I think there are problems with making Instagram seem tacky by clobbering on a marketplace. It would make it look cheap and shilly. Right now it’s the most rarified space to share pictures of your awesome lifestyle. I think you can either have that very cool, chic vibe or the amazon marketplace vibe.
I think that despite their enormous resources, there are places that brands can’t go.
I don't think that would be fair and that it is 100% likely there was a great deal of deliberate strategy involved as well.
This is a very marketing-heavy operation that I don't think could stand on its own and be sustainable, and so the only possible outcome is to stay afloat long enough (by reinvesting a significant chunk of revenue into more marketing) to get gobbled up by a bigger fish.
They had the right investors that believed in it and bankrolled it for long enough and it paid off, but it's ultimately still a stroke of luck IMO.
It is a very marketing-heavy operation, as the platform itself doesn’t offer that great of a deal to sellers - they charge a 10% commission plus payment processing fees (PayPal takes 2%, though now I believe there’s an option to use a different processor), so high-volume sellers are unlikely to use it. I wouldn’t be surprised if up until this day they were spending more on marketing that they would’ve made back from most customers.
The business itself is quite low-margin (support & fraud/scams cuts into that), has decent competition (Mercari, StockX) and can be trivially replicated by the likes of Facebook (Depop is basically an Instagram but where you can buy & sell - something FB can trivially replicate if they wanted to).
It makes sense for Etsy to buy it for access to the userbase and to integrate it into their existing business, but as a stand-alone business it's not that great IMO because of the aforementioned points.