Josh Silverman
Chief Executive Officer at Etsy
Thanks, Deb, and good evening, everyone. Etsy delivered a strong fourth quarter to wrap up an impressive 2021 with record levels of GMS, revenue and adjusted EBITDA. During the holiday season, when many retailers were struggling with congested supply chains, Etsy sellers brought the benefits of shopping small to scale. And in doing so, we further cemented our place in buyers' hearts while deepening our relationship with our sellers as well. Etsy's mission is to keep commerce human, and we believe that these past two years have shown that the needs we meet are both powerful and enduring. 2021 was another historic record-breaking year for Etsy. And while the pandemic introduced millions of people to Etsy for the first time, shoppers have loved the experience they've had with Etsy and are coming back for more, even in a world of greatly expanded choice. We're incredibly proud of our full year performance, which you can see on Slide 3, with consolidated GMS of $13.5 billion, up 29.6% year-over-year on a currency-neutral basis. GMS for the Etsy stand-alone marketplace grew 29% year-over-year and 158% on a 2-year basis. Consolidated revenue grew 35% year-over-year, and our adjusted EBITDA margin was a very strong 31% despite the anticipated dampening impact on our profitability from our two new subsidiaries. Rachel will review fourth quarter details later on. While 2021 was not the return to normalcy that many of us had hoped for, it did indeed offer greatly expanded options for consumers' time and money compared with 2020, and many more places, online and off, where you could shop. Yet, Etsy continued to gain market share. In 2019, we laid out a long-term goal to outgrow e-commerce. And you can see that we have done that very substantially. And evidence is mounting through our cohort and brand data that these gains were not transitory. We believe that Etsy offers the world a true alternative to commoditize shopping, that buyers and sellers value this alternative, and we are in the early days of expanding our share of wallet. We grew that market share by bringing new buyers to the Etsy marketplace and encouraging our existing buyers to shop more frequently.
A few things stand out when reviewing our 2021 performance on Slide 5. We continue to grow existing buyers, reaching a record high of 90 million active buyers. We reactivated nearly as many buyers in 2021 as we did in 2020, which is, in my view, simply remarkable. And while new buyer additions didn't quite keep base with 2020's spectacular level, new buyers still grew by 84% in 2021 when compared with the prepandemic level of 2019. And the pandemic cohort has been sticky. 53% of all active buyers who made a purchase on the Etsy marketplace in 2020 made another purchase in 2021, and 37% of new buyers in 2020 made a purchase in 2021. 2021 frequency metrics also improved, with 49% of active buyers making two or more purchases, up from 48% in 2020 and 41% in 2019. And GMS per active buyer on a trailing 12-month basis achieved a record $136 in the fourth quarter. We've always said that frequency is a challenging metric to move. So we are especially proud of the cross-functional efforts that drove these results. We believe there are several factors, inspiration, efficiency and reliability, that will contribute to making Etsy the go-to e-commerce destination for many more consumers. Our investments in each of these areas have really been paying off. Our teams beat their purchase frequency goals for the year with creative approaches, including app downloads, post-purchase experience improvements, updates and offers. We also exceeded our goals for visit frequency with triggers like app icon badging and push notifications. This slide captures some of the many ways we are engaging with buyers along their Etsy journey to keep them revisiting and repurchasing, and you can expect to see much more of these work streams in 2022. Search and discovery made some big leaps forward in 2021, and we've only just begun to make the Etsy marketplace feel more made for you. Leveraging XWalk, we're continuing to narrow the semantic gap by relying less on listing taxonomy and more on buyer interests. At year-end, our XWalk engine was utilizing over four billion data points, a 50% increase from when we launched in the second quarter of last year.
This means we can use 16 times more real-time data to capture semantic, meaning across our inventory with XWalk than we could with our prior search capabilities. Putting a finer point on it, Etsy search is simply getting better. On this slide, you can see some of the great progress we've made in U.S. search. For example, by year-end, about 95% of search purchases came from items appearing on the first page of search, up 10 percentage points from the beginning of last year. During the fourth quarter, we incorporated various additional data such as estimated delivery dates, real-time in-session features and listing information to improve organic search results. We also began laying the foundation to apply XWalk to non-U.S. search. Clearly, a lot more to come in 2022. We continue to make Etsy even more human in many ways. For example, seller videos, which are a very visible example of how we drive human connection and engagement on and off the marketplace, topped 13 million by year's end. Etsy's dramatic growth has also necessitated that we invest and improve in many other often less visible ways to connect our 90 million buyers with over five million sellers. We've made meaningful improvements in our member support and trust and safety processes with a combination of people and technology to help make these experiences more joyful, safe and streamlined. For example, in member support, we've invested in self-service, better dashboards and education for our sellers so they can more quickly resolve issues without our intervention. And in trust and safety, investments have included expansion of our content moderation team, investing even more deeply in our handmade and counterfeit item efforts, and creating a dedicated machine learning engineering team to support these initiatives. The size of these combined Etsy marketplace teams increased by about 35% last year, and our total 2021 investment was in excess of $100 million. We're planning to significantly increase our investments in these areas in 2022 as well as we believe effectively managing complex, very human peer-to-peer interactions at scale is a big differentiator for Etsy.
Reliability was a major focus area in 2021, and we made great strides. We improved delivery transparency and provided buyers with more clarity and certainty around their Etsy purchases. Just one example of a small iteration with big impact was the fourth quarter addition of estimated delivery date to our search and ranking models, perfect timing to help buyers narrow their searches for items that could arrive in time for the holidays. We also use new, highly sophisticated models, including many thousands of data points on ZIP codes and postal carrier performance, to anticipate holiday delays and dynamically adjust delivery dates. We had nearly 100% U.S. listing coverage for estimated delivery dates, tracking coverage and origin ZIP codes in time for the holiday crunch. In addition, 90% of U.S. domestic orders that were estimated to be delivered on time for the holidays did, in fact, arrive on time, up significantly from the 2020 holiday season. You'll be hearing more about our efforts to further improve reliability in 2022, including work to achieve more consistent and transparent results in our core non-U.S. regions and deeper initiatives designed to ensure that shopping on Etsy feels worry-free. We believe reliability is the cornerstone of a habitual shopping experience, remaining a key needle mover to drive top-of-mind awareness, loyalty and frequency. Etsy marketplace sellers continue to thrive, growing in total number and the success of their shops. Turning to Slide 10. For the full year, active sellers grew by 28% and more than doubled on a 2-year basis. And even more importantly, our seller cohorts retain more GMS in subsequent years on the platform. We're continuing to innovate in areas that matter to our global seller community such as improvements to the onboarding experience, particularly for international sellers, and investing in our seller app. And our Star Sellers represented 31% of fourth quarter GMS, with the program gaining traction with international sellers during the fourth quarter. Today, we announced an increase to our base transaction fee from 5% to 6.5% effective April 11. We expect to invest most of the incremental revenue into marketing, seller tools and creating world-class customer experiences.
Etsy enables anyone with a creative idea to start a business and reach a built-in audience of millions of shoppers. We've demonstrated our ability to drive more sales and value for our sellers and believe that this represents a fair exchange of value between Etsy and our seller community. We see so much opportunity to continue to raise top-of-mind awareness and consideration for Etsy, among those who already shop on Etsy and those who don't. We've become a top 10 marketplace for buyers in several of our core international markets. We're reaching new audiences in the U.S., and we've made significant progress staying more top-of-mind in order to bring existing buyers back more frequently. Starting at the bottom of the funnel, we've improved our performance marketing feeds and Offsite Ads. In the middle of the funnel, we've had great engagement with our social content. For example, over one million people watch the sellers colorful weaving reel that's shown on this slide. And at the top of the funnel, our brand campaigns cut through the noise. As you know, we've leaned more heavily into upper funnel brand marketing strategies since 2018 through TV, digital video and paid social to create a flywheel that elevates the effectiveness of all of our other marketing channels. These efforts have significantly moved the needle on brand awareness and loyalty. Our U.S. Etsy buyer surveys indicate that since the fourth quarter of 2018, we have nearly doubled buyers' loyalty. Prompted awareness is up 11 percentage points, and unprompted awareness is up eight percentage points. When we first showed you this data, we said our goal was to move the needle on purchase intent so that we could build top-of-mind awareness and consideration in the minds of buyers. And we've done just that. Purchase intent has come a very long way, up over 100%. And visit intent has nearly doubled in that same period. We believe this data further supports my earlier comment that the pandemic will have a lasting impact on our brand.
We're seeing great movement in our brand funnel metrics in the other core markets where we're investing in top-of-funnel marketing. In the United Kingdom, unprompted awareness was up 10 percentage points year-over-year. And in Germany, that same metric has more than doubled. The vast majority of our brand spend is currently in the United States, United Kingdom and Germany. So you can imagine that we may decide in the future to take this strategy to other regions as well. In 2021, we also began focusing more on consumers who identify as male based on 2020 data that showed nearly 50% of male consumers in the U.S. were unaware of Etsy. We launched our first ever above-the-line campaign with specific media placements to reach broad male audiences and found these to be highly effective in building awareness and connection with the brand. We've also started to see some good efficacy from new channels like out-of-home, podcasting and highly targeted segmentation with our CRM tools. We see these all as important levers to further expand our buyer base in 2022 and beyond. 2021 was also a transformative year as we deepened our Right to Win strategy by identifying and integrating two great marketplaces that in many ways look like Etsy, creating a house of brands. As we look ahead, our North Star is to accelerate value creation for each subsidiary with the goal that the whole is greater than the sum of the parts. You'll see on this slide some examples of fourth quarter 2021 product and marketing initiatives at Reverb, Depop and Elo7, which are indicative of how they're utilizing the Etsy playbook that has unlocked so much value over the past five years. I'm also incredibly proud of how we cared for our people, our communities and our planet in 2021. We come to work grateful to be able to support creative entrepreneurs around the world. In this new reality, it's even more important that we take care of our team with empathy, resources and support to help them stay happy and productive. We continued to attract and retain world-class talent in 2021 with a keen focus on diversity. In our soon-to-be-filed 10-K, you'll see some strong movement in the percentage of our leadership level employee population who identify as a member of an underrepresented community.
I'm also proud that Etsy's attrition remains significantly below industry averages, a testament, I believe, to the power of our mission, the health of our culture and the care we take of our team. In addition, we created impactful initiatives to support sellers from underrepresented communities, such as our work with the [Indecipherable] basket weavers. We drove our climate work forward by setting ambitious 2030 net zero targets and launching sustainable packaging for Etsy marketplace sellers. We collected over 6.8 million donations in 2021 for the uplift fund, our donate the change effort that supports the dismantling of barriers to creative entrepreneurship. And we engaged buyers in the positive impact that they create by launching an impact tracker that delivers a personalized digestive year activities such as the number of supported shops, environmental impact and uplift fund contributions. People want to shop their values. We know there's so much more we can and should do to connect our mission to the impact our marketplace makes in the world, and we see this as an integral driver of growth for Etsy. One of my favorite investor questions is when someone asks what my big hairy audacious goal is for Etsy. Well, it's to make Etsy the starting point for your e-commerce journey. We understand that's quite a bold goal given that to make that ambition a reality, we must and are competing against the biggest names in e-commerce and all of retail for that matter. But we believe we have a real opportunity to win. We believe that unlike most of the rest, we offer something truly different and compelling. We aren't trying to sell you the exact same commoditized product just $0.02 cheaper or two minutes faster. And that's why for the Etsy marketplace alone, we see a TAM of about $2 trillion. We believe there are many more millions of potential buyers around the world who should be shopping on Etsy and so much more opportunity to build the Etsy habit for those who already know and love us. To get there, we plan to inspire buyers with an Etsy that feels personal and made for them, like a friend who gets to know you better over time; make buying on Etsy worry-free; be the selling platform that drives seller and buyer loyalty; strengthen the foundation of our House of Brands to enable growth for each marketplace; scale our infrastructure and safeguards to efficiently and sustainably power our global growth and availability; and foster an equitable and productive environment for our people.
In 2022, you'll see us doubling down on increasing buyer frequency through product and marketing experiences designed to inspire and reengage with better personalization, habit formation, intelligent retargeting and strategic discounting. And we'll be leaning into messaging that reaffirms our belief that Etsy turns shopping into a joyful expression of your taste and your values. We believe it's possible to achieve our bold ambition based upon the highly differentiated nature of our marketplaces, the clarity of our strategy and the talent of our team. Our Right to Win strategy is more relevant than ever, both for Etsy.com and our subsidiary brands. And I've never been more excited about Etsy's growth opportunities than I am today. With that, I'll turn it over to Rachel.
