Naved Khan: Understood. And then maybe a quick follow-up. So I think Josh talked about app downloads as a priority. What are the things you look at in terms of driving those downloads?
Josh Silverman: Yes. Great question. Thank you so much for that. So first, we find that someone who is an app user produces about 75% more GMS than somebody who’s not an app user. So we think having someone on the app is a really valuable thing. And we — frankly, we leaned into this a fair amount in 2021, and in 2022 and 2023, it wasn’t a big focus with competing priorities. It’s a big focus right now for us again. And the kinds of things we can do is, first, use more screen real estate to be promoting why you should be downloading the app. When someone is on mobile, web or on the desktop, using more screen real estate to talk about the benefits of being in the app, there’s some trade-off of that, of course, because we could be using that space to try to sell you something and drive the sale.
And we’re going to be using it in the right moments in the right ways to try to drive to app download. We think from a lifetime value perspective, that’s a good trade-off. We’re always looking at how can we add more benefits in the app to make the app more valuable, to make it richer. So you’ve seen us do things like have app-only specials and sales or to have first on app like certain deals and drops that are specific to the app. Track your package has been a very powerful call to action. Why you need to download the app, so you can track the package and the purchase that you just made. So we’ve got some spots that are really focused right now on just developing the value propositions and promoting the value propositions to make sure that people are downloading the app and using the app more.
And when we compare Etsy to our peers, we find that our penetration on Etsy is lower than many peers. So we think that’s a gap that we can close. And we think in doing that will drive more LTV, more frequency, and we think that’s very healthy.
Naved Khan: Thank you.
Deb Wasser: Thanks, Naved.
Operator: Our next question comes from Trevor Young with Barclays. Please unmute your audio and your video and ask your question.
Trevor Young: Okay. Great. Thanks. Just to clarify on the full-year guide commentary and accelerating in 2H. Is that to be interpreted that we’ll still be slightly negative in the back half? Or do you think we’ll get to flattish GMS by year-end?
Rachel Glaser: So the guide we gave said that we the range of the guide was that we could be slightly positive, slightly better than Q2, not positive, slightly better than Q2 or slightly worse than Q2, which I know is not very helpful. Our current forecast sees that our current view is that we see some acceleration as we go through the year. But the cushion, the margin of error has gotten a lot narrower, which is why we very cautiously giving you some giving you some perspective on what we are seeing. So it’s a kind of a cautious narrow range without specifically saying, can you get all the way to flat or positive at that upper end? And how much further could you go from the Q2 range that we’ve given you on the downside. We’re modestly optimistic because we have really great product and marketing initiatives planned and they stack as they go through the year. And so we felt confident enough in our internal forecasting to be able to keep give that guidance.
Josh Silverman: I think what we said is a modest acceleration in the second-half of the year.
Rachel Glaser: And we didn’t say whether it would be to get to positive or not.
Josh Silverman: Yes.
Trevor Young: Okay. And then just to clarify on the 50 bp headwind from removing listings that violate the policies. Is that expected — that 50 basis points expected to continue throughout this year? Is that what’s baked in?
Josh Silverman: So that has been happening for about six to nine months. And the reason we put that data point in there is just to give some sense that we’re leading in a lot, but there’s still quite a high replacement rate. So even as we take things down we generally see another seller ready, willing and able to make that sale, but it has a slight headwind. I wouldn’t be surprised to see it continue. It could even grow a little bit more as we keep leaning in more and more. We’ve always said that there — we try as far as we can to enforce, and there are some things that get through our — controls. It is a small but non-zero number. And so I think 50 bps is pretty consistent with that prior commentary.
Trevor Young: Okay. Great. Thank you very much.
Josh Silverman: Yes.
Operator: Our next question comes from Ken Gawrelski with Wells Fargo.
Ken Gawrelski: Hi. Good afternoon. Thanks for doing this. Appreciate it. Can I ask — it’s clear to me that you see yourselves as a growth company, right? And unfortunately, you haven’t been growing. So the question I have is, do you feel like you have enough certainty around the different macro and maybe even micro factors to be more aggressive, to take — to be a bit bolder in your initiatives. And I’m not suggesting that you’re not making real attempts to get back to growth. But what I’m getting at is are you willing to make the bet now to say either we’re going to spend much more on marketing because we have a better feel for the landscape and we’ve stomached the T-move, excessive spending for multiple quarters. And now we know what it looks like?
And we have a feel for where the macro, where the consumer opportunity is or is not. I guess, what I’m just trying to get at is, it feels like there’s loyalty and alpha coming or in a beta coming in the back half, but it doesn’t — I don’t hear yet that kind of the real aggressive move from you. So talk to me about how you think about that, how do you feel like the organization is prepared to be more aggressive to get back to growth?
Josh Silverman: Yes. I think that we — the internal mantra we have been on for the past year is bold and fast. That we want to move to bigger, bolder, more eye-catching, more tension grabbing releases and fewer of the more incremental steps that have been driving a ton of progress in a very ROI positive and very predictable way for the last seven years is not what’s going to catch consumer attention and drive that kind of step function change that we are looking for. And so that’s very much the kinds of things that we have been leading into, Gift Mode being one example, where we’re launching a whole new experience on Etsy, we launched it very quickly in MVP form. I’m very proud of what the team was able to do in a short amount of time.
And now you’re going to see us steadily make that experience much better and continue to really differentiate that versus the rest of the market. I think the work that we’re doing in quality, which you’ll see as we roll through the second half of the year, I think, is going to be very impactful. And in fact, pretty bold, I do think launching a loyalty program in beta like we’re trying to launch, you’ll see is going to be interesting. And our economic model looks different than first party and making the economics work when you’re a third-party seller, it’s a little different. You’re going to see us really lean in there. So we are very much looking for frame breaking, attention grabbing, customer experiences that we can launch more often whole cloth and less bit by bit, which has pros and cons, but I think in terms of catching consumer attention, it’s really important.
What I don’t think is just spending a lot more is going to be the answer. So if — when we hear like marketing, lean a lot more into marketing, we think we spent a rational amount of money on marketing. We think we’re very rational about what is our cost of capital? What do you get if you invest the dollar? And how do we make sure every time we invest the dollar, we get more than our cost of capital back. We, I think, have a lot of science and a lot of discipline around that. The other thing I’ll say is minimizing waste is a really important value that we have always held dear. We are in our seventh year of efficiency now. Every single quarter, we look at every single dollar we spend. And so if you look at the KTLO, the keep the lights on activity required to support an organization of our size and scale, it is a pretty material effort to run a business of our size, scale and complexity.
We have resources to grow. They’re not infinite. And so every year, we pick a few battles, and we really lean into those with our resources. You could rightly say why last year and the year before, where you’re not focused more on app download. App download is a great idea. You should be doing it. And I couldn’t agree more. It’s a great idea relative to the other things we were shipping last year, it didn’t make the cut. And we are every year making very tough decisions around what are the few things we really want to lean into that we think are gold that we really think are going to drive growth. By the way, what the team did last year, we have conviction, we will — ton of measurement — sorry, a lot of measurement — excuse me, a lot of measurement to say we think it drove $1.5 billion of incremental value from the products that team shipped last year.
And we have a lot of conviction that the work they’re going to do this year with a 12% smaller team is going to drive even more. So we think the work we’re doing is meaningfully driving growth. It’s driving strong ROI. And we’re going to keep leaning into things that we think get customers to reconsider, they think they know Etsy, here’s things you didn’t know about Etsy that gets you to want to come back and come back more often.
Rachel Glaser: I just want to slip in a couple of quick data points. First of all, the definition of MVP is most valuable.
Josh Silverman: It’s minimum viable product.
Rachel Glaser: So that’s our short hand for shipping not — being agile, not waiting for the whole thing to be fully baked. Second of all, there’s a couple of data points that just point to strength. I mean I think one of the things we feel internally is that we’re building really great product, and we have really great marketing initiatives, and we’re walking straight uphill into the wind with these macro pressures bearing down on us. And when the winds shift, we are going to be very well poised for — we have a phenomenal product offering and we are on a terrific differentiation from other players out there. And a couple of data points I would point to when we — again, when we look at our household income differentiation between lower household incomes and upper and especially the highest household income, so it was above $200,000.
We see continued separation that the higher household incomes are actually growing. And so when the lower household incomes are not. So you can see that behavior quite clearly that people are looking for discounts. They’re spending on essentials and things like health care, gas food, whatever. And they just don’t have money left in their bank account for things that are highly discretionary. Secondly, our GMS per buyer is still 25% higher than it was in 2019. And the reason that’s important is if you look at — I don’t know if you’ve got a chance to listen to the whole call, but we showed a slide and you can look after that shows consumer discretionary spending is coming down and down and down. And it’s not all the way down to the levels it was in — yet in 2019.
It’s still about 8% higher than it was then, but our spend GMS per buyer is 25% higher than it was then. So we’re still strong amongst — is it like a giant among.
Josh Silverman: Pick your analogy, I’ve already messed up our language enough to.
Rachel Glaser: We’re still quite strong, and we’re laying down these initiatives brick-by -brick they just aren’t really getting the benefit of the true consumer demand that we would expect to get once we’re not facing these strong network pressures.
Ken Gawrelski: Understood. One quick follow-up just on the big game, I spending, I almost said the super name. But the BM, you now have 60 to 90 days to kind of judge the impact of all brand spending. You really leaned into brand spending. What have you seen as the impact? Where has it worked? Where hasn’t it worked? Is it frequency, occasional buyers, what — new buyers, what is it?
Josh Silverman: So if we’re talking about — are we talking about the big game ad in particular or kind of Gift Mode kind of more generally?
Ken Gawrelski: No, no, I’m talking about the big game, but I’m also talking about brand advertising, like that big push on brand.
Josh Silverman: So in big game, I am happy we did it. it did what we wanted it to do, which was to ignite a conversation around the nation about Etsy’s new product, Gift Mode, and that was the goal. I want to complement the team. We managed to secure the single most viewed spot during the entire big game and our ad tested super well for things like recall and breakthrough and generating interest to try. So I think the team’s execution of it was really good. But the strategic goal was we have something to say, and that is that Etsy is the place to go for gifting and we’re launching this new thing. And I think that big game ad did a good job, and we shared some data on the call about 200% increase in conversations mentioning Etsy, significant increase in people associating Etsy as a place to help find gifts.
And if we look at gifting GMS, that grew significantly faster than site-wide GMS and was positive in the first quarter. All of those, I think, are helpful data points. Does that mean we would do it again next year? I’m not sure. It really would depend on do we have something we really want to announce. Do we have something we really want to say? But getting back to your first question, bold and fast has really taken root. It’s — you hear it in the halls of Etsy every single day. Is this bold? Is this fast? And a little story behind that. The team pitched me in the summer of 2023 and said, we have this great idea for Gift Mode. We think it’s going to be amazing. And we think we can do it great. It’s going to be bold, and we propose to launch it in the big game of 2025.
And Josh, if you’re prepared to be bold this would be a way to do it. And I said I am prepared to be bold. I’ll meet you halfway because we’re going to do it in the big game of 2024. And that team built and shipped that in four months. And I think it’s a great example. I’m proud of the work that, that team did. And as we said, it’s the kick off, not the mic drop. There’s now a lot more work that’s going to happen to make Gift Mode better and better and better. But it’s that kind of urgency and the willingness to place a bet that I think is exactly what we’re talking about. Now a big game ad is not going to make or break the company. It works or it doesn’t work. We don’t do it in the next quarter, it’s fine. We’re not betting the company on these things.
