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Startups

How Etsy is Becoming a Services Firm

Online craft marketplace Etsy, considered one of last year’s IPO duds, has seen its stock rebound like the handmade bouncy ball cat toys it sells ($5 for two, with felted wool and organic catnip). It’s more than doubled to above $13 in recent months, closer to its $16 IPO price than it has been for a while.

Yes, it’s fended off competition from Amazon.com and improved margins. But the fact that Etsy is becoming more of a services company rather than a place to buy and sell crafts is also fueling the rally. Etsy, which originally made all its money by taking a cut of each sale and charging a listing fee, now gets 55% of its revenue from helping sellers process payments, promote listings and ship goods. Its latest offering, a subscription service for helping sellers manage their online stores, could ensure a steadier stream of revenues.

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By expanding what it does for sellers, Etsy has kept its revenue growth rate high, currently around 40% year-over-year.