For about the last six months I’ve been observing etsy.com with some interest. To first order it is a classic two sided hub, so naturally I’d be interested.  A market place in this case.  It aggregates a large number of small sellers of handmade goods and their buyers. Providing shops, search/browsing, transaction orchestration.

As a business they are not built to flip, but rather to last.  That is always risky and thus more respectable. Over all they are a rough but solid operation.  It’s no wonder that they have attracted some very high quality folks as advisors/investors/coders.

For me the most interesting aspect of esty might be called their branding.  But boy that is far too bloodless.  Worse, it leads to a misunderstanding. Etsy is entrepreneurial in two or more ways. They are building a business. One that can turn out to be a quite significant retailing hub.  Thus, they are classic business entrepreneurs with all that implies; much of which is unfortunate.

Success in creating that hub would be significant.  As a rule internet hubs aren’t good for small enterprise.    I am conflicted about that conclusion, but there it is.  Generally the internet has accelerated the hollowing out of small business.  The Internet’s power to create major intermediaries and thus break and thin out the connections between producers and consumers ain’t a healthy development for us all.

I’ve written before about my hypothesis about how to help counter that. You need to create more connections horizontally between parties. Which I call small group forming. These are hard to create in scalable ways.  But  when created they shift social and economic flows downward on the distribution of wealth rather than upward.

So should Esty succeed in doing what, say OSCommerce has failed to do, it can create a bloom of vibrant small business activity inside of the Internet.  That, in turn, it would help shift the curve. That could be a real help tempering rather than worsening the distribution of wealth.

Which brings us to the second kind of entrepreneurship that Esty is trying to execute on. It is a kind of social entrepreneurial activity. An effort to change the nature of the economy. You can hear that in some of their communication. For example talking about creating a more adaptable or robust economy is one sign of that.

This two for one kind of entrepreneurial activity is hard to execute on. There are powerful systemic forces in play that tend to hand the power to economic rather than the social side of the balancing act. There is a wide spread presumption (a fair one!) that firms talking about the social side of the game are only playing a branding game. That they are the capitalist version of a corrupt politician who uses populist rhetoric.

But, Etsy is taking a interesting swing at the problem. Surprisingly practical. For example if you look at the list of things that make businesses resistant to consolidation (franchising, chain store, mail order, etc) the Esty target market (handmade goods) is a good choice. For example their efforts to encourage their sellers to engage in local organizing is another sign of taking seriously the puzzle of how to strength, rather than suck the life out of local and small business.