How Nextdoor is using verified location data to quietly build a big ads business

Nextdoor, the 7-year-old social network for neighborhoods, is after more advertising dollars. The quick pitch: Nextdoor is home to only users with verified addresses across 190,000 U.S. neighborhoods. That means advertisers can target real people by their specific location, merging the online and offline worlds.

Nextdoor tripled its revenue over the last year, said Lauren Nemeth, Nextdoor’s chief revenue officer. The company, which is backed by $285.2 million in venture capital funding from big investors such as Kleiner Perkins and Benchmark, declined to disclose the total revenue for 2018 as well as whether it’s profitable. In an earlier interview with Fortune, Nextdoor CEO Nirav Tolia had projected “tens of millions” in revenue for 2017.

The platform has “tens of millions” of users, the company said, without providing additional specifics.

“We tripled our ad business, not just because I’m a genius and have a team of geniuses. It’s more that we dramatically evolved the ad product to be frictionless. Before we were a walled garden and not taking third-party data, but now we do CRM ingestion and lookalike modeling,” Nemeth said.

Indeed, Nextdoor has been investing in maturing its ad platform. In December, it introduced a programmatic offering so advertisers wouldn’t necessarily have to work directly with Nextdoor’s sales team. Nextdoor now works with “hundreds of advertisers,” Nemeth said. Top industries include home security, retail, dining, financial services, tech, telecoms and automotive.

Nextdoor offers several ad formats, including native display, native video, rich media and email ads. The minimum spend is $25,000 and CPMs range from $8 to $30 depending on the ad format and the targeting, Nemeth said, and buyers confirmed.

HomeAdvisor, the IAC-owned online marketplace for homeowners, began advertising on Nextdoor in late 2017. Nextdoor had launched sponsored posts in April 2017 for its news feed and its newsletters. HomeAdvisor CMO Allison Lowrie said her company was interested due to its matching audience of owners. Nextdoor said 74 percent of its members are homeowners.

“The home service category is massive, but only a small portion of the hiring activity is happening online. Most people turn to friends or neighbors. Nextdoor creates a bridge between the traditional offline word of mouth and online behavior,” Lowrie said.

Schlage Locks, a door hardware manufacturer, began running ads on Nextdoor last summer and during the holiday season. Jason Owens, director of consumer marketing at Schlage Locks, said he has been a Nextdoor user for a couple years and was interested in how his company could use it to reach homeowners.

“We had that desire to reach verified homeowners in a less crowded advertising space, where we could get past the noise in other digital marketing,” Owens said.

Of course, Nextdoor isn’t the only platform offering advertisers the ability to reach neighborhoods and very specific local markets. Craigslist and Yelp offer local listings as well as Angie’s List (which is owned by IAC and combined with HomeAdvisor in 2017). Facebook and Google also allow local listings, and Facebook has been working to expand its local product.

Nemeth said that a desire for verified identities is one of the most common interests she hears from advertisers. Nextdoor verifies user identities by requesting proof of address such as a cell phone bill. This is one way Nextdoor is able to compete against other platforms. Facebook, for instance, may also tout real names and community, but the platform is still rampant with fake accounts as well as harassment.

Advertisers can target campaigns based on location and time of day. They also can target specific users through interests, household composition and local behaviors. For example, Nextdoor would know if a user has a dog. The platform also offers third-party targeting through Oracle and LiveRamp. Advertisers can also upload their own CRM data and can use Nextdoor’s lookalike modeling.

“We like how we can locally target, and it wasn’t just about specific engagement rates, but we also got to understand users who commented and asked questions [about our products]. There was more of an intimate dialogue,” Owens said.

Nextdoor’s 2019 road map is focusing on “eliminating buying friction” for agencies and brands, Nemeth said. The platform also plans to release more ad formats and improve ad targeting and personalization.

There’s also a part of Nextdoor that has yet to be monetized: local businesses. Nemeth said 2 million small businesses are part of the platform, but they don’t require them to pay if they want to post about their services on their neighborhood’s news feed. Mary Guy from Roseville, Minnesota runs one such small business. She offers lawn and garden care and has been using Nextdoor to promote her services.

“I appreciate Nextdoor’s tolerance of businesses such as mine being allowed to promote themselves, and my postings stay up there forever, and people see them and the recommendations all the time,” Guy said. “I would say every year I pick up [approximately] a dozen to two dozen inquiries.”

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