Nextdoor is building a hugely valuable social network that could eventually impact or displace many classifieds sites and local directory sites. While all that sounds grandiose it may not be as remote a possibility as it seems.
Following its massive $60 million funding round I caught up with Nextdoor CEO Nirav Tolia over the phone to get an update on the site’s progress. I spoke to him just after the site launched and then again roughly a year ago. At each point I’ve discussed what I believe are Nextdoor’s opportunities, challenges and product shortcomings. Most of those shortcomings have now been addressed.
Tolia explained that in the first year Nextdoor only had 175 neighborhoods. But now the company is adding 75 to 100 neighborhoods a day. Tolia added that Nextdoor has a presence in 24,000 neighborhoods across the country, which he said represented “one out of seven.” The most active of these neighborhoods generate more than 100 messages per day, he told me.
In the San Francisco Bay Area, where Nextdoor is based, Tolia said that penetration is almost 100 percent. He invited me to check out my neighborhood on Nextdoor. (I’m not a user.) I went through the sign-up process and discovered that the Nextdoor-defined neighborhood encompassing my address has very strange boundaries and a random name (associated with one of the streets). That was disorienting and off-putting but undoubtedly a function of how the group was established and the people who initially established it.
There were two early things that Tolia and his team did that were very smart and in some ways counter-intuitive. First they created scarcity and friction. I’ve written about this is the past but it’s worth repeating.
Nextdoor requires new neighborhoods to have at least 10 members before being “accepted.” That created barriers to entry, but guaranteed that a cluster of interested people would show up. Otherwise you have the “cold start problem.”
The other smart thing Nextdoor did (and still does) is allow members to send physical postcards and flyers to those in their immediate area, inviting them inviting them to join (see graphic above). Nextdoor takes care of creating the postcards (or flyers) and pays for postage. In some small way this is analogous to Yelp’s early offline parties that built a sense of community in San Francisco among users.
Across the network Nextdoor sees roughly 1.5 million messages per day. Tolia says that 25% of these are local service provider requests and recommendations and 15% are classifieds related. It’s still early and the “inventory” is quite spotty but you can see the potential.
Facebook has so far failed to create a “trusted marketplace” (for services or classifieds). Despite the “reputation systems” that exist on vertical sites, the opportunity is clearly there for a trusted social network to become a broad, next-generation marketplace; it’s just very hard to execute against that opportunity.
In my area the non-profit and long-standing Berkeley Parents Network, and similar online parents or private groups in other areas, are very influential sources of local advice and recommendations. This doesn’t mean that Yelp, yellow pages and search aren’t still widely used; they’re used in addition. Local is not a “zero sum game.” However there is only room for a few sites to win in each category.
If Nextdoor were to continue to with its current momentum it could eventually become a primary source for local business recommendations as well as a classifieds resource. All this remains to be seen, but the company has made it farther than many would have predicted at the outset — including me.
Currently Nextdoor is only in the US. Tolia said part of the $60 million will likely be used for international expansion. He told me that “the amount of international interest in Nextdoor is amazing.” Partly he’s selling but I’m sure the statement is also correct.
One of the major criticisms I had about Nextdoor was that a private group of neighbors in a narrowly scoped area didn’t actually reflect the way people interacted locally in the real world. People interact with friends and acquaintances in extended neighborhoods and areas around school groups, religious groups, sports teams and so on. While the people in these groups generally live in the same areas they typically don’t live in the same immediate neighborhoods.
From a business model perspective, limiting communication to people of isolated neighborhoods also was problematic in terms of creating marketplaces: there wouldn’t be enough inventory and liquidity. Tolia and I spoke about this problem a year ago. The site has responded by creating “nearby neighborhoods.”
The screen shot above shows how members can customize and manage communication from people in the extended area. This effectively allows users to build customized neighborhoods to better reflect their actual lives and extended local interactions. And it’s a critical innovation for Nextdoor and its product evolution.
Notwithstanding what I said about directories and classifieds Nextdoor has no immediate plans (or need) to monetize. Tolia wants to keep gaining users and penetrating new neighborhoods. Getting more scale is the near-term focus. If that’s accomplished the business model and revenues will follow.
“We want to be authentic. This is the most important thing,” Tolia said to me. “We knew from the beginning was going to take a long time.”
He said that if it takes years more to get to where they want to go he and his investors are prepared to be patient. Indeed, if they can stay the course Nextdoor could go public in a few years. However well before that happens the acquisition offers will come.
The idea that Nextdoor is built upon is far from unique. Nextdoor’s vision of an online representation of the real world was exactly that of the earlier FatDoor, which pivoted (to became Center’d then later The DealMap) and then sold to Google. Indeed, many have had the same idea that Tolia and his team are pursuing. They just haven’t been able to build it.
By comparison Nextdoor seems to be executing.