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One of the ways Etsy has been steadily growing its revenue while its gross merchandise sales (GMS) decline is by capitalizing on artificial intelligence (AI) capabilities.
That includes Etsy using AI for search and discovery on the consumer side, and on automating routine tasks for sellers. In the past year, Etsy has also leaned into AI for advertising and to work toward enabling agentic commerce. Part of that has stemmed from a partnership with OpenAI to use the large language model (LLM) ChatGPT for what that platform named “instant checkout.”
Etsy ranks No. 20 in the Global Online Marketplaces Database. The database is Digital Commerce 360’s ranking of the 100 largest marketplaces by third-party gross merchandise value (GMV).
Etsy core marketplace GMS increases in Q1 through mobile, AI
“There’s a good reason that search and discovery has been a focus for us,” CEO Kruti Patel Goyal said at a Morgan Stanley technology conference in early March. “Matching is really the core value proposition of a marketplace. So it has been a priority. It should continue to be a priority forever more.”
Goyal called search and discovery “an evergreen priority” for Etsy. And she said advancements in AI, particularly via LLMs, have enabled Etsy to tackle some of its “stickiest challenges.”
She said Etsy uses AI to develop a “deep” understanding of its inventory, its buyers and their intents. Addressing those three aspects together “really amplifies the value of the 100 million-plus listings that we have on the marketplace,” Goyal said.
She also noted that what AI offers in search and discovery has become “a lot better” in the last two years, but even just in the past year.
How Etsy will sell directly through Google’s AI Mode
Etsy has partnered with OpenAI, Google and Microsoft on enabling agentic commerce. In January, Etsy announced it would sell directly through Google AI Mode.
Etsy is also one of the backers of Google’s Agent Payments Protocol (AP2), along with Mastercard, PayPal, American Express, Coinbase, Salesforce, Shopify and Cloudflare.
“We think that agentic commerce presents a really meaningful potential incremental discovery channel for Etsy,” Goyal said.
She called AI-powered platforms “a very strategic area” for the marketplace. She also noted that Etsy traffic from agentic AI sources had grown 15x year over year in its fiscal Q4. Still, that growth came from “a really tiny base, so it still makes up only less than a percentage of our traffic.”
Etsy highlights the different ways it’s using AI and testing agentic commerce integrations. | Image credit: Etsy fiscal Q4 2025 presentation
What Etsy has seen from generative AI-referred traffic, though, is higher purchase intent, average order value (AOV) and a “strong flow-through from this channel,” Goyal said. She said that means consumers are discovering Etsy items via generative AI platforms and going to Etsy “to learn more and engage more deeply.”
Etsy chief financial officer Charles Baker, also speaking at that conference, echoed that AI agents have been “a great source of pass-through traffic.”
“While we’re excited about the agentic checkout on OpenAI or on other destinations, what we’re seeing is a lot of customers say, ‘I need a little bit more information’ … So there has been a very strong flow-through of traffic on to Etsy where people are looking for a little bit more information, which only we have, about those goods and the connection to the seller,” Baker said.
Goyal said the conversation around AI agents “is largely centered on off-platform opportunities presented by agentic commerce. But I actually think the most exciting thing that this new technology offers is really improving the experience on Etsy.”
She said agentic AI is “exciting” as an on-site tool because it makes consumers “comfortable” with a different interface. She said agentic platforms train consumers to use a “more conversational interface as they’re searching and exploring content.”
Etsy experimented with conversational experiences “a couple years ago,” Goyal said, adding that “it wasn’t very effective” at the time. Now, consumers are more comfortable with conversational commerce, she said.
“That unlocks a lot of opportunities” through agentic platforms as well, she said.
In addition to the buyer side, Goyal said “there’s a huge opportunity to apply the same technology and the same interface to the seller side of our experience and to our internal teams.”
Baker said the strength of Etsy’s advertising model reflects its technology to match ads and “the nature of the search query.” He said there are multiple answers to most consumers’ search queries about Etsy’s inventory. Baker also stressed the value of being at the top of the list in search results.
That value “exists even as traffic is coming through from agentic AI,” Baker said.
“We’re trying to show up where buyers start their shopping missions,” he added. “So this means being at the forefront of what’s happening in agentic commerce.”
In addition, he said it means being more present than before on social media, moving advertising spending from linear TV to streaming, and focusing on its mobile app “as a way to have direct, non-intermediated conversations, marketing conversations with our buyers.”
On its mobile app, AI factors into how Etsy applies personalization and targeting, as well as improving the match between advertised products and consumers.
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Copyright © 2026 Digital Commerce 360 | Vertical Web Media LLC
Copyright © 2026 Digital Commerce 360 | Vertical Web Media LLC
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