Letter from New York: Nextdoor and the rise of the nosy neighbour

Dear readers,

For five years after I moved to south Brooklyn, I only knew two other families on my street well enough to say hello to. Both were immediate neighbours.

A long commute to work and a young family left me little bandwidth for socialising. The lockdown changed that, sparking a greater interest in my local community. That reorientation, mirrored across millions of US neighbourhoods, has all been grist to the mill of Nextdoor.

Founded in 2011, the internet social network aims to provide an online community rooted in locality. It is meant to be a place where users can discuss local happenings, seek recommendations for tradespeople and exchange photos of the latest raccoon sightings. 

This week, Nextdoor announced plans to go public through a Spac merger at an implied valuation of $4.3bn. That is almost twice what it was valued at in its last funding round in September 2019. 

Frothy tech stocks aside, you can see why investors think the business is worth more than it was. Long periods working from home have allowed many of us to develop entire new social networks of the analogue kind.

I have forged new and unexpected friendships. There is Lily, a fellow Cantonese speaker who plies me with homemade lo mai gai (a Chinese snack food resembling tamales). Mario, an elderly Sicilian, regales me with stories of old Brooklyn. In return, I drop off extra baguettes that my husband makes when he goes into baking mode.

But the pandemic has also brought its share of awkward encounters. One neighbour knocked on my door because my kids were playing outside by themselves. And I could do without disparaging remarks from another neighbour concerning Jewish people, people of colour and immigrants.

It is that duality in neighbourhood relations that makes me a little sceptical about Nextdoor. Critics say the app encourages nimbyism and facilitates racial profiling.

The business has grown strongly during the pandemic as people who stayed home sought to keep a closer eye on their community. The number of verified users rose more than a fifth last year to 58m. That has since grown to 60m, with just half of its users logging on once a week. The company says it is now present in almost one in three households in the US.

Revenues — made almost entirely from advertising — also grew at a brisk pace. These were up 49 per cent to $123m in 2020. However, the company remains lossmaking, with a net deficit of $75m last year. The figure is forecast to rise to $103m this year even as forecast revenues rise another 44 per cent to $178m.

A hyperlocal approach and its small size has allowed Nextdoor to avoid much of the scrutiny aimed at Big Tech. But it has not been able to keep Facebook at bay. The social networking giant rolled out Neighborhoods, a Nextdoor clone, in May. With a $1tn market cap and plenty of cash on hand, Facebook is a tough competitor.

Nextdoor says its purpose is to “cultivate a kinder world where everyone has a neighborhood they can rely on”. It is a noble goal. Its enterprise value to forward sales multiple of 14 times is twice that of Facebook. You might expect that, given its swift growth trajectory and a hot market for tech stocks.

But the Spac deal has been cannily timed to occur before Americans make a widescale return to workplaces. When that takes place, many of us will feel less engaged with our neighbourhoods. Factor in competition from Facebook, and a natural reaction to the investment proposition of Nextdoor is to cry “next!”

Enjoy the rest of the week, wherever your home is.

Pan Kwan Yuk
Lex writer