Etsy, the site that lets producers and consumers of all sorts of stuff buy and sell directly to their customers, has a terrific little business model. Talented folks from around the world can sell their arts, and crafts, without having to go thru a middleman: retail stores.

That said, not every item on Etsy is worth buying. Same goes for Ebay. And even Saks, for that matter. But I digress.

Etsy is now in a storm of controversy due to greeting cards. Yep, greeting cards. If you haven’t seen any of the cards that have sparked this storm, count  yourself lucky. Poor taste is the highest level they achieve, and then they slide downhill from there. Taking cracks at folks with Down Syndrome, or survivors of rape,  or people with breast cancer? Not exactly humor than can effectively prevent death threats.

The problem for Etsy? As a Web 2.0 enterprise, they completely missed the boat on responding to people – buyers, sellers, CUSTOMERS – who objected to the content of these cards, and asked to have them removed. The objectors went where we all go when we want to say – right now, in public – what’s on our minds: Facebook and Twitter.

Etsy’s response: “Don’t ruin our shiny happy place. Email us at idiots [at]” And they deleted – and continue to delete – the posts on their Facebook wall that  objected to the cards.

The result? A petition on the Social Action 2.0 community Change.Org:

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Taking a company’s message online with social media means that you’re encouraging two-way communication. If your customers choose to talk to you via the social media platforms you create for your brand means that you have to respond – meaningfully – on those same platforms. Whether what you’re hearing from them is “Shiny Happy People” or “Burning Down the House.”

Etsy is now becoming a meme for social media clueless-ness. Which is particularly ironic, since they’re essentially a marketplace driven by social connection.

The lesson here is for any company, large or small, who plants their flag using social media has to make it a real campfire, where conversations happen. Not a bonfire, where the flames can grow too hot, too fast, if not tended to – where Etsy finds itself today. They attempted to control the conversation the way the Red Queen did in Alice in Wonderland: “off with her head!” Don’t listen, just cut off discussion.

They’re seeing in real time what the after-effects are of using that approach. Whether they’re learning is still to be determined.

That’s my story, and I’m stickin’ to it…

Etsy: When Grassroots Burst Into Flame