Chief Executive Officer at Etsy
Thanks Deb. We're happy to speak with you this evening to share our latest performance and our outlook for the business. Once again in 2022, our team was able to significantly improve the Etsy customer experience, and do so in ways that had a meaningful and demonstratively positive impact on our financial metrics. We believe it's no accident that Etsy's performance has remained healthy in a volatile environment. We're also proud of the continued focus we've had over the past five years on profitable growth and cost discipline, which we believe serves us especially well today. Our ability to retain pandemic gains supports our belief in the relevancy of our Right to Win strategy, the focus and discipline of our investment strategy, and the resiliency of our business model.
The Etsy marketplace ended the year on a high note with strong holiday performance and accelerating year over three-year GMS in the fourth-quarter. Etsy and our sellers helped to make the season bright. GMS grew year-over-year on a currency-neutral basis during Cyber 5. We had particularly strong days on small-business Saturday and Giving Tuesday, supporting our belief that buyers associated Etsy with shopping small and making a positive impact. We pulled out all the stops to help our sellers have the best season possible, which included holiday ad campaigns in the US, UK and Germany, spotlighting well-crafted items for all budgets, types of people and giftable moments, out-of-home campaigns in the UK and Germany, increased seller participation in our annual cyber sales event, educational moments and optimized selling tools, and last but certainly not least, our new Etsy Purchase Protection program, which enhances peace of mind for buyers and sellers. This strong fourth-quarter enabled us to finish 2022 having delivered consolidated GMS of $13.3 billion, down slightly from the prior year; record revenue of $2.6 billion, up about 10%; and non-GAAP adjusted EBITDA of about $717 million, essentially flat with the prior year as we reinvested most of the Etsy transaction fee increase back into the business. Rachel will of course review the financials later on.
From a topline perspective, we're now nearly three times the size we were pre-pandemic. And we've been careful about how we've grown our cost structure with an eye towards investing in the fewest most important areas we believe will sustain and continue to grow the business visible in our profitable growth and strong free cash flow during what was undoubtedly a challenging year for e-commerce at large, as well as for Etsy. I'm truly proud of our performance, and importantly while we don't have a crystal ball, it's this sustained performance that gives us the conviction to believe that our discipline, focus and the size of our market opportunity sets us up well no matter what business conditions lie ahead.
Investment in our core Etsy marketplace have really paid-off. And you saw that as we went through 2022, maintaining most of our gains in the face of enormous headwinds. That performance is summed up here. We have nearly twice as many active buyers as we did in 2019. Shoppers are coming to us more frequently and spending more with Etsy and we're continuing to build the Etsy habit. In addition to earning our place in buyers' hearts, we believe we've also deepened our relationship with Etsy sellers. We've seen seller cohorts retain much of the gains achieved during the pandemic even if the world reopened and e-commerce headwinds increased. Etsy's mission is to keep commerce human, and we believe that these past two years have shown that the customer needs we meet our both powerful and enduring and that Etsy offers something different.
In addition to maintaining our gains, we did in fact grow in some very important ways last year. Just a few examples. Strategies to introduce more buyers who identify as men to the joys of Etsy resulted in 22 million male active buyers at year end, up 124% since 2019 and now at our highest-level yet. We reactivated 24 million buyers who lapsed over the prior 12 months, the most ever reactivated in one year. Germany was a standout performer for Etsy in 2022, with GMS increasing at a healthy double-digit growth rate, and now over four times larger than in 2019. That's pretty remarkable especially given macroeconomic conditions in that region of the world.
We made real progress in our newest core market India growing to over 120,000 sellers with approximately 5 million listings, over 30% of which thanks to our investments in local payment options are now available to local buyers. We're making important strides as we methodically build the foundation for a vibrant two-sided marketplace. We believe that these metrics are indicative of just how early we are in expanding our share of wallet in our estimated two trillion-dollar TAM and our mission to bring the world a true alternative to commoditized shopping.
I'm also incredibly proud once again of how we cared for our people, our communities and our planet in 2022. We come to work grateful to be able to support creative entrepreneurs around the world, and as a result we continue to attract and retain world-class talent. Being part of a community means that when one part is suffering the rest of us try to step-up and offer our support. And even now as we start 2023, Etsy has already stepped-up to support sellers impacted by the California floods and of course by the devastating earthquakes in Turkey. As you'll see in our soon-to-be filed 10-K we continue to make excellent progress on our ESG goals which remain very well-aligned with our business goals. At our core, we believe, people want to shop their values and they want to work where they can make a difference. We know there is so much more we can do to connect our mission to keep commerce human to the impact our marketplaces make in the world and we see this as an integral driver of growth for our entire house of brands.
No Etsy presentation would be complete without our Right to Win slide, the strategy we unveiled in 2019 which remains robust and relevant today. We're confident that this strategy has enabled us to deepen our competitive advantages and gain market-share over time and that our disciplined ROI focused approach to investments in product, marketing, technology and people has and will continue to pay-off. Each year we pick a select set of customer experiences where we believe we can make material improvements in ways that result in materially better experiences for buyers, more sales for sellers and better returns for investors. Etsy teams often working in what we call a squad are tasked with a single customer experience to improve in ways that achieve a specific financial target. For example, in 2022 we tasked the Etsy Ads team to make ads more relevant for buyers while keeping seller ROACE above our target levels, which drove over $100 million in incremental annualized revenue, while improving the experience for our customers. Squads have a great deal of freedom to test fast and learn fast and a strong bias to action. They often push more than one release per week typically to 50% of Etsy's audience so we can quickly measure whether that release has demonstrably lifted GMS or moved the target metrics. Importantly, we meet monthly to review the progress made by each squad. By doing this across our entire portfolio of work, we're able to understand the degree of payback we're getting we're not from our investments, how they are impacting daily performance and adjust our work accordingly to ensure we're moving the ball forward to improve customer experiences and meet our targets. It's important to note and as shown on this slide that our teams work not only on the core buyer and seller experiences, we take the same approach across member services, trust and safety, payments, fulfillment, our Martech stack, site performance and enablement and so on. Last year, we said, in order to earn a greater share of wallet, we've centered our Right to Win investments on inspiration, having fun and engaging experiences that keep you coming back for more; efficiency, helping you quickly and easily get-in, buy and get-out when you already know what you want; and reliability, ensuring a stress-free and dependable purchase. I'm going to run-through some very tangible examples of how the approach I've just outlined shows up in our performance.
A great example of how we made Etsy more inspirational is with by our collections, a wafer uses to organize items into groups which are easy to share or come back to later. In 2021, we set a goal to increase the number and usability of collections and that year 29 million collections were created. In 2022, we shifted focus from creation to display to make collections a more useful part of the buyer journey and to develop ways for our community to inspire each other. Our teams delivered excellent results, including a 20% increase in items being added to collections, a 36% increase in the number of shop followers, and a 12% increase in the number of items favorited. All of this makes our work to engage buyers and personalize their experiences even more powerful. In 2023, we plan to focus on making collections more inspiring and shoppable, building new avenues for buyers to discover, save and purchase items as well as to find and follow shops to get targeted sales and personalized updates.
We made the Etsy buying experience more efficient. Improvements in the search experience drove lifts in site-wide conversion rate and average buyer spend. We improved the buyer experience in so many ways. One of my favorite examples from last year was putting an add to cart button directly on the search result page based on the insight that some buyers now feel they have enough information on the search result page to buy without needing to visit the detailed listing page. This made the buying experience faster and more convenient for those shoppers while improving conversion rate and hence driving more sales for our sellers. Our team is particularly excited about last year's work to improve site performance. For example, we reduced page load times in search, which were cut by nearly one full second. These and other performance wins in 2022 drove nearly $100 million in incremental site-wide GMS. And we've made so much progress making the Etsy experience more trusted and reliable. This included our continued efforts to provide more transparency around delivery times and launching clear listing level return policies. At the end of 2022, over 30% of Etsy listings had a policy of accepts returns clearly visible at the listing level up from less than 10% when we started focusing on clarity of seller return policies in the fall. And Etsy purchase protection is already impacting the customer experience. Resolution times for customer issues dropped materially as our customer efforts score improved from 70% to nearly 90%. We have an equally disciplined approach to the payback we get on our marketing investments. Dollar spent in highly targeted and strategic ways to differentiate our brand, build awareness, attract new buyers, fuel engagement, and get buyers coming back. As you know, since 2018 we've leaned more heavily into upper funnel brand strategies through TV and digital video to capture the hearts of millions of global buyers and create a flywheel that elevates the effectiveness of our other marketing channels. As you can see, these efforts have significantly moved the needle on-brand awareness and loyalty and in particular on purchase intent, a critical leading indicator.
While we become a top 10 marketplace in the majority of our core markets, we continue to see so much opportunity to help buyers associate Etsy with more specific purchase occasions throughout the year, and to do so both among those who already shop Etsy and those who don't. We've been getting strong returns from our brand spend in terms of in-period GMS as well as lifetime value of buyers. In addition to top of funnel brand work we've deepened our investments and elevated effort throughout the funnel. Our team delivered hundreds of millions of dollars of incremental annualized GMS by improving the data feeds to our advertising partners and affiliate channels, improving search engine optimizations and fun fact, we drove about $100 million in incremental annualized GMS just from improving our email campaigns. We're seeing positive returns from new channels like out-of-home and podcasting. We'll continue to lean into these carefully, testing and measuring ROI before going deeper.
With all this progress, investors often ask if there is still more opportunity to improve the Etsy marketplace. Absolutely. We believe there are many millions of potential buyers around the world who should be shopping on Etsy but aren't yet, and so much more opportunity to build the Etsy habit for those who already know and love us. For 2023, we've centered our Right to Win Strategy and our teams work on these objectives: First, welcoming new buyers to the joy of Etsy. When we think about how we can foster continued growth over the coming years, we see new buyer growth is an important lever. We intend to meet new buyers where they are, in the channels in which they are spending time and help them feel at-home, no matter their interests or tastes, the country they come from, or how they came to us. Second, deepening by our curiosity and engagement. This is really about how the Etsy experience gets better the more you visit, the more you engage and the more you shop, such as advancing our personalization to delight you with our inventory and our purchase suggestions. Third, building trust when transacting with us. When you shop on Etsy, you're buying from one of five million creative entrepreneurs around the world. We want to make sure both new and existing buyers have peace of mind when buying on Etsy. Among other initiatives, we'll build-on the foundation of Etsy purchase protection to help buyers and sellers have even more confidence in us, while we continue to invest and ensuring a trusted and safe platform. And fourth, being the platform sellers love to sell on, creative entrepreneurs have so much to juggle. We'll keep investing to help them manage their shops as efficiently and effectively as possible so they get the absolute most out of their time and money while delivering the best possible experience to buyers. We have so much on our road map that we're excited to tell you about as we go through 2023.
In 2022, we worked to integrate Depop and Elo7, which joined Reverb and Etsy in our House of Brands. While the performance of each marketplace differed given their various stages of evolution and specific marketplace dynamics, we're excited to unlock the potential of each. In 2022, Reverb invested in optimizing conversion rate, delivering a more customized experience to different types of music makers and driving international growth. Similar to Etsy, Reverb maintained the vast majority of its pandemic gains in 2022 and continued to meaningfully outpace the musical instrument market on a three-year basis, yet still represents less than 4% of the total musical instrument market. Depop has become a community-powered fashion marketplace to buy and sell unique fashion with approximately 30 million registered users. While reopening, competitive dynamics, exchange rate fluctuations and other factors impacted Depop's 2022 performance, we believe it's still very early days for the resale opportunity.
Kuthy and her team are focused on reigniting top line growth by improving the core economics of the business, including the reach and relevance of search and discovery, improving the web buyer experience, embedding value signals and establishing trust to transact. For Elo7, the easing of the COVID-19 pandemic in Brazil last year led to a resumption of consumer mobility and therefore, a return to in-person celebration in events, Elo7's sweet spot, and the business began to see some performance improvement. Key areas of investment for Elo7 during 2022 included conversion rate improvements and giving sellers access to faster and more affordable shipping. Elo7 also began testing an online marketing campaign aimed at driving brand awareness as it builds a broader marketing strategy. Similar to Etsy, we believe that Elo7 can expand its consideration set in the mind of Brazilian consumers, becoming a destination they turn to more frequently for more of life's special moments.
Last year, we said it was our aspiration to make Etsy a starting point for your e-commerce journey. I feel even more confident than I did a year ago that this bold statement is the right aspiration for us. In our quest to achieve this, we'll remain hyper-focused on doing something different enough that is better enough and matters often enough to win sustained customer loyalty. I want to thank our incredible global team for all your hard work making our marketplaces better places to sell and shop in 2022 and to our shareholders for your continued support. While the world remains a fairly unpredictable place, we've proven our differentiation and resilience, and that gives us a lot of comfort as we keep our eye on the prize. With that, I'll turn it over to Rachel.