Etsy to Sell Depop to eBay for $1.2 Billion as Company Refocuses on Core Marketplace
Etsy has agreed to sell Depop, its secondhand fashion application, to eBay for approximately $1.2 billion in cash, a move that sent Etsy shares up around 9% and signalled a strategic retreat to the company's roots as a marketplace for handmade and artisan goods.
The deal, announced alongside Etsy's fourth-quarter earnings, drew an enthusiastic response from investors despite the underlying financial results falling short of expectations in several areas. Etsy chief executive Kruti Patel Goyal said the divestiture would allow the business to concentrate fully on its primary platform, where it has been stepping up marketing efforts to attract more buyers.
Etsy reported earnings of 92 cents per share for the fourth quarter, ahead of analyst expectations of 84 cents. Revenue came in at $882 million, narrowly missing forecasts of $885 million. Gross merchandise sales, which measure the total value of goods sold through the platform, fell 3.8% year on year to $3.59 billion, also missing estimates. The company attributed part of that decline to its earlier disposal of Reverb, a musical instruments marketplace sold last June.
Net income for the quarter dropped 14.8% compared with the same period a year ago, falling to $110.7 million, or 92 cents per share, from $129.9 million, or $1.03 per share previously.
Despite the weaker figures, investor attention remained fixed on the Depop transaction. Launched in 2011 and acquired by Etsy in 2021 for around $1.6 billion, Depop became popular with younger consumers seeking vintage and pre-owned clothing. The platform never fully integrated into Etsy's broader strategy and its sale at a significant discount to its original purchase price reflects the difficulties Etsy encountered in making the acquisition work.
For eBay, the acquisition presents a different opportunity. The company described Depop as complementary to its existing operations and said it would reinforce eBay's position in fashion, which has emerged as one of its fastest-growing categories. eBay shares also rose around 3% following the announcement.
Etsy's seller base continued to expand, with active sellers growing 7.7% year on year to 8.76 million, surpassing analyst forecasts of 8.5 million. Active buyers, however, slipped 2% to 93.54 million, reflecting broader pressures on consumer spending. The company cited a sustained pullback in discretionary expenditure and shifting buyer behaviour as ongoing challenges.
Looking ahead, Etsy guided first-quarter gross merchandise sales of between $2.38 billion and $2.43 billion, well below analyst estimates of $2.68 billion and significantly lower than the $2.8 billion recorded in the same quarter a year ago. The cautious outlook suggests the company expects near-term trading conditions to remain difficult.
Industry Impact and Market Implications
The Depop divestiture illustrates a wider pattern emerging among technology-driven marketplace businesses: the retreat from aggressive acquisition strategies pursued during the low-interest-rate environment of the early 2020s. Companies that expanded rapidly through bolt-on purchases are now reassessing whether those assets deliver sufficient returns, and several have chosen to shed non-core divisions to simplify operations and improve profitability.
For Etsy specifically, the sale acknowledges that managing multiple distinct consumer platforms requires significant capital and management focus that may not be justified when each platform serves a different demographic with different expectations. Depop's user base skews younger and trend-driven, a distinct contrast to the craft and artisan community that forms Etsy's core audience.
The transaction may also influence how platform businesses are valued in the current market. Depop changing hands at roughly $1.2 billion, against an original purchase price of approximately $1.6 billion, sets a reference point for resale and recommerce platforms at a time when investor enthusiasm for such assets has moderated.
For eBay, the deal is a measured but strategically coherent move. Fashion resale is growing, driven by environmental concerns and cost-conscious younger shoppers. Adding Depop's community and brand recognition could help eBay compete more effectively with dedicated recommerce platforms and large general retailers that have introduced their own resale features.
More broadly, the results highlight that even established online marketplaces face structural headwinds. Declining active buyer numbers and subdued merchandise sales at Etsy reflect not only competition from lower-cost platforms but also a more cautious consumer, particularly in the discretionary categories that dominate craft and fashion resale. How Etsy performs in the quarters ahead as it refocuses its resources will be closely watched as an indicator of whether strategic simplification translates into improved commercial outcomes.
