advertising, as well as search engine optimization, social media usage, mobile “push” notifications and email. We obtain a significant
number of visits via search engines such as Google, Bing and Yahoo!. Search engines frequently change the algorithms that determine the ranking and
display of results of a user’s search and may make other changes to the way results are displayed, which can negatively affect the placement of links to our
marketplace and, therefore, reduce the number of visits to our marketplace. The growing use of online ad-blocking software, including on mobile devices,
may also impact the success of our marketing efforts because we may reach a smaller audience and fail to bring more Etsy buyers to our platform. We also
obtain a significant number of visits through email advertising. If we are unable to successfully deliver emails to Etsy sellers and Etsy buyers, or if Etsy sellers
and Etsy buyers do not open our emails, whether by choice, because those emails are marked as low priority or spam, or for other reasons, our business could
be adversely affected. Social networking websites, such as Facebook and Pinterest, are another important source of visits to our marketplace. As online
commerce and social networking continue to evolve, we must maintain a presence within these networks. We may be unable to develop or maintain such a
presence.
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Etsy buyers primarily pay for purchases using Direct Checkout or PayPal. In the United States and other countries where Direct Checkout is available, Etsy
buyers can use Direct Checkout on our platform to pay with credit cards, debit cards, bank transfers, PayPal, Apple Pay, Google Wallet and Etsy gift cards,
rather than being directed to a third-party payment platform. A significant portion of our GMS is processed through Direct Checkout, and a portion of our
revenue is derived from Direct Checkout.
We have engaged third-party service providers to perform underlying compliance, card processing, currency exchange, identity verification and fraud
analysis services. If these service providers do not perform adequately or if our relationships with these service providers were to terminate, Etsy sellers’
ability to receive orders or payment could be adversely affected and our business would be harmed. In addition, if these providers increase the fees they
charge us, our operating expenses could increase. Alternatively, if we respond by increasing the fees we charge to Etsy sellers, some Etsy sellers may stop
using Direct Checkout, stop listing new items for sale or even close their accounts altogether.
The laws and regulations related to payments are complex and subject to change, and vary across different jurisdictions in the United States and globally. As
a result, we are required to spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any
failure by our third-party service providers to comply, could cost us substantial resources, could result in liabilities, or could force us to stop offering Direct
Checkout. As we expand the availability of Direct Checkout or offer new payment methods to Etsy sellers and Etsy buyers in the future, we may become
subject to additional regulations and compliance requirements.
Further, through our agreement with our third-party credit card processor, we are indirectly subject to payment card association operating rules and
certification requirements, including the Payment Card Industry Data Security Standard, which are subject to change. We are also subject to rules governing
electronic funds transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply.
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We spend substantial time and resources creating new offerings in order to add new members to our community, grow our ecosystem and open new sales
channels for Etsy sellers. For example, in October 2013, we expanded our ecosystem by allowing Etsy sellers to apply to work with values-aligned
manufacturers and in September 2015 we announced the preliminary
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