Etsy 2015 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2015 Etsy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 126

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126


Etsy, Inc.
Notes to Consolidated Financial Statements
Revenue Recognition
The Company operates a platform for third-party sellers. Its business model is based on shared success: the Company makes money when Etsy sellers make
money, and the Company offers services to help Etsy sellers be more successful. The Company does not compete with Etsy sellers, hold inventory or sell
goods. The Company’s revenue is diversified, generated from a mix of marketplace activities and the services the Company provides Etsy sellers to help them
create and grow their businesses. The Company’s revenue consists of Marketplace revenue, Seller Services revenue and Other revenue. The Company’s
revenue is recorded net of actual and expected refunds. Marketplace revenue includes the fee an Etsy seller pays for each completed transaction and the
listing fee an Etsy seller pays for each item she lists. Seller Services revenue includes fees an Etsy seller pays for services such as prominent placement in
search results via Promoted Listings, payment processing via Direct Checkout and purchases of shipping labels through the Company’s platform via
Shipping Labels. The Company deducts its cost of shipping labels and estimated refunds from gross shipping fees to determine net shipping fees. Other
revenue includes the fees the Company receives from a third-party payment processor and derecognized funds the Company receives from a third-party for
unused Etsy Gift Cards.
The Company recognizes revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has
been provided to the Etsy seller; (3) the collection of fees is reasonably assured; and (4) the amount of fees to be paid by the Etsy seller is fixed or
determinable. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether it is the
primary obligor in a transaction, has inventory risk and has latitude in establishing pricing and selecting suppliers. Based on its evaluation of these factors,
revenue is recorded net of merchandise values associated with the transaction.
. Marketplace revenue consists of the 3.5% fee that an Etsy seller pays for each completed transaction on the Company’s platform,
exclusive of shipping fees charged. Marketplace revenue also consists of a listing fee of $0.20 per item that she lists in its marketplace. Revenue from
completed Wholesale transactions is also included in Marketplace revenue. Transaction fees are recognized when the corresponding transaction is made.
Listing fees are recognized ratably over a four-month listing period, unless the item is sold or the seller relists it, at which time any remaining listing fee is
recognized.
. Seller Services revenue consists of fees an Etsy seller pays the Company for the Seller Services she uses, including Promoted
Listings, Direct Checkout and Shipping Labels.
• Revenue from Promoted Listings consists of cost-per-click based fees an Etsy seller pays the Company for prominent placement of her listings in search
results generated by Etsy buyers in its marketplace. Revenue is recognized when the Promoted Listing is clicked.
• Revenue from Direct Checkout consists of fees an Etsy seller pays the Company to process credit, debit and Etsy Gift Card payments. Direct Checkout
fees vary between 3-4% of the item’s total sale price plus a flat fee per order, depending on the country in which her bank account is located. Direct
Checkout fees are based on the item’s total sale price, including shipping. Revenue from Direct Checkout is recognized when the corresponding
transaction is made.
• Revenue from Shipping Labels consists of fees an Etsy seller pays the Company when she purchases shipping labels directly through its platform, net of
the cost it incurs in purchasing those shipping labels. The Company provides its sellers shipping labels from the United States Postal Service and
Canada Post at a discounted price due to the volume of purchases through its platform. The Company recognizes Shipping Label revenue when an Etsy
seller purchases a shipping label. The Company recognizes Shipping Label revenue on a net basis as it is not the primary obligor in the delivery of these
services.
. Other revenue includes the fees the Company receives from a third-party payment processor, which is recognized as the transactions are
processed by the third-party payment processor, and derecognized funds the Company receives from a third-party for unused Etsy Gift Cards, which are
recognized when the third-party approves the release of these funds.
76