Etsy is a peer-to-peer (P2P) e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items. These items cover a wide range, including art, photography, clothing, jewelry, food, bath and beauty products, quilts, knick-knacks, and toys. Many sellers also sell craft supplies such as beads, wire and jewelry-making tools. All vintage items must be at least 20 years old. The site follows in the tradition of open craft fairs, giving sellers personal storefronts where they list their goods for a fee of US$0.20 per item.

As of December 31, 2014, Etsy had 54 million users registered as members, and the online marketplace for handmade and vintage goods connected 1.4 million active sellers with 19.8 million active buyers. At the end of 2014, Etsy had 685 employees, and had 29 million items listed on its website. In 2014, Etsy clocked a total sales (Gross Merchandise Sales or GMS) of US$1.93 billion on the platform. Of this, 36.1% came from purchases made on mobile devices and 30.9% was generated outside the USA.

In 2014, Etsy garnered a revenue of US$195.6 million, and registered a net loss of US$15.2 million. Etsy generates revenue primarily from three revenue streams. Its 'Marketplace' revenue includes a fee of 3.5% of sale value, which an Etsy seller pays for each completed transaction, and a listing fee of 20 cents per item. 'Seller Services', Etsy's fastest growing revenue stream, includes fees for services such as Promoted Listings, payment processing and purchases of shipping labels through the platform. 'Other' revenue includes fees received from third-party payment processors.

In November 2016, Etsy disclosed it purchased Blackbird Technologies for $32.5 million. Blackbird Technologies is a startup that developed AI software used for shopping context - search applications.

The site was launched in 2005 by iospace, a small company composed of Robert Kalin, Chris Maguire, and Haim Schoppik. The initial version had taken two and a half months to build. Later Jared Tarbell joined the team. Former NPR executive Maria Thomas joined as COO in 2008, was promoted to CEO and left Etsy in December 2009. Robert Kalin resumed his role as CEO from December 2009 until July 2011. Investors include Sean Meenan, Spencer and Judson Ain, Union Square Ventures, and founders of Flickr and Delicious.

Kalin said that he named the site Etsy because he "wanted a nonsense word because I wanted to build the brand from scratch. I was watching Fellini's 8 ½ and writing down what I was hearing. In Italian, you say 'etsi' a lot. It means 'oh, yes' (actually it's "eh, si"). And in Latin and French, it means 'what if.'"

In Etsy's first year, it attracted attention for frequently adding new tools and functionality to the site to help sellers gain exposure and traffic, including Adobe Flash-based visualizations and a taxonomy of categories with tags. Etsy passed $1.7 million in sales in May 2007. On July 29, Etsy had its one-millionth sale and anticipated its two-millionth sale would occur mid-December 2007. In November 2007, buyers spent $4.3 million purchasing 300,000 items for sale on Etsy, an increase of 43 percent from October 2007. In June 2007, it expected to be profitable by the fall, but in December 2007 it was not a profitable company. In January 2008, Etsy received an additional $27 million in funding from Union Square Ventures, Hubert Burda Media, and Jim Breyer.

In February 2008, trouble at eBay, including a strike by some dissatisfied sellers, brought speculation that Etsy could be an increasing competitor. At the same time, however, some Etsy sellers expressed unhappiness with how Etsy was handling complaints about stores. At the time, a comparison of the two websites included complaints that on Etsy, items are difficult to find, the interface "feels slow", and the buying and selling process is United States-centric. Other reviewers enjoyed using Etsy's specialized search options, including the "Shop Local" tool.

In July 2008, Rob Kalin ceded the position of CEO to Maria Thomas. Some longtime Etsy employees left the company in August 2008, including founders Haim Schoppik and Chris Maguire. In September 2008, Etsy hired Chad Dickerson, who formerly worked at Yahoo!, as Chief Technology Officer. The company acknowledged concerns about vendors selling other people's work as their own.

In April 2009, users organized an "etsyday" promotion on Twitter that brought extra attention to the site. As of May 2009, it had approximately 60 employees and sales of $10 to 13 million per month, possibly boosted by consumer interest in cheaper and more personalized goods due to the United States recession.

In March 2011, Etsy "introduced a Facebook-style social networking system called People Search...to help buyers and sellers connect with each other and become friends". By doing so, Etsy made any past purchase with feedback easily searchable, which caused many complaints. Etsy then made changes to the site to better guard information regarding users' purchases.

In March 2010, Kalin said that the company is profitable and "plans to go public, though not until at least next year." Financial statements required to be filed by Etsy in order to go public show that due to reinvestment of annually increasing gross profits in marketing, product development, and management, the company has not reported a net profit as of 2015.

In December 2010, Etsy said it had seven million registered users, and that it would continue to focus on a personal community feel as it grows larger, as that is part of what distinguishes it from eBay.

On March 3, 2015, Etsy announced that it had filed for a $100 million USD IPO. As of 2015, Etsy generated transactions worth US$1.93 billion on its platform, which has 54 million members. Etsy went public on April 16, 2015. The company's valuation was $1.8 billion and raised $237 million in IPO proceeds. Less than a month later, Etsy stock dropped more than 8%. The stock closed at $30 on its first day of trading on April 16 and dropped down to $20.32 as of May 11.

Shortly after the IPO in 2015, a group of investors filed a class action lawsuit against Etsy claiming fraud. The suit claimed that Etsy's CEO and officers failed to disclose numerous problems with the site which could affect the stock price, among them that "more than 5 percent of all merchandise for sale on Etsy’s website may be either counterfeit or constitute trademark or copyright infringement” and that “brands are increasingly pursuing sellers on Etsy for trademark or copyright infringement, jeopardizing listing fees and commissions." The suit also claimed that Etsy management knew of the rampant trademark and copyright infringement but did little to stop it, and in fact worked to hide this information from potential invenstors.

In July 2011, Chad Dickerson, CTO since September 2008, became CEO, upon the firing of Rob Kalin. Later CTOs were Kellan Elliot-McCrea and John Allspaw.

In April 2012, a newspaper article about Etsy covered its fraud detection efforts; Etsy had been criticized in the past for inconsistently applying its rules about items having to be handmade. Later in April 2012, the writer of Regretsy, a popular blog, did independent research into a specific featured vendor, Ecologica Malibu, and found evidence to accuse the vendor of being a reseller, which would be against the Etsy Terms of Service. The vendor asserted that it was in line with the Terms of Service, stating that the shop had simply failed to identify itself as a "collective" that included the work of several individuals, and many Etsy community members posted on the Etsy forum expressing unhappiness with the action (or lack of action) taken by Etsy. As of June 2012, the vendor's account is no longer active on Etsy.

In May 2012, Etsy raised $40 million in Series F funding, and announced the company had become B Corporation certified. This funding is partly going toward expanding Etsy in international markets, including France, Germany, and Australia.

On October 1, 2013, Dickerson held an online Town Hall Meeting to announce that Etsy would now permit factory-made goods and drop shipping, provided the seller either designed or hired designers of the items, disclosed to Etsy their factory, disclosed that they used factories and took "ownership" of the process. In that meeting and afterward, Etsy claimed the meaning of the word "handmade" should be redefined to encompass factory made.

In September 2016, Etsy announced the acquisition of artificial intelligence startup, Blackbird Technologies. Etsy Inc. after experience a first-quarter loss in May 2017, replaced its chief executive and cut 8% of its workforce. Board member Josh Silverman was appointed CEO over Chad Dickerson.

In May 2017, the company's board replaced Dickerson as CEO with Josh Silverman, citing pressure from shareholders and poor profits.

A variety of products are sold on Etsy, including arts supplies, handmade products and vintage pieces. Vintage pieces can only be listed if they are a minimum of 20 years old. In order to sell products on Etsy, users must create a username and have the option to create a shop name. The username cannot be changed once created. Creating a shop on Etsy is free, however each listing that is posted in the shop costs $0.20. Each listing will remain on the shop's page for 4 months, or until someone buys the product. The sale prices of products are determined by the shop owner, but Etsy claims 3.5% of the sale price of each listing. Shop owners are sent a bill at the end of every month containing the fees they owe, and they have until the 15th day of the following month to pay the Etsy bill. Since on-line sign-up appears for every region internationally, Etsy provides a global shipping feature.

On the Etsy homepage, potential buyers can type a product description into the search bar or they can "Browse" through a list of options on the left side of the homepage, which includes Art, Home & Living, Jewelry, Women, Men, Kids, Vintage, Weddings, Craft Supplies, Trending Items, Gift Ideas, Mobile Accessories, and more. Alternatively, buyers may choose from a list of categories by clicking on the "Categories" link under "More Ways to Shop". This will bring the user to a page of over 30 categories, each containing sub-categories.

When a buyer views a product, he/she can view the positive percentage feedback of each seller to determine the reliability of the shop. Once a buyer finds a product he/she would like to buy, he/she clicks "Add to Cart", and that product is added to his/her virtual "Shopping Cart". The buyer may then continue shopping or purchase the selected item. In order to purchase items, buyers do not have to have an account with Etsy and can register with Facebook or Google accounts. Sellers can choose which payment options to offer buyers; options include credit/debit cards and PayPal, among others.

Etsy has received criticism for its handling of customer data and privacy. As of 2016, according to the Privacy Policy Section on the Etsy website: " By using Etsy, you authorise Etsy to use your information in the United States, Ireland and any other country where Etsy operates ".

Etsy is popular as a side-business as well as a place to buy goods made from recycled and upcycled materials, along with less expensive or more unusual versions of mass-produced items. The unique nature of many of the items for sale is part of their appeal to some shoppers. Product photos on Etsy tend to be editorial or artistic instead of commercial catalog style. Sellers can add tags to their products to help buyers find them, and buyers can choose to search for items available locally. Etsy staffers publish lists of featured items.

Etsy makes money by charging a listing fee of USD 0.20 for each item and getting 3.5% of every sale, with the average sale about $15 or $20. Most sellers are women who tend to be college-educated and in their twenties and thirties. Individual Etsy sellers decide which payment options to offer buyers; these options may include credit card, check, money order, PayPal, bank transfer, and Etsy gift card.

Etsy sellers range from hobbyists to professional artists who use the site to make a living. According to artists who have developed their Etsy stores into their primary jobs, scaling up production of handmade items can require more than full-time work, especially during the holiday shopping season.

Etsy's main office is located in Dumbo, Brooklyn, and it has hosted open crafting classes in the "Etsy Labs". The site's technology, customer support, marketing/PR, business, and communications teams operate out of this office. Etsy Labs has a workspace that provides equipment and donated materials where members gather to make items, take and teach workshops, and attend special events. Etsy also has an office in Berlin. In April 2012, Etsy announced that it was taking steps to hire more women engineers to improve the gender balance of its team, as a website with majority women users but few women engineers.

Etsy was one of the main members of the Handmade Consortium, a 2007 effort to encourage buying handmade holiday gifts. Etsy has partnered with the retail chain West Elm to sell some Etsy products in its stores. In December 2012, Etsy opened a temporary holiday storefront in SoHo, New York City.

In an interview in August 2013, CEO Chad Dickerson emphasized the importance of human interaction and meaning from creativity in regard to his perspective on Etsy. Dickerson described the website as "a platform that provides meaning to people, and an opportunity to validate their art, their craft", and after spending time with Etsy users, Dickerson learned that "all commerce is about real human interaction". Dickerson also provided a summation of Etsy that is a further reflection of the company's relationship- and meaning-based ethos: "At the end of every transaction, you get something real from a real person. There is an existential satisfaction to that."

As of March, 2016, Etsy's top three competitors according to Hoovers Online are Amazon Handmade, Craigslist, and eBay. Etsy has been compared to "a crafty cross between Amazon and eBay", and to "your grandma's basement". Etsy also has a number of direct competitors. DaWanda (de), based in Germany, focuses on growing in European countries. ezebee.com, based in Switzerland, is a global competitor, but also caters to freelancers and professionals Bonanza (formerly Bonanzle and 1000 Markets) is based in the United States and focuses on clothing and fashion, Zibbet and Made It which are based in Australia, iCraft is based in Canada, Artfire is based in the United States, and Hello Pretty is an online craft marketplace targeted at South Africans. Tindie is based in Portland, Oregon, and focuses on technology and electronics.

Asked about competitors, Etsy's European CEO said, "As far as I am concerned, the more people highlighting the value of supporting micro-producers and buying handmade and vintage directly from them, the better."

In an effort to add social networking features to Etsy, the company implemented features in 2011 that allowed users to search other users' buying histories and to trace their purchasing transactions. Etsy thought that this feature would allow Etsy users to connect to individuals with similar buying and/or selling histories and an automatic opt-in was applied to all users without the attainment of prior permission. Users of the service raised concerns over the feature's violation of privacy rights, but an official response was not released by the company.

In April 2012, some Etsy users began requesting the removal of Ecologica Malibu from the website due to the shop's use of a wholesale manufacturer. Users complained that Ecologica Malibu's practice was contradictory to the anti-big business values of Etsy. CEO Chad Dickerson responded in an Etsy blog post:

Much of the information we learn from investigations can’t be shared with the larger community out of respect for the privacy of the seller being investigated, so there is a natural divergence between what the community sees when they report a seller and what we see as we go deeper on the case. … [T]here are times when available public evidence suggests that a violation of our policy is clear, and our investigations find that it’s actually not the case.

Many users are still not content with Dickerson's response.

On Oct 1, 2013, Etsy changed its policy to allow sellers to outsource production to third parties and factories and to use shipping or fulfillment services. The new rules allow products to be labeled "handmade" as long as the original idea for that item — or its "authorship" as C.E.O. Dickerson says — comes from its respective seller. Further, the policy changes allow Etsy businesses to hire as many employees as they deem necessary (including workers in different locations) and allow sellers to ship orders via third-party couriers rather than the post office.

The move has prompted at least one Etsy competitor to distinguish itself by committing never to sell manufactured items.

In September 2015, Etsy made further changes to its manufacturing policy with the launch of Etsy Manufacturing, a marketplace allowing sellers to connect with outside manufacturers to fabricate their products. Manufacturers must be reviewed and approved by Etsy to ensure they adhere to certain criteria, although Etsy will not conduct visits or in-person inspections. Sellers must apply and be approved to work with any partners listed on Etsy Manufacturing and are required to disclose their use of outside manufacturers on their pages.