How Does Nextdoor Make Money? | Nextdoor Business Model

Nextdoor has been around since 2008 and allows users to share photos, locations, and messages with friends and family.

Nextdoor business model connects you with your neighbors and local communities for a more robust neighborhood network.

Nextdoor limits its network to the local area rather than letting you link to people all over the world.

“Nextdoor’s mission is to make local communities a place to meet for trustworthy relationships, exchange useful information, and purchase items.” 

Nextdoor needs new members to prove where they live when they sign up to foster trust. You can do this over the phone or by mail.

Nextdoor is currently used by more than 260,000 communities worldwide, including one in five American households, making it the largest app globally. 

Other countries represented include the United Kingdom, the Netherlands, Germany, France, and Australia.

The program is used by thousands of government departments, in addition to ordinary citizens. Furthermore, businesses have received more than 40 million referrals.

However, the strength of Nextdoor lies in its power of proximity. Other platforms start globally and include the ability to target specific audiences based on their geographical location. 

On Nextdoor, you experience things local to the postcode level.

Business owners can use local targeting in their online experience, which is already built-in.

Nextdoor users will have the ability to communicate with neighbors, communicate about community events, discuss neighborhood news, suggest local services, and more.

What is Nextdoor?

Nextdoor is a social network that connects neighbors and allows them to create shared communities. 

The Nextdoor mobile app and website allow neighbors to stay updated on local news, hire babysitters, receive crime alerts, and perform other activities.

Nextdoor earns money from brand partnerships and sponsored content. 

Nextdoor Business Model

This platform offers three programs to local and international businesses (Local Deals, Sponsored Posts, and Neighbourhood Sponsorships). Business owners pay Nextdoor a one-time or monthly fee for increased exposure.

A group of seasoned entrepreneurs founded Nextdoor in 2008, which has been highly successful so far. 

There are now 27 million active monthly users on Nextdoor in 11 countries around the world. The latest funding round for Nextdoor values the company at $2.1 billion.

How Does Nextdoor Work?

Nextdoor is a social networking app that is designed specifically for residents in small towns and neighborhoods. Nextdoor is unique from traditional social media platforms, such as Facebook and Instagram, as people within proximity (e.g., neighbors) form groups in Nextdoor.

Nextdoor serves as a social networking platform for neighbors to interact.

Users are assigned a neighborhood based on their legal residence. Users will be able to connect with others at the exact location.

This online platform allows neighbors to advertise for help, such as a babysitter needed, a missing dog, or items for sale. In addition, neighbors can help one another in a variety of ways.

Users who are interested in joining Nextdoor can do so if they:

  • Own or rent an apartment,
  • If you have a second home,
  • You own land where you want to build a house, or
  • Rental property owner

….in a specific neighborhood. An individual’s phone bill address can be used to verify their identity, or a postcard containing a code can be sent. Due to this, all members register using their actual names.

Various features relevant to local communities are accessible (via the web or as part of the mobile application) to registered users.

Some of these include:

  • Finding out what local activities are available in your area (restaurants, parks, etc.)
  • Keeping up with local news
  • Get alerts about crime and safety (either through other users or the local authorities)
  • Items for household use (and other things)
  • Using professional services (e.g., babysitters or dog walkers)

Most importantly, you’ll be able to get to know your neighbors better.

How Does Nextdoor Make Money?

Nextdoor’s primary revenue source is advertising. Like Facebook ads, you can also like, share, and comment on these advertisements. The company generated millions in revenue from advertisements in the previous year.

The Nextdoor company is venture-funded and, as such, has been exempt from the requirement to earn income to fund its operations. Unfortunately, this led to the company not making any money until four years ago.

The company began generating new revenues in 2016. Nextdoor’s business model revolves around three revenue streams: local businesses posting ads, bargains from local merchants, and neighborhood sponsorships.

Advertisers can target specific neighborhoods and display sponsored content from specific organizations on this page. Classified ads are part of Nextdoor’s plans. In addition, agents and brokerages can list homes for sale or rent.

Let’s take a closer look at each one of them.

Advertisers use sponsored posts to create content for Nextdoor and share it with customers. Users will see this content in their news feed and daily neighborhood newsletter. Once approved, it will appear.

The sponsored messages appear much like any other content on the news feed, except that they are tagged with “Sponsored.”

Sponsored posts are only available to larger local and national businesses. In addition, companies must make a minimum monthly commitment of $25,000 to publish sponsored content.

Neighborhood Sponsorships

Local businesses can advertise their services on Nextdoor through the Neighborhood Sponsorship program. Here are some examples of companies that can promote their services:

  • Experts in rental properties
  • The roofers
  • Experts in Vacation Rentals
  • Experts in Mortgages, Insurance, and Renovations
  • Agents or brokers of real estate

A user’s posted ad will appear in their feed and in particular sections related to that ad (e.g., Real Estate). Nextdoor sponsors pay a fixed fee (on a monthly subscription basis) for the opportunity to appear on the user’s feed, similar to Local Deals.

Local experts can cancel their subscriptions at any time, helping them to remain budget-conscious. There are a variety of ways in which agents and other service providers can build relationships with their customers, including:

  • Meet in person
  • Creating customer satisfaction polls
  • Updates on neighborhood happenings
  • Provide videos for their content

The sponsored content is only shown to users close to the business as with the other ad programs.

Local Deals

Businesses can share coupons and discounts through Local Deal, a program that allows them to share coupons with neighbors. The program also allows local businesses to receive support from residents.

Nextdoor Business Model

Business owners pay a set fee to have their deals appear on Nextdoor. Some deals start at $3, but the majority range from $60 to $90, depending on the region.

You can only make Deals through a local account. The authentication process is similar when private consumers sign up.

How to use Nextdoor for Business?

Both individuals and businesses use the Nextdoor app for many reasons, including coyote alerts and charity fundraising. You can use it for many things.

An individual user uses Nextdoor for:

  • Buy stuff or ask for services
  • Plan and organize events
  • Find recommendations
  • Post an alert
  • Get to know your neighbors
  • Post a question or a poll
  • Sell your stuff

Nextdoor reports that 74% of its members are homeowners. Due to this, one out of every four conversations is real estate-related.

Business owners use Nextdoor to:

  • Promote local deals through local ads
  • Participate in community events
  • Offers special discounts
  • Find out how they’re rated locally

Members and authorities have also used Nextdoor to police crime. According to Nextdoor CEO Sarah Friar, approximately 5% of posts are related to crime and safety.

With Kindness Reminders, Nextdoor keeps things friendly by detecting threatening language and encouraging users to edit what they have written.

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Success Story of Nextdoor

Nirav Tolia, Sarah Leary, Prakash Janakiraman, and David Wiesen founded Nextdoor in 2008 as a social networking platform. The company holds investments in Snapchat, Uber, and WeWork. Benchmark is one of the leading venture capital firms in the world.

Nextdoor’s tale begins nine years earlier, in 1999, at the turn of the century. Then, Tolia and four others co-founded Epinions, a review site for consumer products.

Together, Shopping.com and DealTime formed Shopping.com, which went public in 2004. The IPO generated a valuation of $750 million, making it one of the most successful of 2012.

A $100 million profit was made by Benchmark and Tolia (the firm contributed $4 million at the inception of Epinions in 1999), and $20 million was made by Tolia, but its co-founders got nothing.

Nalin Ravikant, one of Tolia’s co-founders, started a company called AngelList that aims to curb the same types of theft he battled.

The co-founders (together with 25 former workers) and Tolia reached an undisclosed settlement a year later, in 2005.

Then Tolia’s sacking from his firm; he claimed to have graduated from Stanford in 1995 (he did so in 2004, several years before the IPO) and worked as an analyst at McKinsey and Company (he didn’t).

A Benchmark entrepreneur-in-residence position was offered to him to save face. Three years later, the same move led to the founding of Nextdoor.

Tolia wouldn’t be Tolia if she didn’t have a rocky beginning. An ex-business partner of Tolia, Raj Abhyanker, filed a lawsuit alleging copyright infringement against Benchmark. The social network at hand was tested in Menlo Park, and Abhyanker informed benchmark. Tolia independently set up the business shortly after that.

Nextdoor is a great way to connect with neighbors. A year after beta testing ended, the service was released in 2011. 175 neighborhood associations from 26 states have signed on.

Users embraced the company immediately. As a result, the Nextdoor network now includes 22,500 neighborhoods (from an estimated 150,000 nationwide).

Bolia stepped down from her position as President and CEO in 2018 to become a board member. His successor is Sarah Friar, the former CFO of Square.

Nextdoor is now present in 11 countries, including the United States, Canada, Germany, etc. The organization generates a lot of income, with 27 million users per month.

Tolia, on the other hand, wouldn’t be Tolia without one last scandal during his tenure at Nextdoor. The former CEO was charged with hit-and-run in 2014 after allegedly injuring a woman’s neck and hand. A $300 fine and a 30-day prison sentence were the consequences.

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What is the Funding and Valuation of Nextdoor?

Nextdoor has received over $455 million in venture capital in nine stages, according to Crunchbase. In addition, Nextdoor recently raised $170 million in Series F funding, helping it reach a valuation of $2.1 billion.

Some investors, including Benchmark, Kleiner Perkins, Tiger Global Management, Redpoint, and Riverwood Capital, have invested.

What is the Revenue of Nextdoor?

The sales and profit numbers of Nextdoor, like many venture-funded firms, are not publicly available. By 2017, the company had just begun to earn money, with ad income estimated to be in the “tens of millions.” But, according to Chief Revenue Officer Lauren Nemeth, revenues for 2018 tripled after the addition of agent service.

When will Nextdoor go for an IPO?

A planned IPO will likely occur shortly due to the increased attention paid to new revenue streams. In addition, Nextdoor’s user base consists of millions of people, and it must show investors that this can be monetized.

Direct sales to small businesses are pretty expensive, so additional revenue must cover acquisition costs.

Other tech giants like Facebook, Apple, or Google might target the company as an alternative. However, an acquisition of this size would not be cheap, given the current price of $2.1 billion.

Key Takeaways from Nextdoor Business Model

The Nextdoor social network brings together individuals from different neighborhoods in North America. Its purpose is to foster connections between people and to foster vibrant communities.

Nextdoor requires businesses with large advertising budgets to pay to appear in sponsored posts. A minimum of $25,000 must be spent on advertising for this service every month.

Nextdoor allows individuals to advertise to consumers based on their zip code if they have a limited budget.

Furthermore, ultra-local advertising is also accessible for people who want to promote a location within a 10-mile radius.

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