Dive Brief:

• Craft marketplace Etsy has acquired Blackbird Technologies, a company with artificial intelligence and machine learning technology capable of improving site search and product recommendations for e-commerce sites. Financial terms were not disclosed. 
• Etsy notes that Blackbird's machine learning solutions analyze user behavior, unstructured data and other variables to suggest relevant and personalized search recommendations; natural language processing to understand complex search queries; deep learning-based image recognition techniques to index and catalog photos, which help provide more relevant search results; and spelling corrections and predictive type-ahead to make searching faster and more intuitive.
• The full team of privately-held Blackbird, including co-founders are Nikhil Raghavan and Manju Rajashekar (its CEO and CTO, respectively), have joined Etsy. 

Dive Insight:

We have talked a lot about how both e-commerce and traditional brick-and-mortar retailers are starting to test and invest in a variety of applications for artificial intelligence and machine learning. Etsy, as a craft marketplace, is not quite in the same camp, though it relies on speedy and accurate product search results just as much as Amazon or any other retailer.

In acquiring an entire company (though apparently a pretty small one), Etsy is is taking a route similar to that of Amazon — bringing in people with talent and experience in an exciting but still very new field. Aside from getting some proprietary technology, one of the big benefits of acquiring such a team is getting people on board who can help to deeply integrate that new technology into existing operations. As AI becomes more integral to retail and the customer experience, Etsy now has a foundation that it can build on.

Investing in AI also could be important to Etsy at a time when Amazon's Handmade store has emerged as a direct competitor to Etsy's marketplace of craft goods. Though Etsy is much smaller than Amazon, it hasn't been shy about pursuing broad expansion, especially since its IPO, and putting itself on the cutting edge of AI technology should give it some leverage to help it stay competitive amid Amazon's handmade push.

Etsy last month reported second quarter revenue surged 39% to $85.3 million, up from $61.4 million the year before. The company also boosted its outlook for the year, forecasting revenue growth of 25% to 28%, beyond the high end of its three-year guidance between 20% and 25%.