Etsy and eBay Turn to Social Media Tactics, AI to Revive Growth Amid Weak Demand

Faced with slowing growth and increasing competition, online marketplaces Etsy and eBay are taking a page from the social media playbook. As reported by The Wall Street Journal, both companies are investing heavily in AI-powered personalization to create "feed-like" shopping experiences, mimicking the successful strategies of platforms like TikTok, Instagram, and Pinterest.

The move comes as both Etsy and eBay grapple with weak consumer demand for discretionary goods, a trend driven by high interest rates, persistent inflation, and economic uncertainty. This has led to sluggish sales and increased pressure on the platforms. eBay recently forecast first-quarter revenue below Wall Street expectations, citing the challenging macroeconomic environment and uncertainty around U.S. tariffs. The company also faces declining advertising revenue. Etsy, while exceeding earnings expectations in Q4 2024, saw its revenue increase only slightly year-over-year, and its active buyer and seller base decreased.

Competition is also intensifying. Both companies face pressure from e-commerce giants like Amazon and Alibaba, as well as the rapidly growing social commerce sector, exemplified by TikTok's shop tab. The average social-media shopper reportedly spends $820 annually, highlighting the potential of this channel. In a related development, Meta is testing the integration of eBay listings on Facebook Marketplace in Germany, France, and the United States, suggesting a potential for collaboration in the face of shared challenges.

To combat these headwinds, Etsy and eBay are turning to AI. They aim to create highly personalized shopping experiences that surface relevant products based on individual user behavior, much like TikTok's algorithm keeps users engaged. This involves:

• Data Collection: Tracking user interactions (what they linger on, scroll past) to understand preferences and demographics (e.g., parent, pet owner).
• AI-Generated Recommendations: eBay is already using AI to generate images of complementary items (e.g., shoes and pants to match a shirt a user is viewing).
• Advanced Machine Learning and LLMs: Etsy is using these technologies to analyze its vast inventory (over 100 million items) and categorize products by style, occasion, and other attributes. eBay has a similar aim, working with a catalog of 2.3 billion products.

The goal is to move beyond simple "you might also like" suggestions to a more dynamic, feed-based experience that anticipates user needs and interests. This approach mirrors Pinterest's successful strategy of connecting visual content with shoppable links, which has significantly boosted clicks to advertisers.

Both companies also hope that improved personalization will help address customer complaints about the prevalence of mass-produced items on their platforms, which are ostensibly focused on unique, handmade, and vintage goods. By better understanding user preferences, the algorithms can prioritize surfacing items that align with the platforms' original brand identities.

Etsy CEO Josh Silverman recently stated, "We have a lot to learn from folks like TikTok and Instagram and Pinterest... We can take Etsy and turn it into a really personalized experience." eBay's Chief Product Officer, Eddie Garcia, echoed this sentiment, emphasizing the need for rapid adaptation in the fast-evolving retail landscape: "The game changes so quickly with AI... I think in five or 10 years, every person has their own personal eBay."