I can't image they're going to negotiate on a per-seller basis though. They're going to negotiate as Etsy, and simply rotate their advertisements through items

I can't image they're going to negotiate on a per-seller basis though. They're going to negotiate as Etsy, and simply rotate their advertisements through items sold by their sellers. The only realistic reason to force the largest sellers into the program is that those are the sellers already moving a lot of volume, thus they must present the most popular goods which would lead to the greatest profits for Etsy.