The point of the article was that Etsy has already established both sides of the marketplace. And that both sides of the marketplace are not equal, as competitors/disruptors are discovering.

To be successful, they need a large consumer base, and a small seller base, who sell high quality goods (which is subjective, but mass drop shipping is certainly not what those consumers are expecting).

Of those, the hardest to attract is a larger consumer base. Sellers will ultimately go where the buyers are.

True, but I think when creating marketplaces, you want a little bit more friction on the sell side. Sellers undertake risk + labor to bring products to market. In exchange, they are rewarded via profit. Buyers take no risk + labor in exchange for paying that profit. The market exists to match sellers and buyers and provide a forum for price discovery.

Make it too easy to sell but not have equal reduction in price penalty is how you get Etsy's current problem. Removing the dropshipped items will (hopefully) remove race-to-bottom conditions that in turn allow for small time creators to charge higher prices + profits and buyers to regain confidence that they are getting more perceived value despite the non-commodity prices. But so long as the dropshippers exist, that balance gets destroyed.

Fun thing about a two-sided marketplace, it has two sides, and sellers need buyers too. In most cases they need buyers so drastically that they will actually pay for the privilege of access to the buyers!

You can make all these same arguments about eBay, or credit card merchant fees. If you charge the seller more for access to rewards-card customers then they won’t join, right?

There is a point of balance, Amex or Diners Club do struggle for adoption, but the guy with the 3% visa or mastercard is actually hugely desirable even if it does cost an extra % or two to get access to that segment of the marketplace.

Unless your business is so entrenched that people are actively seeking you out, you have to go where the customers are. Even if that means accepting an unfavorable deal.

That’s the whole argument about the App Store, right? Android market is free (if you set up your own store etc). But people want access to the apple customer base, because they’ve got more money and tend to spend more money too. So it’s objectively a worse deal to write android apps even if the terms are more favorable, because the customers are less valuable.