And again, with only 3% of people, if you say, name a place to shop for home furnishings, only 3% of people can name Etsy, you say, name a place to shop for gifts, only 12% of people are naming Etsy. We think there’s enormous opportunity there.
Debra Wasser: Okay. Great. I’m going to jump to a question from Trevor Young and his team at Barclays. And it’s related to our seller growth. So you’ve seen — we’ve added over 1 million active sellers in the last three quarters. Can you talk about the levers that drive that strong growth? And Josh, I’ll give that one to you.
Josh Silverman: I’d say that’s the other side of a tough macro we candidly haven’t done anything different to acquire 1 million sellers. Nothing. It’s just — I think it’s a tougher time. A lot of people are learning — are wanting to make some extra money, and Etsy is a fantastic place. If you make things and you want to sell them, there’s no place like Etsy. And so I think it’s just a testament to the great value that we offer to our sellers.
Debra Wasser: Great. Thank you, Josh. And the next one is for Rachel from Anna Andreeva at Needham. Question on take rate. You mentioned there could be an opportunity to still raise some of the fee structure at more Etsy and the subsidiaries. What is the sensitivity towards additional raises from the seller community.
Rachel Glaser: We strive hard to make sure that if there’s any changes to fee structure that we are providing value back to sellers that they can actually feel and not just value to sellers, But good for the buyers too. There’s really three or four ways to expand take rate. One of them would be to expand services we already offer. So for instance, Etsy Ads is a service we provide that we’ve continued to improve the efficacy of that product, and it allows us to grow the revenue from that product. Etsy Payments is another example of that, where we just talked about launching more Etsy Payments markets and that expands fees from Etsy Payments. Also benefit to the sellers in those markets. Another way to expand take rate would be to offer new services.
So you can — we have nothing specific to announce on our call today, but I mean you can look at other marketplaces and you can see a lot of services that Etsy does not currently provide and those might be services that are beneficial to our sellers that we could consider investing in. And then there’s straight pricing increases, and you’ve seen us do that a couple of times. And again, we would never just make a — or we have never make just a wholesale change to our pricing, but we would do it in conjunction for — to answer this question, what can — why would we be — how would we be investing that incremental revenue derived from a higher price? And we think hard about that. So you’ve seen us, if you go back over time, you’ve seen us been able to increase our marketing investment because we’ve taken lifetime value up and we can continue to invest or dollars and still have a high — achieve our marginal ROI thresholds.
And in turn, you’ve seen as we’ve done that, not only has marketing increased, but so has GMS. So it’s been a virtuous circle that we’ve really appreciated. So we need to answer that question for ourselves. What way could we put those dollars to work that will be beneficial to the overall marketplace. And that’s how we look at it.
Debra Wasser: Okay. Great. We had a question in from Eddie Yruma at Piper Sandler, and it’s really about the financials of Depot, which I want to ask Rachel. But I first want to ask Josh sort of what we’re seeing in the business there, talk about the financial performance just in general of Depop and what do we think is attributing their growth? And then Rachel, maybe you can add on how we think about their EBITDA margin drag.
Josh Silverman: I mean Depop had a great quarter. Depop is doing great. And particularly in the U.S. Depop is doing fantastic in the U.S. right now. And again, I think this is the other side of a tough macro is Depop is a way to get very affordable close that doesn’t have a negative impact on the environment. And that’s very popular right now. And so Depop is no question benefiting from that. I also think the management team we put in place and the specific programs they’re executing are working, the marketing programs that are executing are working. . So it is the benefit of a portfolio as we hoped when we bought that company, that having a portfolio allows you to benefit from different sectors of the economy at different times, and that’s where we are seeing.
Debra Wasser: Yes, Rachel, did you want to add anything there on that?
Rachel Glaser: Yes. The only thing I’d add is that when we talked about our guidance, we said that we expect in the fourth quarter, our subsidiaries to be about a 300 basis point contraction to our overall margins. That’s down from the 300 to 400 basis points that we have been talking about previously. Due in part from the divestiture of Elo7 but also strong growth at Depop.
Debra Wasser: Okay. And then, Rachel, while I have you, a question from Laura Champine at Loop. Is the Q4 GMS outlook in line with the quarter-to-date trend. I assume what she means through October. If so, what do you attribute a slowdown from the pace of Q3? And then she had asked us a connected question separately, which was, is it — is it really coming from Etsy getting crowded out by other advertisers who may lack a hurdle rate to him their investments. that’s one.
Rachel Glaser: So I think that’s a yes end. So with the — just to reiterate the guidance we gave, we said that we grew every single month of Q3, but we started to see some softness towards the end of September, and that continued into October, where we started to see slightly negative trends. The guidance we gave reflects that softness in October, and we said that would — we would expect about low single-digit declines for the fourth quarter. If the macro were to worsen, and we have a long list of macro that I think everyone is familiar with, but we’re seeing decrease in consumer discretionary product spending. And I can double-click on that for a second. If it worsens, we would be — maybe that would shift to mid-single-digit declines.
But if it improves, we could be flat to even positive. The double click on the decreases in consumer discretionary product spending is to just point out what we’ve seen, and I’m sure you’ve all seen the economic data is that we’ve seen actually growth in spending in services and we’ve seen stability and some growth in goods from durable goods. But the non-durable goods, which is where Etsy primarily is and particularly nondurable discretionary goods is the piece that’s really under pressure and is receiving a lot of the headwinds from the macro. The increases in spend in non-durable goods is primarily in essentials and items that are heavily discounted. So we’re really in the sweet spot of the eye of the storm, I would say. On top of that, we are seeing a lot of competitive pressure on advertising spend as the CPCs go up.
