Sellers who pay to list on Etsy expect the marketplace to invest in marketing and advertising to attract shoppers. If it does a good job in bringing in buyers, Etsy is rewarded by receiving commission fees from sellers.
With a new change announced on February 26, Etsy will continue to advertise sellers’ listings on Google and elsewhere, but now, in addition to paying a commission fee on all sales, sellers will pay an additional “advertising fee” of between 12% – 15% for sales resulting from Offsite Ads.
Here’s how Etsy explained the new Offsite Ads program:
“We’re introducing an updated advertising service, Offsite Ads, which uses Etsy’s budget and expertise to promote your items on multiple high-traffic sites including Google, Facebook, Instagram, Pinterest, and Bing.
“When a shopper clicks on one of those online ads for your products and purchases from your shop within 30 days, you’ll pay an advertising fee.
“You only pay an advertising fee when you make a sale—eliminating the risk you could pay for ads that don’t work for you. Offsite Ads is only available on Etsy—we designed it with the unique needs of Etsy shop owners in mind.”
There are some positive aspects – sellers won’t pay upfront for offsite ads, so they’ve risked nothing if the ads are ineffective. And Etsy says it has an experienced team of experts managing the ads.
While it’s true that not all sellers are experienced in advertising, they do know their products better than Etsy staff. And while Etsy’s and sellers’ interests are aligned, the ad team will be thinking first and foremost about the company’s interests rather than individual sellers.
There are also some specific aspects of the program that have sellers concerned:
- offsite ads are mandatory for sellers who do over $10,000 in sales/year (not including shipping costs unless sellers have absorbed them by offering “free shipping”);
- and sellers have no control over how much Etsy will advertise on their behalf or which of their listings Etsy will advertise.
Those points have enormous implications. Sellers may want Etsy to advertise more on their behalf. Or, if they have their own website and advertise directly off-Etsy, they may not want to compete with Etsy’s ad program at all. But there’s no way for $10K sellers to dial it up or down or shut it off.
In addition, sellers know which of their items it makes sense to promote for a variety of reasons, not the least of which is financial. Some products have razor-thin margins, and paying an extra 12% advertising fee wouldn’t make sense, yet they have no control over which products Etsy will advertise and thus incur higher fees.
Etsy Ads – Back to Being Promoted Listings (Optional)
Etsy also made a change that sellers had called for – it debundled its advertising program so sellers who wish to pay to promote their listings on Etsy can do so through the new version of the Etsy Ads program. Previously Etsy determined how much of a seller’s ad budget would go toward Etsy Promoted Listings versus Google ads – and sellers complained the program was less effective than when it had not included Google ads.
In its late-February announcement, Etsy explained, “Now when you run an Etsy Ads campaign, your budget will only go toward advertising your listings to shoppers on Etsy.”
“Google is now part of Offsite Ads, so we’ll no longer use your Etsy Ads budget for Google Shopping.”
Etsy Offsite Ads (Mandatory for some)
Etsy will control and pay for ads on Offsite Ads, which includes Google, Facebook, Instagram, Pinterest, and Bing. However, if the ad results in a sale, sellers will pay Etsy an additional ad fee.
To reiterate how sellers are impacted by the new program:
- The program is optional for sellers who make less than $10,000 in sales in a 12-month period. They will pay a 15% Ad fee for sales generated through the program on top of the regular 5% commission fee they pay Etsy.
- Sellers who make at least $10,000/year cannot opt out of the Etsy Offsite Ads program, and they will pay an extra 12% Ad fee for sales generated through the program on top of the regular 5% commission fee.
Keep in mind that all sellers will be automatically enrolled in the program, so if you make less than $10,000 in revenue/year on Etsy, you will have to opt out if you choose not to participate.
Etsy provided an example of how the program might affect a typical seller:
“For most sellers, one in 10 sales—about 10%—will come from Offsite Ads. So, let’s say you make $1,000 a year on Etsy and 10% of your sales come from Offsite Ads, that would mean your advertising fees for the year would be just $15 based on a 15% advertising fee. If you sell $10,000 on Etsy each year and 10% of your sales come from Offsite Ads, you could expect to pay about $120 with a 12% advertising fee.”
Remember that’s in addition to the regular 5% commission Etsy already charges on the selling price plus shipping.
In a Q&A session on the Etsy boards, a marketing employee responded with the following response when asked for further clarification:
“For most sellers, we estimate that 1 in 10 sales, about 10%, will come from Offsite Ads. When calculating these examples, we assumed the seller would pay an advertising fee on just 10% of their orders. So, if you make $1,000 a year on Etsy, and 10% of your sales come from Offsite Ads, that means you would pay just $15 on $100 in sales based on a 15% advertising fee. If you sell $10,000 on Etsy each year and 10% of your sales come from Offsite Ads you could expect to pay about $120 with a 12% advertising fee.”
Another seller asked, “What if a shops revenue falls below $10K? We the shop automatically be removed from this mandatory forced program?”
To which a moderator responded, “Once your Etsy shop makes $10,000 USD or in a 12-month period, you’ll be required to participate for the lifetime of your shop and you’ll get the discounted 12% advertising fee. You can calculate how much you’ve earned on Etsy in your Shop Stats.”
Another seller asked, “Where on Earth do you get 15% from? How can you justify such a massive chunk of OUR money?”
To which an Etsy moderator responded:
“We decided on a 15% advertising fee by doing an analysis of other advertising services, and we’re confident this is a competitive value for Etsy shop owners. We also got feedback from thousands of randomly selected sellers about what kinds of advertising solutions would work best for them before making this change to our advertising service. Traditional advertising services make you spend money even when you don’t make a sale. With Offsite Ads, you only pay an advertising fee when you make a sale. We believe this service will support the long-term success of both new and existing shop owners.”
Additional points sellers should keep in mind:
- Offsite Ads fees are capped at $100 per order.
- Etsy will not charge fees for Offsite Ads until after April 14, 2020; sellers can find information about their rates in Shop Manager before that date.
Etsy said, “Most sellers will pay an advertising fee on fewer than 10% of their sales, so it shouldn’t have a big effect on your bottom line.” But one seller wrote on an Etsy discussion board thread that they were stunned when they received a notice from Etsy that it expected 53% of their sales would be charged the 12% advertising fee.
Etsy posted a video on Facebook featuring a senior product marketing manager explaining the new Offsite Ads program.
And you can join in the discussion on the AuctionBytes Blog.