Chicago VC Ezra Galston has a good analysis of the Etsy S1 on Techcrunch today.  We are investors in many marketplace businesses (YemekSepeti, Vivense, Grupanya, Idemama, Tapu.com, Videdressing, Auctionata, Carpooling, Smava, etc.), and we watch the industry intently, as there has been more recent value created in marketplaces than any area of consumer internet.

Galston's post is worth reading in full, so I will not try to summarize, except for one very interesting data point: that almost 45% of its revenue comes from Seller Services, compared to ~25% just two years ago.

This means that the growth of the marketplace is going to be more dependent on the number of sellers, than the transaction volume.  At first look, this does not look too intelligent: the latter number will certainly grow faster.  However, as we see marketplaces maturing, this is the way that the leader/incumbent can take aggressive pricing moves to keep competitors away.  This is observable in Etsy's commissions moving from 5+% to 3.5%.  If you are an emerging Etsy competitor, there's not enough margin for you to grow fast.

Ultimately, this can lead to marketplace deflation, a la CraigsList, which came and killed many fledgling classifieds sites with its massive traffic and free offering.  I am curious to see if we start seeing this type of defensive behavior from the modern marketplace champions, such as, Uber and Airbnb.