This is a GREAT column we got sent today, specially written for EB by someone who knows what they are talking about, but who wishes to remain anonymous:
What happens when a CEO can’t let go
This December I nearly lost my breath when I found out that Rob was returning as the CEO of Etsy. Under the guise of moving forward, Etsy took a huge step backward. The return of the original founder carries a threat with it, and I’ve seen it happen too many times before. When the creator of an entity (be it a company or a publication or whatever) cannot separate him/herself from the creation, the over-identification with what has been created turns into a vortex that threatens the ability of the endeavor to stay afloat.
Take RealNetworks for example: The creator was so attached to his original idea that he lost incredible opportunities and allowed his entire project to go under. Recently, the board of a Bay Area non-profit demoted their Founder to Creative Director after he led the company within an inch of bankruptcy. He loved the mission of his project so much that he never actually paid attention to how an office should be run, how finances should be managed, how a non-profit should grow into adolescence. (sound familiar?)
Now with Rob back, Etsy is no different. A poster in the comments on EtsyBitch once put it this way, “I had no idea Etsy was in its third year of start up status.” Now we are about to start year six. If Rob cannot find a way to divorce himself from his early living-room project version of Etsy, this endeavor will be threatened with extinction. I’ve been giving a lot of thought about these ideas, and I’ve waited a bit to share them with the EtsyBitch community. Now that I’ve seen Rob play his hand with Etsy over the last few months, I’m ready to provide a diagnosis and a prognosis for the future. Here goes.
Diagnosis of the current situation:
My comments here are twofold. First, the current structure of Etsy, as many seasoned sellers know, is absolutely broken. Second, the current Google situation may have a deeper root than I’ve heard anyone mention before.
First: Etsy was created without much consideration for scaling (going from a few hundred sellers to making it global one day). The infrastructure that was put into place in the early stages of the company is mainly still in place. Buyers still need to set up member accounts to purchase, purchasing isn’t streamlined with marking items as sold . . . the list goes on and on.
I have a hunch that the base software they’ve written makes it impossible for them to give sellers the options we’ve been needing for the last couple years. Because of the inertia connected to this structure, they will not find a way to migrate the current sellers accounts fairly to a totally new structure that can support the demands sellers have been making. Instead Etsy will continue to put (or claim to put!) band-aids on a system that is hemorrhaging (both money, in terms of buyers not supporting sellers with sales, and sellers migrating to new communities/venues such as Big Cartel and ArtFire).
To name one example, the need to make buyers become “members” of the community stems from a fundamental reliance on a “forums” model. Not every buyer wants to be a part of this community, and those who do not wish to, are forced into a community they might not want to be a part of. But there is no other way to buy from Etsy. One of Rob’s many colleges had a student-run forum using the vBulletin platform. When you are in college, being a part of forums is fun. But customers aren’t students, and when you have a business to run, not every customer wants to join the club. Sometimes they just want their hand-felted drink cozy, and that’s it. Times change, markets change. Etsy needs to update this aspect of their business. But this is what happens when CEOs can’t let go. It’s impossible to see how to, when the creation is your baby.
(As an aside, they also have no incentives for fixing the system because they are making WILD profits from its brokenness. Sellers who constantly relist and engage in rabid competition for being found on the site are driving the site’s continued profits. Once we stop renewing like crazy, Etsy will have to sit and think about how it can actually make the site profitable. The only way Maria made the site profitable was to encourage more sellers to join and make them think that everyone can “Quit Your Day Job” if you sell on Etsy (link). Once new markets dry up, that bull-run will cease.
In line with this is Etsy’s reliance on sellers to do its marketing. When you are a broke start-up in 2005 of course you cannot buy ad-space. But now that they are making money, they can at least do themselves the favor of stepping above the animosity that has developed between Etsy central and its seller base and reach out as an entity to potential buyers. If the buyers don’t know how to get to the mall, how the hell are they going to shop there?)
Second: For the last month (or more) Etsy sellers have been livid about their disappearance from Google searches. For many sellers both their shops and listings have been obliterated from Google search and Google shopping. Etsy didn’t comment much beyond accusing Google of changing something on their end (see here and countless forum threads in “site help” in Etsy’s forums for more).
Lets get over the he said/they said and think about this issue on a higher level: Rob’s outside pet-project “Dopple” was rolled out to the Etsy community without announcement around the same time that the Google issue started to affect members of the selling community. Rob’s name choice is pretty transparent (as if they wouldn’t notice, Rob):
The problems might be as simple as this: If Dopple aimed to compete with Google (using Etsy as a guinea pig!), and if Google got wind of Rob’s ambition to out-google Google, the search giant might have made an internal decision to starve Etsy to death slowly by changing how Etsy (i.e., its sellers!) appear in Google searches. And hell would freeze over before anyone in the Etsy offices would want anyone else to know that. So all of a sudden, Etsy sellers (the people who really make money for Etsy) are being subject to a battle between Google and Rob’s Dopple ambitions. This is pure conjecture, but give it a moment’s consideration. It seems all too likely. And given Etsy’s past track record, their silence speaks volumes.
Prognosis for the future:
What Etsy doesn’t get is that the sellers will not be upset if Etsy takes its community seriously enough to explain this deeper issue of structural inertia and how they are going to fix it. Because that is what needs fixing, even if it means they have to stop gorging off the pennies of thousands of sellers’ renewal fees. There is a better way. If Rob can muster the bravery to have this real conversation, the community will embrace the depth of the communication and will most likely support Etsy’s conversion to a more seller-friendly and buyer-friendly format. If the system can be updated to work, they won’t need to continue perpetuating its brokenness.
I get the sense that although Rob WANTS to be able to have a flourishing and open community of makers (see recent WSJ article) until he trusts them with genuine honesty about what Etsy’s current challenges are, Etsy as it is will continue to deteriorate. Sellers are all too aware of these challenges, so when we hear Rob gloss over non-essential issues like site-width, it is infuriating. The problems are so much deeper than how wide the site is. But Rob started out designing the look of Etsy, so that will always remain his pet concern. Has he ever tried to use his own invention to make money like we do? I doubt it. If he did, he’d maybe finally get what we’re all upset about.
We’re ready for a real conversation about how Etsy can lead the pack that it created five years ago. We need to know how Etsy will molt its child skin and become the only place anyone would even think about going to buy handmade crafts. (Notice that I said buy them, not sell them.) Until this conversation happens, and until this progress is made, Etsy will continue to need to feed off of opening new markets to gullible sellers who aren’t aware of Etsy’s internal problems. Once those markets dry up, so will the company.
This is what happens when CEOs can’t let go.