Speaking to analysts after its second-quarter report late on Thursday, Google Chief Business Officer Omid Kordestani pointed to Brooklyn-based Etsy as a good example of web companies winning more business due to Google's recent move to index information and pages within third-party apps.
"Developers like Etsy are already seeing a boost in traffic as a result of deep linking," Kordestani said.
The jump in Etsy's shares pressured short sellers who recently increased bets against the company, which has grown from selling just wooden goods to include other crafts, vintage goods and recently, mass manufactured products.
"It started with (the) Google commentary last night," Wedbush analyst Gil Luria said, adding that short sellers closing their bets were driving the stock up further.
Suggesting a major increase in bets by short sellers against Etsy, borrowing volume for its shares jumped 62 percent in early July, according to SunGard's Astec Analytics.
Trading in Etsy's options surged to an all-time high of 29,000 contracts. Bets on the shares closing above $20 on Friday made up 45 percent of the options volume.
The stock traded at $20.75, up 23 percent, at midday on Nasdaq.
Additional reporting by Saqib Ahmed, Writing by Noel Randewich; Editing by Dan Grebler