Why Nextdoor Believes It Can Be Social Media's Next $1 Billion Advertising Machine

Nextdoor is an online communities platform that essentially combines classic message boards with Craigslist. The startup spent its first five-and-a-half years building a sizable audience of social-media patrons who are more interested in what’s going on down the street than what friends are up to in other time zones. With the possibility of getting to 100 million users by the end of the decade, it's now rolling out advertising for the first time, and its own revenue forecast is eye-opening. “We think it will be $1 billion by 2020,” said Nirav Tolia, CEO of Nextdoor. “Look at the Yellow Pages; it’s still a $40 billion business in the U.S. ... Over the last nine to 12 months, we’ve been getting more than 1,000 incoming advertising requests per week." [kickout id="1"] On Thursday, Nextdoor will announce in-stream native units that look not too unlike other social ads at first glance. At the same time, Tolia and his team contend that they offer marketers a few things other social networks do not—chiefly, home-address data, which is a requirement to joining the site—that can be used to target ads. They have hyperlocal ambitions to attract mom-and-pop shops (like hardware stores, dentists, doctors, lawyers), various kinds of franchisee-based brands (fast food, insurance providers, tax preparers, financial, et cetera) and big-box retailers. “These are in-feed ads, the same way you’d find ads on Facebook or Instagram or Twitter,” said Tolia. “But they are unique in that you can target by DMA [designated marketing area], by zip code, by neighborhood, by physical address. None of those other platforms can target by physical address.” It's true that while Facebook, Instagram and Twitter understand a ton about their audience, they don't necessarily know if a user actually lives down the street from, say, a specific insurance agent. And therein lies Nextdoor, hoping to incorporate retail addresses and, in the case of insurers and banks, photos of branch managers to bring a neighborhood feel to ads. State Farm recently tested Nextdoor's ads in 11 U.S. markets, polling the platform's members about how they interact with neighbors. In a matter of days, the sponsored posts reached 6.3 percent of all households in the markets, engaging with 94,758 members and generating a positive sentiment score of 97 percent. (Sentiment is a performance stat that Nextdoor is pitching to advertisers out of the gate.) "Individual members even reached directly out to our team to find out more about our neighbors survey and how they can connect with our brand," a State Farm rep said via email. "We were very pleased with this response and are exploring additional campaigns for 2017 and beyond." Other launch advertisers include Lowe's, AT&T Fiber and Ring (the doorbell security camera maker). They will be charged a premium, cost-per-thousand-impressions (CPM) rate of $25. What kind of scale can you get at that price? While not giving a specific number, Tolia told Adweek it has "tens of millions of regular users," 50 percent of which use the brand’s mobile app. He said that 40 percent utilize the platform every day, while 70 percent employ it once a week. [kickout id="2"] “Certainly by this time next year," he said, "we should be as large as Twitter. Two years from now, we should be as large as Snapchat. We think, ultimately, by 2020 we’ll have 100 million active users in the U.S. alone.” Nextdoor can be a goldmine for learning about free or cheap stuff, sidewalk-level happenings that daily news publications never report on (effectively, citizen journalism), block-party-styled gossip, parenting tips, local music and theater info, special retail deals and goodwill initiatives. The site has a community for 70 percent of U.S. neighborhoods, per Tolia. "We expect that to be 90 percent by end of year," he explained. “It’s not one-to-one communication or even one-to-many like Facebook. It’s many-to-many, involving inspiring, relevant conversations. And it can start talks about what the ad is.” Tolia said he believes that coupons are a big opportunity for advertisers. “It’s a little strange to get a coupon on Facebook," he said. "We are more like direct mail.” He's putting together a national sales team to bring such advertisers on board, and he said former Twitter COO Adam Bain is an informal adviser. In fact, when he asked Bain about possible executive talent to build his sales team, Bain mentioned his former right-hand man at Twitter, Ali Jafari, who ended up joining Nextdoor in February as vp of business development. (Jafari was vp of partnerships at Twitter.) So while Nextdoor, which accrued $210 million in funding during recent years, seems confident that it can join the likes of Google and Facebook in the billion-dollar club, it's probably fair to wonder about such a forecast, since other digital upstarts have struggled to get there. But one thing it appears to have going for it is that it's kind of like the old Sesame Street song—"One of These Things (Is Not Like the Others)"—of social media platforms. "It’s context," said Steve Wymer, vp of communications and policy at Nextdoor, who plans on building the platform's political ads business. "When you pull up this app, you are not here for funny mustaches. You are not looking to see your friend’s baby in Germany. You are literally thinking, ‘my neighborhood.'”