NEW YORK (TheStreet) -- Online handmade goods marketplace Etsy (ETSY) reported its first-quarter earnings on Tuesday, and concerns about the future of the company are growing.

This was the first time the Brooklyn-based company reported earnings after its initial public offering last month, and while losses were expected, Etsy's particularly disappointing numbers sent its shares plummeting.

Etsy, which provides a platform for sellers to vend homemade goods, reported quarterly revenue of $58.5 million, up 44% over 2014, but with a net loss of $36.6 million, or 84 cents a share, compared to a loss of $500,000 in the first quarter of 2014. This fell short of analyst expectations of $59 million in revenue and earnings of 3 cents per share, according to Thomson Reuters.

Etsy was also recently hit by accusations of counterfeit problems. CEO and Chairman Chad Dickerson touched on the issue, questioning the definition of counterfeit and ensuring that Etsy has measures in place to counter such activity. Wedbush analyst Gil Luria, who first brought the charges, was not assuaged.

Shares were trading down more than 23% to $16 just after the market opened on Wednesday -- that's nearly a 50% drop since Etsy closed its first day of trading at $30.

"Our recent IPO is a milestone in our mission to reimagine commerce in ways that build a more fulfilling and lasting world," said Dickerson. "We will continue to concentrate on creating long-term value for Etsy and our community, which we believe will result in sustainable long-term returns for our investors."

Here are the three key takeaways from Etsy's first-quarter earnings report.

1. Growth in Sellers and Buyers

Gross merchandise sales, or GMS, increased 28% year over year to $531.9 million, largely due to a 26% increase in active sellers and a 36.5% increase in active buyers. An active buyer is defined as an Etsy buyer that has made at least one purchase in the last 12 months, and an active seller is someone who has incurred at least one charge (transaction fee, listing fee, etc.) from Etsy in the last 12 months.

As of the end of the first quarter, Etsy had attracted more than 1.4 million active sellers and 20.8 million active buyers. However, these buyers aren't necessarily spending as much, as GMS per active buyer declined 8% year over year. However, GMS per active seller did grow 2% year over year.

While GMS still grew, it didn't grow as much as expected -- GMS grew 39% year-over-year in the fourth quarter.

That "is likely to put the 'addressable market question' on the front burner and impact Etsy's near-term trading multiple," according to Morgan Stanley analyst Brian Nowak.

Nowak and Etsy both mentioned that the strong dollar played a role in this slowdown, but there is "no denying growth is slowing faster than we believe investors expected," Nowak said. Even though international GMS accounted for 30.5% of overall GMS, international GMS growth slowed down 22%.

Nonetheless, any growth at all can be viewed as a positive, according to Manhattan Venture Partners chief economist Max Wolff.

"The good news is even if there was a deceleration, they grew what matters most -- revenue, sellers, and buyers," Wolff said. "They kept their community and they grew it, not a ton, but they grew it. Going public and being a little bit less of a community, a little less of an alternative commerce universe and more of a public company doesn't seem to have created as much drop-off as had been feared."

2. Investments Are Taking a Toll

The company's total operating expenses increased 73% year over year to $42.7 million, with marketing expenses alone taking up 21% of revenue and jumping 63% year over year. And the spending isn't going to slow down anytime soon.

In its outlook for the next quarter, Etsy acknowledged that it would be hiring a lot more people and spending more on marketing. Plus next quarter's financials will include a one-time $300,000 payout to, a nonprofit that was promised as a part of the company's IPO, as well as $300,000 in IPO expenses.

Though the company's intentions are "to keep our marketing ROI positive," according to Etsy CFO Kristina Salen, the company has yet to realize those intentions.

Etsy will be spending money on search engine marketing, specifically Google's (GOOG) Product Listing Ads, email marketing and affiliates, plus it will begin its first mobile app ad campaign in the second quarter of 2015.

"Etsy's rising costs actually go beyond one-time expenses," Luria said in an email. "Etsy is increasing marketing spending in order to sustain their revenue growth, but is seeing diminishing returns on that marketing spend."

3. Is Mobile the Answer?

One of Etsy's four focuses is "making Etsy an everyday experience." According to Dickerson, that's "all about mobile."

Etsy is working hard to get its marketplace on smartphone screens everywhere in hopes that this will attract more buyers and more time spent with Etsy.

This commitment to mobile is promising, according to Wolff, who believes that if a company is going to sacrifice profitability, it is best done in exchanged for R&D and mobile growth.

"They either get mobile right or they're in decline," Wolff said.

It seems that there is already traction on mobile, as Etsy's apps have been downloaded 25 million times, as of the end of the first quarter, and 57.7% of total visits to Etsy came from a mobile device. Mobile also accounted for 41% of total gross merchandise sales, up from 35% in 2014.

During the call Dickerson spoke about certain features the company is adding to make mobile shoppers more engaged, such as a photo feature that lets buyers post pictures when sharing a review. The company has also rolled out an Apple (AAPL) Watch app.

The big question though is whether these investments in mobile, paired with the investments in marketing, can carry Etsy out of its losses.

"The company is still figuring out how to be profitable, and it's now struggling with a very expensive valuation in front of the whole world," Wolff said. "People paid for an opening night ticket and they got a dress rehearsal."

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