What happened

Shares of online marketplace Etsy (NASDAQ:ETSY) are surging on Thursday, rising as much as 35.7%. At the time of this writing, the stock is up about 34%.

The stock's rise follows Etsy's announcement on Thursday that it is raising its transaction fee from 3.5% of sales to 5% of sales. Reflecting the higher fee, Etsy revised its revenue guidance for the year upward. 

Etsy website displayed on a laptop

Image source: Etsy.

So what

Etsy will raise its transaction fee on sales beginning July 16, 2018. "This revised fee structure will enable Etsy to make further investments in marketing to attract buyers, enhance customer support, and drive product innovation," it said in its press release on Thursday.

The company also announced new tools and packages for sales, including two new subscription tiers of seller tools called Etsy Plus and Etsy Premium. Etsy Plus will launch mid-July for $10 a month and Etsy Premium, "which will be geared toward larger, more established creative businesses" will launch in 2019, Etsy said.

New services and tools for Etsy Plus and Etsy Premium will be incremental to what's available on Etsy's platform today. "Sellers who do not opt into Etsy Plus or Etsy Premium will have access to the same tools and services that are currently available on Etsy without an additional monthly fee as part of Etsy Standard," Etsy explained.

Now what

Etsy is optimistic about how these changes will impact its business in 2018. The company is now guiding for full-year gross merchandise sales (GMS) to increase 16%-19% and revenue to rise 32%-34% year over year, respectively. This is up from a previous forecast for GMS and revenue growth of 16%-18% and 22%-24%, respectively. Notably, revenue growth this steep would mean Etsy's year-over-year revenue growth rates continue to accelerate.

Management is keeping its forecast for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 21% to 23% the same, despite the expectation for more rapid revenue growth. This reflects the company's plans for more substantial reinvestment plans.