Dive Brief:

• Etsy Wednesday reported a Q2 loss of $6.4 million, just beating analysts’ estimates of a slightly worse loss.

• Its Q2 revenues were a bit better than expected too, rising 44% year over year to $61.4 million, beating estimates closer to $50.57 million. Still, it was the company’s slowest reported growth.

• And among the worst news for Etsy came from Morgan Stanley, where analysts said that despite the company’s increased advertising, its number of active buyers is lower than expected.

Dive Insight:

Etsy is trading below its initial share price, and it faces fundamental problems that won’t be easy to solve. First and perhaps foremost, that bane of so many retailers, Amazon, is developing an artisans marketplace to rival Etsy that many analysts say is superior in many key ways. 

Some of the change at Etsy in recent months has been necessary in order to extend its reach and widen its customer base, but it’s been a tricky balancing act. On the ground, many once-loyal sellers have become disgruntled with Etsy’s seeming inattention to them—and its willingness, for example, to feature mass-produced and even fake goods there. 

“We believe many sellers angered by the increasing presence of mass-manufactured and counterfeit goods on Etsy are likely to shift items to Handmade at Amazon,” Wedbush Securities analysts wrote.