Etsy Expands to New Vertical with Reverb Acquisition


Jul. 23 2019, Published 10:08 a.m. ET

Etsy spends $275 million on Reverb Holdings

Etsy (ETSY) stock price edged higher on the confirmation that the company is expanding into a new vertical. The company is expanding its footprint into the business of selling new and used musical instruments. A $275 million Reverb Holdings acquisition is the latest catalyst fueling the price action.

Better known as the eBay (EBAY) for music instruments, Reverb Holdings should strengthen Etsy’s revenue streams. The acquisition should also bolster Etsy’s prospects in the musical instruments market. According to Statista, the music instruments market is set to grow annually by 3.2% between 2019 and 2023.

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Expansion into musical instruments comes at a time when Etsy is looking to bounce back to revenue growth. Growth slowed in the first quarter as the company reported $169.3 billion in revenues, representing 40.1% YoY growth. However, it was still lower compared to $200 million in revenue generated in the fourth quarter of 2018.

Etsy can, however, heave a sigh of relief, as its Q1 revenue represented one of the fastest growth rates among e-commerce companies. eBay, Amazon (AMZN), and JD.com (JD) reported 2%, 17%, and 21% year-over-year growth in revenues in the first quarter. Leading the pack were Shopify (SHOP) and Alibaba (BABA), which boosted revenues 50% and 51%, respectively.

Etsy stock price continues its ascendance on the company expanding into a sector with vast opportunities for growth. The stock is already up by more than 30% for the year. 2019 has turned out to be an inflection year following the Etsy buy.

Merger synergies could help Etsy stock

Reverb is an interesting Etsy acquisition as it has created a global destination for the global music community. Etsy stands to gain access to a global audience of musicians looking for rare and coveted musical items. Reverb also joins Etsy on building a strong brand in a large and fragmented market with strong growth dynamics.

According to CEO Josh Silverman, the acquisition fits well with the push to keep commerce human. Etsy and Reverb joining forces should lead to improvements in the search and discovery of items in online marketplaces. The two also plan to simplify the process of buying by building a global brand and community.

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“We have been successfully implementing these types of initiatives at Etsy for two years now, and are confident that we can similarly impact Reverb’s business. We look forward to welcoming Reverb’s talented employees to the Etsy family as we work to better serve our buyers and sellers and drive value for our stakeholders,” explained Mr. Silverman.

Reverb joins Etsy having raised nearly $50 million from big-name backers such as PayPal (PYPL) founder Max Levchin, according to Venture Beat. Twitter (TWTR) COO, Adam Bain, and Lean Startup author, Eric Rise, are also investors. The company is to continue operating as a standalone business once the deal closes.

This is the first acquisition since Etsy acquired AI startup Blackbird in 2016 for $32.5 million. With the acquisition, the company gained access to artificial intelligence software for enhancing search. The acquisition came at a time when tech giants were increasingly spending big on AI talent. Intel (INTC), eBay, and Salesforce (CRM) had all inked AI deals in the form of Nervana, ExpertMaker, and MetaMind, respectively.

Etsy’s other acquisitions

Other notable acquisitions that Etsy has closed to strengthen e-commerce prospects include Adtuitive and Jarvis Labs. It has also inked deals for Lascaux Mixel and Trunkt in the recent past.

The merger and acquisitions strategy underscores the company’s focus on putting capital to work in an opportunistic way. Such investments have helped Etsy stock price that hit an all-time high of $73 in March.


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