How does Nextdoor work?

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Nextdoor is a social media network created for neighborhoods to allow them to connect with each other and create shared communities. The world’s largest network for neighborhoods was founded in 2008 and is based in San Francisco, California. Later, the company was launched in the United States in October 2011. Currently, its services are available in 11 countries. The fact that the neighborhoods are one of the most important and functional communities in our lives guides the principle of Nextdoor from the very beginning. Today, neighbors rely on this platform in more than 247,000 neighborhoods around the United States, the United Kingdom, Canada, Germany, France, the Netherlands, Italy, Spain, Sweden, Denmark, and Australia, with many more to join in the future. Nextdoor allows the neighbors to stay updated on local news via its web app.

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In this article, we will be diving deep into the Nextdoor Business Model by discussing each and every aspect of the company’s business strategy and relationship that is helping the platform grow in many countries. With this, we will also try to get our answers to the most frequently asked questions i.e., “How does Nextdoor work” and “How does Nextdoor make money?”. Keep reading this article till the end to get the most out of it.

Nextdoor- The Beginning

In 2008, Nextdoor was founded by Nirav Tolia, Sarah Leary, Prakash Janakiraman, and David Wiesen. The company was long-drawn-out of Benchmark, one of the world’s leading venture capital firms, and was responsible for investments in Snapchat, Uber, WeWork amongst many other startups.

It all started long back even before the company was founded. In 1999, Tolia along with four others, co-founded Epinions, a website that reviewed customer products. Epinions went on to merge with Dealtime, a price comparison site. These two companies went public in 2004 under the joint company name, Shopping.com. It became one of the most successful IPOs of the year by making a total valuation of more than $750 million. Although there were many complications in the life of Nirav Tolia yet three years later, he came up with the creation of Nextdoor. After a year of beta testing, Nextdoor services were finally launched in 2011 with 175 neighborhoods from 26 states already registered on the platform. Soon, the company became an immediate success. Just after 3 years, Nextdoor had 22,500 neighborhoods connected on the platform.

Nextdoor- The present

Today, Nextdoor has successfully connected neighborhoods from 11 countries across the globe. The company now counts more than 25 million active monthly users, resulting in the growth of its revenue at a faster rate. Despite various tragedies in the life of its founder, the company continued to grow in various countries including the United States, Canada, Germany, etc.

In 2020, the arrival of the COVID-19 pandemic came up as an opportunity for the company for its rapid growth. As the people started taking shelter at their homes, Nextdoor became the only way to connect with neighbors nearby. The platform helped people to help their neighbors with shelter activities and other basic needs. To help people further with the app and use their needs as an opportunity for growth, the company added a new feature called “The Help Map”. This feature allowed users to identify their neighbors in need. Furthermore, the company partnered with Walmart to assist those in need with essential items.

Although the platform was created as a helping hand to connect neighbors, many people used it as a platform to comment on racists. The platform removed the feature that earlier allowed users to forward requests directly to one’s local police department and updated its user guidelines to stop this nuisance. It has also started featuring an anti-racism notification, a pop-up notification that halts the user’s post and prompts them to recheck what they wrote. In a nutshell, 2020 was the year of strong growth for the company as it was the year that finally witnessed the welcome of Nextdoor as a public company. In July 2021, Nextdoor entered into an agreement with Khosla Ventures Acquisition Co. II which will take the company public.

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Nextdoor Business Model

Nextdoor, the social networking app specializes in connecting you with your neighbors and local communities. This networking helps in building a stronger and safer network with the neighborhood. Besides all the advantages, there are some disadvantages associated with its business model which we will be exploring while discussing the Nextdoor business model. So, without much time delay let’s move on to explore the Nextdoor business model in detail.

Value Propositions

The innovative part of the company’s business model is that it aims to provide a trusted platform to users where neighbors work together to build more connected and stronger communities. It allows local communities to connect and talk to neighbors online by creating a private social network.

Customer Segments

Accurate customer segmentation allows operators to engage with customers most efficiently. That’s what Nextdoor did to engage customers in its business model. Nextdoor’s services are targeting a community of neighbors, local real estate agents, and advertisers to create a stronger and helpful community.

Customer Relationships

Nextdoor maintains its customer relationship by providing a platform that allows local communities to connect with each other online. It allows them to create a private network, questions local advice, connect to real estate agents, and query any other subject matter.

Key partners

Nextdoor is a privately owned company based in San Francisco. Some of the prominent investors of the company are Benchmark, Greylock Partners, Shasta Ventures, Kleiner Perkins, Riverwood Capital, Bond, Axel Springer, Comcast Ventures, and others. Other key partners include hardware providers and marketing agencies.

Key activities

The key activities of the Nextdoor Business Model are:

  1. Marketing Strategies
  2. Advertising
  3. Salesforce
  4. Customer acquisitions
  5. Public relations
  6. Social Media
  7. Copywriting
  8. Executive
  9. Sales
  10. Web Design
  11. Product Design
  12. Technology development
  13. Management
  14. Entrepreneurial
  15. Startup
  16. Leadership
  17. Creative Thinking
  18. Collaboration
  19. Analytics
  20. Customer services
  21. Training
  22. Coding
  23. Testing

Channels

The Nextdoor platform is accessible through the web platform and mobile app. Other channels include private neighborhood websites, blogs, and press.

Key Features

Here is the list of few Nextdoor features that will help in understanding the Nextdoor business in short:

  1. Nextdoor is basically a North American social media networking site/app that allows users to connect with their neighbors. The platform was created to enhance human connection and create safer and happier communities all around.
  2. Nextdoor makes its money by charging fees from brands, local dealers, or any other service providers for sponsored ads or posts on the platform. In fact for bigger brands, the budget is also very high i.e., the monthly spend for this service must at least be $25000.
  3. Since the sponsorship advertisements costs quite high, the platform offers those with smaller budgets a chance to advertise their business on the Nextdoor platform to consumers based on zip code. Furthermore, ultra local advertising is also offered to small businesses who want to promote their services to a target audience in a specific area of no more than 10 miles in radius.

How does Nextdoor work?

In comparison to other social networking apps such as Facebook, Instagram, which allow people to connect with users across the globe, Nextdoor focuses on connecting local communities (people in close proximity to each other).

Other users can also join the communities if they want to:

  1. Rent a property
  2. Buy a property
  3. Own a rental property
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The authentication at the platform occurs either through the address on an individual’s phone bill or a postcard that requires a code and is sent to the address. As a result, all the registered members on the platform go by their real names. Once registered, users can access various features of the Nextdoor platform. These features are:

  1. Local communities can share recommendations with each other for different local activities
  2. The local communities allow people to stay updated on local news
  3. Users get crime and safety alerts nearby
  4. Users can easily share information if they want to place their property on rent
  5. The local connection can be used for buying and selling household time with the people nearby
  6. It allows users to connect with local professionals

Nextdoor connects the professionals with each other

Nextdoor recognizes the fact that flourishing communities are made up of neighbors and organizations. This is the reason why it has come up with a business model that connects neighbors, businesses, nonprofits, public agencies, and large brands.

Creating a business page on Nextdoor

Nextdoor allows its users to create a business page on the platform. To create one for yourself, here is the step-by-step guide:

  1. Visit the link mentioned: nextdoor.com/create-business
  2. Create an account by signing up
  3. Enter your business name, address, and click the continue button
  4. Enter the email, phone number, website, and address to allow customers to contact you
  5. To begin with, your business page, select the appropriate business category that fits your business
  6. Then, move on to set up your Nextdoor business profile
  7. In the business profile dashboard, click on Upload a logo image. This will take you to the basic information form.
  8. Upload a cover page
  9. Upload the logo image
  10. Add a bio to share the details of your business or service that your business provides
  11. Enter the contact information
  12. Add more categories that are related to your business
  13. Add pictures in the photo gallery to represent the products and services your business offers

How does Nextdoor make money?

Now, let’s move on to discussing the Nextdoor revenue model in detail in order to answer the question- How does Nextdoor make money?”.

Nextdoor makes its money via sponsored ads, fees from local deals, as well as display ads that pop up. As earlier discussed in the Nextdoor Business Model section, the company is based on 3 revenue streams: sponsored ads for different brands, local deals, and neighborhood sponsorship. Let’s discuss the 3 revenue streams in detail:

  1. Sponsored Advertisements:

These sponsored ads are shared by businesses that have partnered with Nextdoor’s advertisement program and are displayed daily in the user’s news feed as well as the daily neighborhood newsletter emails. The sponsored ads on the app are only available to the bigger local businesses or national brands as the companies have to commit a minimum amount of $25000 a month to be able to publish their ads.

  1. Local deals:

The Nextdoor Local deals program allows the local businesses to share coupons, discounts, and other related news with their local communities in order to make them aware of the various services and offerings of the local dealer. This allows the platform to support companies in their community. These local businesses have to pay a fixed fee to Nextdoor for the deals to show up on the app.

On September 24, 2019, Nextdoor announces its Local Partnership Network, which was built to enable partners to integrate into the Nextdoor platform and connect Nextdoor’s app/website users with local service professionals. Handy, HomeAdvisor, and Thumbtack were launched as its initial partners. With this, Nextdoor members are now able to find and book their appointment with available professionals nearby for specific tasks through the platform.

  1. Neighborhood Sponsorships:

The Neighbourhood Sponsorship program of Nextdoor allows the local service companies to boost their business through the platform. These service providers might include, real estate agents, rental property experts, brokers, insurance agents, vacation rental experts, etc. Nextdoor promotes its services on the app by posting ads that appear on the user’s news feed as well in the advertisement section. In this program, the service providers also have to pay a fixed fee to the company to gain an opportunity to attract the local communities through the app. These sponsored ads or posts are only shown to users who are close to the business locations as compared to the other ad programs. To create better relationship with customers, local businesses must provide images and videos for their sponsored content.

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Also, the local businesses can cancel their subscription at any time. This feature was added in the business model to help them remain budget-conscious.

Talking about the revenue generated by the company, then the sales and profit numbers of Nextdoor are not publicly available. However, according to ex-Chief Revenue Officer, Lauren Nemeth, revenues for 2018 tripled after the addition of agent service and in 2017, the company had just begun to earn revenues. Back then, Nextdoor’s ad income was estimated to be in “tens of million”.

Who are Nextdoor’s investors?

According to Crunchbase, Nextdoor is funded by 24 investors. Out of which 8 are lead investors. Here are the names of some of Nextdoor’s investors, Bond, Meyer Equity, Sean Tiner, Tiger Global Management, Riverwood Capital, Benchmark, Kleiner Perkins, Redpoint, Counterpart Advisors, etc. Out of these mentioned names, Bond, Riverwood Capital and Redpoint are a few of the leading investors.

Nextdoor has been successful in raising a total amount of $447.9 M in funding in over 9 rounds. Bond and Meyer Equity are the most recent investors of the company.

According to PrivCo, the company has a post-money valuation in the range of $10B+ as of Sep 11, 2019.

Nextdoor has acquired 3 organizations till now. These are:

  1. Neighborland: It was acquired on April 1, 2020
  2. Hoodline: It was acquired in Aug 2019
  3. Trove: It was acquired on Feb 19, 2019

Conclusion

The increase in social media usage is increasing since the last decade as there has been an increase in the amount of time that people spend surfing the internet. In the US, adults spend almost 6 hours per day on digital media. In fact, adults aged 18 to 29 in the US are more likely to get news indirectly through social media platforms than any other print materials such as newspapers.

With this data, we can conclude that there is a huge scope of social media platforms today and Nextdoor is one of those platforms that is taking the benefit of the gap in social networking sites. Nextdoor has now become the go-to place for neighbors across the country to get recommendations and information that matters the most in our local community. Neighbors in various countries are turning to Nextdoor as a way to join trusted, useful, and relevant local news providers to address their daily needs, and build safer and happier communities. According to the data, approximately 20% of posts on the platform are neighbor to neighbor recommendations and include local service provider’s information like plumbing, electricians, groceries, etc. The most common way to discover the pros and cons of the services and other facilities in the local communities is by asking it from a neighbor and these recommendations are now happening online through the Nextdoor platform.

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