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What's Next, With Nextdoor CEO Nirav Tolia
01:01:19
When social media platform Nextdoor launched advertising in 2017, CEO Nirav Tolia declared it would be a $1 billion business by 2020. That didn’t happen. Nextdoor generated $66 million overall in Q3 of this year, and Tolia chides himself for his...
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- [00:13]
Alison Schiff
Welcome to Ad Exchanger Talks, the podcast devoted to examining the issues and trends in advertising and marketing technology that matter most to you.
- [00:24]
Nirav Tolia
Let me tell you a bit about this month's sponsor. Activision Blizzard Media is the gateway for brands to the leading interactive entertainment company. Their legendary portfolio includes iconic game franchises like Candy Crush Saga, Call of Duty, Overwatch, World of Warcraft, and more, which together attract hundreds of millions of monthly active users worldwide.
- [00:57]
Alison Schiff
This is Alison Schiff and you're listening to Ad Exchanger Talks, your friendly neighborhood podcast about advertising. And my guest this week is Nirav Tolia, CEO and co founder of Nextdoor, which is a social network for people who live in the same neighborhood. We'll talk about Nextdoor's advertising offerings, its ambitions for growth, how it's working with small and medium sized businesses, and what it's doing to keep the conversation kind and civil on its platform. Plus lots of other good stuff. So stick around, neighbor. But first, allow me a quick plug for our sister podcast, the Big Story, which is a weekly roundtable discussion on the biggest stories of the week featuring a rotating cast of members of the very excellent Ad Exchanger editorial team. It's good fun, so please add it to your media diet. And while you're at it, please also save the date for next year's CTV Connect March 12th and 13th in New York City, Ad Exchanger is joining forces again with synopsys, admonsters and chief marketer to host a can't miss summit on all the key issues and opportunities in Connected TV. Learn more and register@ctvconnect.com hey Nirav, welcome to the podcast.
- [02:11]
Nirav Tolia
Thank you, Allison. I'm excited to be here.
- [02:14]
Alison Schiff
All right, what is one thing about you that not a lot of other people already know? Or maybe it's like a story that you haven't told in a while?
- [02:23]
Nirav Tolia
We are diving right into it. So I've got to search for something that is non obvious and potentially not findable online. Correct. You want something that's a little bit more of a unique nugget, shall we say?
- [02:36]
Alison Schiff
I would love a unique nugget, please.
- [02:38]
Nirav Tolia
Well, let me start by saying that typically I would answer this question by saying not a lot of people know that I am originally from Texas, which is where I grew up, and until I left Texas to move to California for college, I'd spent all of my formative years there. And the reason that people typically don't think that or know that is because I have spent most of my adult life in Northern California and in Silicon Valley, and I don't have a Texas accent. However, I can no longer say that that is something unique or something that's unknown, because three years ago, my wife and three kids and I moved back to Texas from San Francisco. And so a lot of people know that I am in Texas now. And lest they think that I was fleeing California for tax relief or some other reason, I typically will tell them I grew up in Texas and my entire family is in Dallas, which is why we ultimately went back there. So I would typically say that. But I had to dig a little deeper given that the Texas thing is no longer that unique. So I will go to my college days at Stanford and something that I don't typically reveal because it's a little bit embarrassing.
- [03:56]
Alison Schiff
Great. I love that.
- [03:59]
Nirav Tolia
There you go. Right, so I'm going to start by making a fool of myself. But when I was at Stanford as an undergrad, I was lucky enough to be in one of those collegiate acapella groups. An acapella group is a singing group. A cappella means without an instrument. So it's a vocal group where folks get together and they sing songs and they perform. And my particular group was called the Stanford Fleet Street Singers. It was an all male collegiate acapella group that we took probably as seriously as we took any of our classes when we were at Stanford. And so that in and of itself is kind of unique. But let me tell you the interesting tie between that group and Next Door, which is in subsequent years post my graduation, I would come back when Fleet street was choosing the singers for subsequent years. And two years after I left, we chose a person named David Wiesen. And he was part of the group and he had a great career in Fleet Street. And many years later, that was probably 1997, many years later, in 2010, David Wiesen became one of my co founders of Nextdoor. And so it's an interesting little tidbit because I no longer sing. And if you met me, you probably would not think that I have any musical talent. I'm not sure I had any musical talent back then either. But it is something that I enjoyed and took very seriously. And it ultimately yielded not just great memories at college, but one of my Next Door co founders.
- [05:31]
Alison Schiff
Nirav, you do know that I'm going to ask you to sing something at the end. I need you to prepare yourself.
- [05:37]
Nirav Tolia
I need to protect the listeners of this podcast. And so as you and I were saying, I have the perfect face for an audio only podcast and I have the perfect voice for a Silent film. Right. And so we are not going to subject anyone to my singing, at least not on this podcast.
- [05:58]
Alison Schiff
Well, we'll see about that. So I want to ask you actually about the first entry on your LinkedIn page under Experience. It says that you were an associate producer and surfer at Yahoo between 96 and 98. What is a surfer in that context?
- [06:18]
Nirav Tolia
Boy, that's a great title, isn't it? And it has nothing to do with waves or anything related to the water. But I was so lucky going to Stanford in the early 90s and being around the very beginnings of the dot com boom and. And my first job in technology, my first job really in business, was as one of the first hundred employees at a company called Yahoo, which many of us probably remember extremely fondly from those early days of the Internet. And Yahoo's earliest iteration was as a directory of websites. And so in those early days in the late 90s when folks were just starting to experience the Internet and be introduced to the wealth of content on the Internet, many people, pretty much all the people using the Internet at that point would go to Yahoo. Because Yahoo had classified the thousands, tens of thousands, hundreds of thousands of websites online and had put those websites into an ontology, almost like a card catalog that you would go to in a library if you were looking for a book. If you're looking for a website to learn about something or to be entertained or really for any reason whatsoever, you would go to Yahoo. And it was really the first search engine. It wasn't a search engine the way we think of search engines today, because the classifications of the websites were done manually by real people. And we were called surfers because we were surfing the Internet to understand the content that was being submitted to Yahoo and then put it in different categories. That was actually early 1996 until about the same time in 1999. And so what an incredible experience for a young person in their early 20s to be at a place like Yahoo before it was really big and established. And to see it over those three years go from less than 100 people to over 10,000, from being worth a couple hundred million to 100 billion, to serving a couple million users to probably hundreds of millions of users. I mean, it's really was a winning lottery ticket for me to be an early employee at Yahoo. And I took it as that honor. But what I realized over three years being there is that I was not really part of that success or I wasn't part of making that success. And if I'd been run over crossing the Street. I don't know if anyone at Yahoo would even have noticed and certainly the business would not have suffered. And so ultimately, Yahoo. Not only was this incredible place to learn so much about the early days of the Internet, it was an inspiration because I walked away after three years and no one at that point in 1999 was leaving Yahoo. I mean, it was the coolest company in the world. But I left because I wanted to try to create my own Yahoo. I wanted to create my own company where I knew that the success or failure of that entity was kind of on my shoulders. And I'll never forget my going away party. One of the co founders of Yahoo, Jerry Yang, was kind enough to stop by and he said, you know, Nirav, no one's leaving Yahoo right now. Why have you chosen to go off and do this? Like, where are you going? What are you going to do? And I said, oh, Jerry, when you walk into work and you see all these thousands of employees and you think of all the things that the company's accomplishing and you must be so incredibly proud, I want to try to do something like that. And he was quiet, kind of looked at me, and after a pause, he said, you have no idea how hard it is to actually build something like this. You see the result now, but thankfully you didn't have to experience all of the struggle along the way. And truer words were never spoken. Because then when I went off to start my own company, my first company in 1999, I then, in a very visceral way, began to experience the struggle.
- [10:25]
Alison Schiff
Right. So Epinions, although we'll skip over that and we'll go over to Nextdoor, we're going to fast forward from the late 90s to when you were a surfer to when you co founded nextdoor. So my main experience with nextdoor is as a platform to give stuff away that I'm finished with. I gave away a fixie bike earlier this year for free. I posted it and literally minutes later, I had, I think six, seven, eight offers from people asking if they could come by and get it. And I ended up giving it to this guy. He was so grateful. It was really, really nice. Actually. I had less luck unloading a plastic IKEA chair that's still in my apartment. I was also alerted to porch pirates in my neighborhood, or lobby pirates, I guess, in Astoria, which was very handy. But I know nextdoor has a lot more going on than that. And we're going to talk about the advertising business also. But talk to me about what Nextdoor was in 2008 and what it is now. And is it the same thing?
- [11:29]
Nirav Tolia
Yeah, it's a great question and a couple of interesting threads to pull on there. The first is Nextdoor. Maybe I should have mentioned this as the unique thing that people don't know. Nextdoor was created as a result of a company that I was working on that had failed. And so Nextdoor was an attempt to take money that had been raised for another concept and apply that money towards a new idea. And this was the summer of 2010 and social networks had emerged and folks were starting to use Facebook and LinkedIn and Twitter @ scale. And my co founders and I were really inspired by this idea that community was more vibrant than ever online. But no one had created an online service to build community offline said a different way. We believed that our local communities are one of the most important communities of them all. But there was no technology tool that would help strengthen that local community. So from the very beginning, the vision for Nextdoor was kind of a dual attempt to build an indispensable local Internet service, which is a kind of business goal, but also with a human goal of using the power of technology to help create stronger, safer and happier places to call home. And we were really struck that summer by how complementary these two things were. If we were successful in building local community, we would probably be successful in building a valuable business. If we were successful in building a business, we probably would go a long way towards helping community to be built. So from the very beginning, this idea has been very special because we don't feel that it's a compromise. Sometimes when you think of social media, I particularly think this as a parent of three kids, a 12 year old, a 10 year old, an 8 year old. I don't always love it when my kids are on social media. I don't love the idea of doom scrolling. I don't love the idea of spending all of my time looking at a screen or the people I love spending all of their time looking at a screen. But nextdoor was created to use technology and to give people the leverage that the Internet provides, but then ultimately to lead them to the physical world, the world of their online communities. When you talk about those two examples of how you've used Nextdoor, you can't give away something virtually that's a physical thing, it's a physical object that then someone walks over to your apartment to come and get you, used an online technology to then break through to the offline world. When you talk about a porch pirate, someone who comes and steals an Amazon package that's on a doorstep. That, too, is something that's happening in the physical world. So before I get to what may have changed, I'll go back to from the summer of 2010 until today, the idea behind the company, the concept, the power and potential of building this indispensable local Internet application. It hasn't changed. It's all about local, it's all about community, and it's all about the power of technology. And you take those three things and hopefully you can create something magical. Now what's changed is that the world has really evolved. You think about COVID and how that made us feel about where we live. You think about the now resurgence of people wanting to travel places, and some people now work from home instead of going in the office. And the world's more flat than it's ever been. So the world has changed a lot. And what we've realized, I think, over the last year or so at nextdoor, is that the product needs to evolve the same way the world has. And so I'm looking forward to the next version of nextdoor, which we call Next, which I think will be more in step with the world today even than that original vision in 2010.
- [15:31]
Alison Schiff
So I'm glad you brought up next, but I'm going to put a pin in it because I want to talk about the advertising business first, and then we'll talk about what's coming next and the transformation that you have in store. But even before we talk about the advertising business, we should talk about who uses nextdoor, because the value of any platform from an advertiser perspective, beyond reach, is data, the people, first party information. So who is the typical Nextdoor user and what would make them attractive to an advertiser?
- [16:05]
Nirav Tolia
Well, we've been very fortunate because now, 14 years into our journey as a company, we have 99% of American neighborhoods using Nextdoor. So who's using Nextdoor? Everyone is in the U.S. i mean, we have approaching 100 million verified neighbors, 80% of whom are in the U.S. and so we're also operating in almost a dozen countries around the globe. But let's just talk about the US for a second. Nextdoor started primarily as a tool that was used in suburbs, in suburbs that already had some sense of community. And I would say it probably biased a little bit towards homeowners, potentially homeowners who had children, because the kinds of things that you saw nextdoor were neighbors asking each other for service provider recommendations, or neighbors asking each other for advice on what to do with their kids on the weekends or for a great babysitter or a dentist. And as next door grew, we realized that whether you live in the densest urban place in a major city like New York, which is what you do, or whether you live in a suburb of a city like I now do, I live in Highland park, which is a small area in Dallas or around Dallas, Texas. Next door is relevant. It can be relevant for different things. If you're in a neighborhood where you have a bunch of young single people, maybe next door is what they use to find a great pickleball partner. If you are in a neighborhood with lots of young children, then you're going to have lots of chatter about babysitters. If you're in a neighborhood like you are in Brooklyn, you will have people that are free cycling, giving away things to their neighbors as they decide that they're rearranging furniture or changing where they live or whatever the case is today, I would say anyone that you want to reach locally, you can reach using Nextdoor. That's the advertiser value proposition. But going a little bit deeper, local is something that typically is not easy for big advertisers or small advertisers to scale. And the value of Nextdoor, with 99% of neighborhoods using the product is you can do local but at scale. And that's very unique in the world today.
- [18:21]
Alison Schiff
So I'm going to read the first sentence of an article that my colleague James Hercher wrote in. It was 2022 in April when you guys launched your self serve ad platform. And I know there was stuff that came before that, but he started out that story with it's just your friendly neighborhood ad platform, which I thought was kind of funny and actually sounds like how you would position the ad business. And that's kind of how I think about it. Would that be like how you characterize it?
- [18:51]
Nirav Tolia
We love anything related to friendly and neighborhood. And so yes, that is how we would characterize it. I will say however, that what we've seen since 2022 and what we continue to see is we have three large segments of customers of advertisers. We have the small businesses that are really the lifeblood of any neighborhood. These are service providers or retail establishments or the folks that you know that you love that give your neighborhood its character. Then we have mid market advertisers and these are folks who typically are regionally based, but they have multiple locations. I wouldn't quite call them chain establishments, but they are thought of as larger than individual small Businesses. And then finally you have enterprise businesses. And enterprise for us is folks like Best Buy or folks like Panasonic. I mean, big advertisers that we would consider Fortune 50 or Fortune 100 that have hundreds of millions of dollars that they're putting towards advertising. But they want to feel authentic, they want to feel local, they want to connect with people where they live. And so, yes, we are your friendly neighborhood ad platform, for sure. But that's really about what the platform enables an advertiser to do, which is reach someone in a neighborhood in a friendly way. It doesn't mean that the advertiser has to be a small business, which is typically what we think of as the folks in these neighborhoods. And probably the most important thing is, I will go back to something I said about the user value proposition for these advertisers. It's about giving them the opportunity to use the online mechanism to drive activity offline. And that's something that, you know, if you think about Instagram today, it has become an incredible driver of E commerce. I mean, you can shop on Instagram because the ads are so good, and those are typically direct to consumer e commerce brands on Nextdoor, there is some of that. But the vast majority of advertising is going to inspire our users to go and do something in the physical world world, in the real world, in their neighborhoods.
- [21:07]
Alison Schiff
When you have millions of users, tens of millions of users, though, there is always the question of moderation and vibes. I mean, that really is part and parcel with being a social network. There was this column that I read in the Washington Post from earlier this year, from February, had the headline, next door has gotten way out of hand. And the guy is making this argument that people sometimes use next door to air their grievances about their neighbors or, like, post photos of people that are just, like, walking down the street. Like, does anyone know this person? They've been loitering and it turns out, yeah, they're just walking to work or something. So how do you, like, keep things, like, not only civil but also, like, positive when it's kind of like humanity's tendency, when they're not being nice to each other, to go in the opposite direction?
- [21:58]
Nirav Tolia
Yeah, you really started to touch on the richness of this topic. And you can imagine in 14 years of being around this company, the number of times we've said to ourselves, wow, we wanted to create this friendly neighborhood application that's all about bringing people together, particularly in an increasingly divided world. However, social media, as we've learned it, is a mirror of the real world. And in the real world, people do lose their tempers, they do get mad at their neighbors, they do air their grievances. And so for us, it's really about reminding them that when you're emotional, when you're hurt, when you're upset, that's maybe not the best time for you to engage in an online conversation. And we've done a lot of work in this area, whether it's using AI for something called our Kindness Reminder, where we'll scan a post before it's put on the service. And if it feels a little antagonistic, we'll return it to the user and give them some suggestions on how they can make it a little bit more constructive. But look, at the end of the day, I mean, the stat that we know is 0.26% of our total content is what we would describe as harmful or hurtful. We won't be happy until the point to 6% goes to zero. But the reality is these are human beings. They have emotions. They go through ups and downs in their neighborhoods. And when someone's upset, I would still rather they express themselves on nextdoor because it gets the emotion out. And almost always there's someone in that conversation, a neighbor that will provide support. And so it's. It's not always a fun thing to see how the sausage is made. And that's what we end up having to experience as well, whether it's the moderation or the AI tools or the code of conduct that we try to inspire our users to embrace. But ultimately, the end result is these are people, and they have strong opinions and they have emotions and they want to connect with others. And as long as they do it the right way, it's productive. Sometimes online mechanisms bring out the worst possible sides of people. I don't think that's predominantly what happens on nextdoor, because when you join Nextdoor, you have to use your real name. You have to verify with your physical address. It's not an anonymous forum where you can slander people or be the worst version of yourself, but those emotions are genuine. And we just got to remind ourselves that sometimes when you're emotional about something, don't go write about it on nextdoor or other social platforms. Just take a walk, and before long, you'll realize that you're in your neighborhood. The people there actually are much more like you than they are different. And life's just too short to focus on the negative stuff.
- [24:55]
Alison Schiff
Yeah, you're here. When I'm ticked off and I feel like emailing somebody about it. I write the whole email, but I don't fill out the two lines and then I just delete the email. That's how I approach it.
- [25:06]
Nirav Tolia
It's really funny. I was talking to a CEO coach once and I was complaining about something that happened at the company and I said, yeah, I know I have to get more zen about this. I need to make sure that it doesn't bother me and just ignore it. And the CEO coach stopped me and he said, no, no, no, you don't need to pretend like it didn't happen or ignore it because it did happen. And if you ignore it, you're probably going to in some way push it down and then at some point it's going to explode like a jack in the box and have an even worse impact on you than if you just embrace it, understand the way it makes you feel, but not lash out as a result. And that was actually really good advice. And so I think what you just said, which is, hey, when something happens that upsets us, we have to acknowledge it, we have to try to understand it, we have to try to respond to it, but let's not do it in a way that hurts someone else. You know, there's that expression, hurt people end up hurting people. Let's try to cut it as when I'm hurt, I understand it, I embrace it, I'm curious about it, but then I move on. And if we do that, I think the world is a lot better for it.
- [26:15]
Alison Schiff
So it's, it's a little free therapy here on ADD Exchanger talks.
- [26:19]
Nirav Tolia
That's right, that's right.
- [26:20]
Alison Schiff
Take a quick break and when we're back, we're going to talk in more detail about nextdoor's advertising business. Like what's in there, what kind of data have you got? And also AI because of course we're going to talk about AI. So stick with us.
- [26:47]
Nirav Tolia
I'm Sarah Sluice, Executive editor of Adix Exchanger. I have with me today Antonio Miller. He is research manager of Advertising Insights of Activision Blizzard Media, where he gets to research how people are gaming and what kind of ad experiences work for players and brands. Welcome, Antonio.
- [27:05]
Antonio Miller
Hi Sarah. Thanks for having me.
- [27:07]
Nirav Tolia
Attention and the metrics that define it are really hot industry topics today. And I know your team recently did research on this subject. Can you tell us a bit more about it?
- [27:17]
Antonio Miller
Yes. So for the past year our team has been diving into the subject of attention, mostly through eye tracking research and internal measurement data. And now through our latest research titled Play It How Gaming Immersion unlocks player attention. We dive into the concept of immersion, which when studied, can predict consumer action with 80% accuracy. This means immersion impacts metrics like brand recall, awareness and even purchase intent for brands. And we're finding that gaming is the key to high quality attention, not only because it outperforms online video and social media in immersion, but also because of its ability to engage and delight audiences and hold consistent, stable immersion.
- [27:57]
Nirav Tolia
Okay, so immersion is a key thing here. How does gaming differ from other forms of media in terms of capturing and sustaining audience attention?
- [28:06]
Antonio Miller
So, in our latest research, we found a few things. First, Gaming has a 99% viewability rate. It also has more ads that are fully viewed at 100%. That's hard to beat. Secondly, games provide players a place to be relaxed and happy, which is crucial for stable immersion and can translate to better ad experiences. This seems obvious to us. There's so much content on social media and online video platforms, you don't know what you're going to get. With gaming, every point of the journey is opt in, from launching the content to ad moments that are timed and rewarded when you need the most. And that's what keeps in Game immersion and ad Immersion stable. And finally, as a result of all this, gaming outperforms online video and social media and immersion, which, as I've said earlier, has huge impact on metrics like awareness, recall and purchase intent.
- [28:53]
Nirav Tolia
If brands want to take advantage of this highly immersive gaming space, how should they get started?
- [28:59]
Antonio Miller
So the thing to remember is that gaming is about joy. It's inherently fun. So I'd encourage brands to have fun with it and execute it in a way that can enable that balance of fun immerse and brand resonance. We have an internal studio, it's called Starcade Studios, that does exactly this. It partners directly with brands to find that right balance. So I'd say Starrcade Studios is a great place to start. However, if you're intent on creating a campaign without so much external support, prioritizing partnering with a publisher that is thoughtful about ad placement offers immersive experiences like branded mini games and rewards players for their time. We know players value this exchange. We also have data showing that players are more immersed after a thoughtful ad experience, which supports the sentiment that when done right, ads are welcome.
- [29:46]
Nirav Tolia
Thank you so much, Antonio, for those tips.
- [29:48]
Antonio Miller
It was my pleasure. Thanks for having me, Sarah.
- [30:05]
Alison Schiff
All right, we're back. And before we talk about the advertising platform, which I feel like I've been teasing the whole time, there's one other fun fact. About you that we didn't talk about, which is that you're a guest shark on Shark Tank. It's pretty cool. You've invested in a bunch of different companies. There's this company called Soapin, which is like a soap filled pen for kids so they can draw on their hands with soap and, and then wash it. So it makes washing your hands kind of fun. And a company with the best name ever. Hello Prenup, which is like a DIY software based prenup platform. So how did you get involved with Shark Tank? And then how involved do you stay with these companies after?
- [30:47]
Nirav Tolia
Well, first of all, I mean, being a shark on Shark Tank, what a dream for an entrepreneur like me. And in many cases I have to pinch myself that I'm one of the sharks versus one of the people that's being fed to the sharks. Because most of my career I feel like I've been the latter. But I love entrepreneurship. I love what it represents. I love being an entrepreneur, I love supporting entrepreneurs. And so when I had the opportunity to go on Shark Tank, it was a real privilege. And the interesting thing about Shark Tank is it's not scripted at all. So what you see on the show is actually what is happening. And there is no artificiality about what you ultimately view. That's in fact what has really happened. That's the way the pitch has happened, it's the way the sharks have negotiated. It's the deals that ultimately you either decide to consummate or you walk away from. And so I enjoyed my experience a lot. I loved seeing the entrepreneurs. I mean, I could put myself in their shoes so easily. I remember so many of those moments when I was the one going in to pitch my company, whether it was nextdoor or earlier companies. And the anxiety, how nervous you feel, that incredible rush if you get the deal, those are all things that I've experienced myself. And so when I did the deals, whether it's with Sopen or hello Prenup, I really felt like the entrepreneur on the other side was like me. I felt like that we had a connection and in simpatico that you can only have if you have actually done that experience or gone through that experience yourself. And so I, I loved being a shark. I love the fact that I'm still in touch with these companies and what an honor. And to me, Shark Tank really is one of the best examples of the American dream. Because this idea that you have an idea, you work like crazy to start to get that idea off the ground, you need help. You go to People who are successful, who've been business builders themselves and you get their money, their advice, their support, and you can go on to become one of them. And that really is the American dream. And that's something that has made our country great. And so I just couldn't be a bigger supporter of that concept and of the show itself. And it was a lot of fun.
- [33:14]
Alison Schiff
I also think it's a great thing they do with Make a Wish. My cousin's daughter was able to present one of her business ideas to the sharks. I don't know if it was aired or not, but she had to make a wish and they put time aside for that, which is really cool.
- [33:31]
Nirav Tolia
Look, I think all of those things are the way that we give back when we've had some success ourselves. And so this idea that we stand on the shoulders of giants and we need to allow others to stand on our shoulders, that's a really important concept. It's been really important when I think about the way my parents raised me, it's been very important when I think about Silicon Valley and all the people who've helped me along the way and, and so anything I can do, even though I still feel like I'm an early entrepreneur that needs to find the giants whose shoulders I can stand on, anything I can do to help fellow entrepreneurs, that's something that I just, I love doing. It's one of my favorite things in the world.
- [34:12]
Alison Schiff
Well, now we're going to talk about our listeners favorite thing in the world, advertising. So let's get in the weeds. Was it 2016, 2017 when Nextdoor first launched advertising, Is that right?
- [34:26]
Nirav Tolia
That was a long time ago in entrepreneur years, but yes, it sounds about right. Probably more 2016, 17 and a very nascent effort. I mean, I give the team so much credit. You know, I was next door CEO for almost nine years, the first nine years. And then we hired a wonderful woman, Sarah Fryer, who's been the CEO for the last five and a half years. And then I came back nine months ago. I'd say the last five years under Sarah is when the advertising systems, technology and work really started to emerge as a, as a really well developed part of Nextdoor. And we have a long way to go. But I give that team all the credit for where we are today.
- [35:08]
Alison Schiff
It's sort of like the manifest destiny of any platform that has inventory, like particularly a social platform or any platform with social elements to monetize through advertising. But like still you can't just turn on ads like flipping a switch So I know it mostly happened under another CEO's tenure, but do you know what the process was like at the beginning? I mean, I know it was mostly in stream native ads, not disruptive, but like, how did users react at the start to having their platform monetized with advertising?
- [35:40]
Nirav Tolia
You know, it's funny when you use words like monetization and platform being monetized and even advertising in general, I mean, you have to realize when you're building a consumer product that's mainstream, the users don't think of it that way. The users think of it as are they seeing additional content that's valuable or are they seeing content that is getting in the way of the content that they find valuable? And so from the beginning, a guiding light for us, and it's something we still think about today. And we'll use words like ad load and relevance and formats. But what we're really talking about at a high level is ultimately, can you create an experience where the ads are additive to the overall experience of nextdoor, or are you creating an experience where people just can't wait to skip past the ads? And so that's, I think, the struggle for all of the ad platforms. And you want to talk about AI, of course. I mean, when you think about what the meta properties have done using AI and machine learning, I've heard many people say that Instagram's ads are better than the organic content on Instagram. And so that is increasingly the goal. And when we think about Nextdoor, 20% of the content that's posted by neighbors is commercial in its intent. It is folks that are looking for service providers or folks who want information on businesses in the area, or they want a recommendation for how they can spend money in their area, how they can invest in their home, that sort of thing. And so would they think of those questions being answered by ads as being monetized or as content that they'd want to skip through? No, I think they actually find it quite valuable, particularly if it's from a brand that they recognize, whether that's a local brand or whether that's a national one. But that's kind of been the guiding light. I mean, when you think about being an ad platform, can you ultimately create advertising that feels like it's additive to the experience versus subtractive.
- [37:43]
Alison Schiff
So I'm going to rattle off a list of what I know of to be your ad offering and then let me know if I, if I missed anything. There's the Ads Manager, it's a self serve ad platform. There's a creative builder. There's targeting and I do want to talk about the data aspect in a sec conversion, tracking. And then there's an ads API program which is more for like businesses and agency partners that are like not your local pizzeria, I assume. And they, they can use the API to create ads and then run and measure their ads, like for nextdoor, but through their own platforms. Is that pretty much the universe or.
- [38:19]
Nirav Tolia
Is there other stuff you've hit on the major points? And we think of it collectively as our ad stack. And so when you hear us talking about it to the outside world, whether it's to advertisers or to Wall street or even to journalists like you, we will think of it as our set of advertising technologies or our ad stack. And we're still very early. Even with all of the things that you mentioned and all the work that we've done for years, I would say that we're in the first or second inning of really developing the best ad technologies that we can. And again, if we look at the giants in our industry, the metas, the alphabets, they have done so much in this area and they have so many resources and it's both daunting but also, I think, very encouraging because the roadmap is pretty straightforward. We know all the things we need to do. It's just going to take a lot of time to do them.
- [39:16]
Alison Schiff
I mean, small business advertisers, that's the key to everything. I mean, that's the key for Facebook's growth. They appealed to SMBs. They made it easy for the little guys like mom and pop shops and local restaurants and coffee shops and small stores and e commerce sellers. If it's easy for them to advertise, then they do and they keep doing. And maybe it's a small amount, but you multiply it by it's more than 10 million at this point. Advertisers that Facebook has across its platforms or meta or whatever, it has to be more today because I think they announced 10 million multiple years ago. So I don't even know how many advertisers they have on their platform today. But SMBs are the catalyst for scale. You just get a lot of them together and that's how you do it.
- [40:07]
Nirav Tolia
It's very difficult to build a successful SMB audience because you don't have the same network effects that we're always pursuing as technology companies. But you know, just to take a step back for a second, and on Nextdoor, we have 2 million SMBs who've created pages, they're not all advertisers, but they've created pages on nextdoor. So the 10 million number that you mentioned, I'm sure it's much greater given the scale of those platforms. But just to take a step back for a second, generally speaking, I think there are three major categories of advertising. There's, there's brand advertising, and I'm talking about the Internet now. There's brand advertising where you're really trying to create a conversation or reinforce a perception that people have about the brand or, or in some way connect emotionally with users. But it's not direct response. It really is about building a brand. It's more like maybe your traditional TV advertising. The second thing is there's that direct to consumer that you see mostly on Instagram these days and platforms like that, where it's really about being able to consume something specific online. And so with a few clicks, you can not only see an ad, but you can act on it. You can actually buy something and then have it delivered. And then there's the third category, which is how are you using the fact that people are spending the majority of their free time online to ensure that when they're ready to transact, they know about the places they can spend money offline. And in that category, when we drill a little bit deeper and we think about SMBs, think about what SMBs used to rely on. The Yellow Pages. And the Yellow Pages really don't exist anymore. I mean, Google has completed, completely taken away the Yellow Pages business. And the other way that small business would grow is through word of mouth and word of mouth because we don't know our neighbors. We don't spend as much time physically walking around our neighborhoods or sitting in our front yards being social with neighbors. Where is that word of mouth? So I think there's a tremendous opportunity and almost a responsibility to small businesses to do two things. One is to create very easy ways for customers to discover them online, whether that's through Google Search or through places like Nextdoor, through any of the meta properties. But I think even more to the point, there's this amazing opportunity to bring that word of mouth online. And that's really the power of Nextdoor, because neighbors are talking about the businesses they love. And so maybe it's not traditional advertising per se, because it's a recommendation that's organic, that's coming from an existing customer. But then if we provide the small business with an opportunity to capitalize on that word of mouth, I think that's a really special thing that really Only the Internet can do.
- [43:01]
Alison Schiff
When you were saying that today, not a lot of neighbors necessarily know each other or not the same as it used to be. I mean, that is so true in New York. It's really bad, actually. I only know one of my neighbors on my floor in my building, and I've lived there for seven years. It's so bad.
- [43:24]
Nirav Tolia
You know, the statistic when we started the company in the summer of 2010 was that 30% of Americans cannot name a single neighbor by name. So 30% of Americans back then were even worse than what you just described. They didn't even know a single neighbor or couldn't name a single neighbor that lived around them. I would hope that as we have approaching 100 million verified neighbors on Nextdoor, I would hope that we've helped make a dent in that percentage. But you're absolutely right. We know much more about celebrities than we know about the people next door. And what help is it that we know Taylor Swift's birthday or that we know her favorite ice cream flavor or we know how many pets she has? Right? But if we knew those things about our neighbors, think about how much richer our lives would be. Right? So there's this amazing opportunity to bring the communities that are local together. But we have to do it in this world. And the way we do it in this world today is we get leverage from technology. And that was the opportunity in 2010. And I don't think the opportunities faded at all. In fact, if anything, it's become more vibrant.
- [44:38]
Alison Schiff
Well, let's talk about targeting neighbors. So when Nextdoor first launched ads, like in a serious way, or maybe it wasn't as serious in 2016, 2017, it was still nascent. But you were out there talking about the first party data targeting opportunities and capabilities like how advertisers can target by dma, zip code, neighborhood and physical address. And that is, I mean that, that is a special parameter. I mean, not everybody has that, but I think it's also a special responsibility because people can clear their cookies, but they can't clear their physical address. And I know some people probably turn off personalized ads on nextdoor. Not everybody. But how do you strike the right balance between like hyper local personalization and not overdoing it just because you, you have that data?
- [45:31]
Nirav Tolia
Look, it's a great question and I think the first thing you have to do is you always have to give your user the opportunity to opt out if they don't like what is going on on the platform. And that is always going to be the minority of users, because a lot of people may complain, but then going that extra mile into the settings and turning it off is a different level of annoyance that you must have if you go and do that. But you start there. And then I think the second thing is you think about not sharing the personally identifiable information. And so typically, I think we are much more of the approach that advertisers can target on a zip code, DMA or neighborhood level versus a specific physical address. And the reason it's so powerful to use location as a proxy for targeting is because the location tells us much more without the user having to share the information directly. So, for example, you know that in a zip code, the average salary of people who live there is some range. You don't have to ask those people. They don't have to divulge any personal information. You just know that through the census, you know, in a given zip code or a neighborhood or a dma, what the average number of kids a person has or a couple has. And so you tend to get the right information without needing to cross the line into the personally identifiable information piece. And so I think location is a real. It's an absolute superpower when you're thinking about targeting because you can infer so much more than just the physical location without having to go to that next level of feeling like you're prying into people's personal lives.
- [47:19]
Alison Schiff
Mind if you see an ad for a local pizzeria, you're not gonna think, oh, my God, how did they know? Because they're two blocks away or around the corner.
- [47:28]
Nirav Tolia
Well, you know, the classic meme that goes around a lot is. And I don't believe this myself, but now I sometimes wonder. My wife told me one day, you know, that Facebook's listening to you? And I said, what do you mean Facebook's listening to me? And she said, well, you know, I'll have a conversation with some of my friends and then I'll go to Instagram. And the next thing I know, there's an ad about that thing that we were discussing. And I said, as a technology person, no, no, no, that's probably your cookie. You visited a website. And my wife says, no, I've never actually visited a website related to this thing. And they're still showing me ads, and I kind of just shrug it away. But then it's happened to me a couple of times, and I don't actually know the truth along these lines, but I have heard that we do give permission to the meta properties and some other ad driven Properties to use our microphones to record what we're saying. And that, to me, starts to get into a place where even I feel uncomfortable. And I am a lover of technology, and I believe that these companies want to do the right thing. So I'm not a skeptic or a cynic or someone who's paranoid when it comes to these things. But it is a little weird if you and I are having a conversation about Coca Cola, for example, and I haven't visited a Coca Cola website, but we can have a conversation about our favorite flavor of Coke. And then if I see an ad from Coke, that is going to make me feel a little weird. And. And so we don't do that kind of thing. Like, if you're having pizza for dinner, we don't show you ads from Pizza parlor. Right. However, if you live in a neighborhood where the pizza parlor is a beloved business, it makes sense for you to see that ad. So I think you can do it in the right way. But there's definitely a line that, if you cross, starts to feel a little bit more squirmy. It would be good for the people to know whether Mark knows about all the conversations we're having or whether we're just being paranoid. I don't know the answer myself.
- [49:21]
Alison Schiff
What's the saying about paranoia? It's not paranoia if they're really after you.
- [49:28]
Nirav Tolia
I like that. I like that.
- [49:30]
Alison Schiff
I want to talk just for a minute about something that you teased briefly during the first half. This initiative to transform the product, like a complete transformation of nextdoor. It's this initiative you're calling next, which is a good name for a project about what's next for nextdoor. But break down for me what that means in practical terms. Like, when you guys say you're doing a total transformation, what exactly about the platform, like, needs to be different and, like, what will you be doing differently?
- [50:03]
Nirav Tolia
Well, at a high level, what we mean by transformation is not necessarily different, but better. And so the first thing I'll say is we need to transform the experience so that it delivers more value to our user base, full stop. I mean, it's pretty simple. I have pitched the concept for Nextdoor tens of thousands of times in the last 14 years. And I have to say, as a lifelong entrepreneur who's pitched a lot of different ideas, I've never received as positive a response to any idea that I've pitched as I have to the Next Door idea. This idea that technology can keep us in touch with what's going on locally can help Us get to know our neighbors can solve some of the important problems we have in terms of where we live. People's eyes light up, they start to imagine this incredible thing that they would find indispensable. And then time and time again over the last 14 years, they use the app or they go to the website and it just doesn't live up to that incredible potential. And so when I came back to the company nine months ago, talking with our employees and talking with our investors and talking with our users, it was very clear. Even our advertisers, it's very clear that we need to build a much better product if we really want to deliver on our potential today. Nextdoor is incredibly valuable. For episodes where you have strong intent. We call it episodic, infrequent usage. That is intent centric. And what I mean by that is when you need something, next door actually delivers. When you need to give away something, it will work. Unless it's that plastic IKEA chair that you talked about.
- [51:45]
Alison Schiff
Oh, by the way, I like Uncle Glad no one picked up the chair because I kind of like it now. But go.
- [51:49]
Nirav Tolia
There you go. There you go. So, you know, we, we served you in that way as well. But when you lose a dog, your neighbors are going to help you find the dog. When you need a trusty plumber, your neighbor is going to recommend a plumber. Those are episodes where you have very high intent. If you're in the middle of a hurricane, next door literally will become a lifeline. But if we think about our aspiration, which is to become a major part of your life every single day, we need to expand intent to what we're calling discovery. And the idea behind discovery is when I wake up in the morning, I go to five or six different services. My email, SMS, WhatsApp, the New York Times, front page ad exchangers. Front page, right. I mean, a number of different, in most cases, news or communication services to very quickly get my lay of the land and discover if there's anything that I need to know about. Well, there's no reason why Nextdoor can't be one of those, because it would be incredibly valuable for you to have one place you could go to discover on a daily basis if there's a terrible thunderstorm coming or if your commute is going to be delayed because of construction or because of a traffic jam, or to hear about the new taqueria that's in the neighborhood because you love tacos or whatever it is that isn't a burning need, but the burning need is that you want to be informed, you want to feel like you know what's going on, and we need to bring you that information. And so the major thrust with NEXT is to move from just being intent centric and nextdoor is there when you need it, to Nextdoor being this invaluable tool that you rely on to tell you what you may need instead of simply responding when you need something. And so that requires rethinking the way that we built the application, because originally we built an application that was very good for recommendations of service providers and finding lost pets and asking your neighbors advice on things related to your home or your family or something related to where you live. For us to now move into more of local news, local information, weather, traffic, almost some, I would say, evolved version of a local newspaper or the local newscast. That's something that requires transformation, and that's what we're excited about building with next.
- [54:16]
Alison Schiff
Does AI play a role in that?
- [54:18]
Nirav Tolia
For sure. I mean, I think the value of AI, and it's really machine learning. But AI is the broader term, the ability to take lots of disparate sources of information and braid them together, summarize them, and then present them in a way that's coherent. That's something that typically would take a human editor. And with AI, you can do it mostly in a magical, technology centric way. And so let's take weather as an example. There are lots of different sources of weather. Strangely, they are all slightly different. If you go to weather.com or you go to the Weather Channel, or you go to all of the other weather services, you will find similarities in the forecast for your specific area, but not exactly the same forecast because they all use different methodologies. AI could bring all of those forecasts together and boil them down into one line or a set of lines. That gives you a lot of leverage. And so AI will be used, I think, to give much more focus and simplicity and value to all the disparate information that exists locally. But you don't have time to read every bit of information. You want the power of summarization and things that are most relevant to you. And AI can play a huge role there.
- [55:41]
Alison Schiff
So we're nearly out of time, so I'm going to ask three last questions. One is a serious question, one is a semi serious question, and the last one is an unserious question.
- [55:51]
Nirav Tolia
So I'm ready.
- [55:54]
Alison Schiff
You're a public company, so we have some revenue numbers. 66 million in revenue in Q3. It's a 17% increase year over year. Good Numbers. But when you first launched ads around seven years ago, I read a quote from you. You predicted that it would be a $1 billion business by 2020. And I mean, that hasn't happened yet. So what has to happen for that to happen? Like, where is the growth going to come from?
- [56:18]
Nirav Tolia
Well, I'm going to have to find that quote and I'm going to have to ask for all those articles where I said that to be revoked. That was a classic example of trying to set a really high, ambitious target. And then, as you said, we're not there yet. What do we need to do? We need to deliver more value to our users. By delivering more value to our users, we'll deliver more value to our advertisers. And if we deliver more value to our advertisers, that revenue number will go up. I think more than anything, our revenue number, which is not small, but it's not a billion, is a reflection of the value that we are creating for advertisers. And that value is 100% tied to the value we're creating for our users. So if we start with the users and we do a better job with them, all the other stuff will benefit and we have to do it. We have no choice.
- [57:07]
Alison Schiff
Fair enough. Okay, so penultimate question. What was just to your recollection, what was the last interaction that you personally had on Nextdoor?
- [57:18]
Nirav Tolia
Oh, that's a great one. I recently read about one of my favorite restaurants in Highland park and how they were designing a menu just for kids, which I thought was really interesting because my neighborhood is very kid friendly and parents are always thinking about, can I take my kids to my favorite restaurants? And oftentimes you can't because the food is actually for adults, it's not for children. And so for this restaurant to actually have the innovation and idea around creating a special menu for kids, it's something that I feel like I grew up a lot going to restaurants where there was a special kids menu, but I haven't seen as much of it these days. And I read about it on Nextdoor and it was amazing how the neighbors were talking about how excited they were about taking their kids there and how beloved a restaurant it is in the neighborhood. And it's all the things that make you love where you live.
- [58:13]
Alison Schiff
That's really nice. And now you are going to absolutely regret telling me that you were in an acapella group.
- [58:20]
Nirav Tolia
I'm not singing. I'm definitely not speaking.
- [58:23]
Alison Schiff
Let me just try to convince you with this one fun fact. So I took over the Ad Exchanger Talks podcast. Maybe two and a half years, three years. I don't know. Time is weird, but the very first guest that I had on when it was transferred over to me from our former executive editor and former host Zach Rogers was an interview with Yvonne Markman, who at the time was the chief business officer of Yahoo. So, bringing it back to the beginning of this episode when we were talking about Yahoo, and I got him to, at the very end of the episode, do the Yahoo.
- [59:04]
Nirav Tolia
Oh, goodness. Yeah, the yodel. The yodel.
- [59:06]
Alison Schiff
He did the yodel. He did the yodel for me. So Yvonne did it.
- [59:11]
Nirav Tolia
You're gonna ask me to do the yodel. That's something that I have not done. I mean, just remember, I mean, it's been 25 years since I worked at Yahoo. I mean, there are probably people listening to this that are not even 25 years of age. And you're asking me to go back into the vault. I. I don't know if I can do it. I. What. What I will divulge. Okay, I'm going to give you a nugget. I'm going to give you a nugget here because I. I read about something this morning which is kind of my generation, which is Donkey Kong country is a game that came out on Super Nintendo that was really groundbreaking decades and decades ago. And they were talking about the soundtrack for Donkey Kong country and how it was inspired by this band Duran Duran. And so the thing I'm going to give you. I'm not going to give you the Yodel, but what I am going to give you is somewhere online is probably a sound file that has me singing the song the Reflex by Duran Duran, which in 1995 was awarded the best song by the Collegiate Acapella Society of America. So I'm smart enough to know when to hang up my spurs, as they say in Texas, right? And so I was lucky enough to end at some kind of plateau. I am not going down from the penthouse to the outhouse by trying to do the yodel. But I like the yodel. I like the yodel.
- [60:32]
Alison Schiff
All right, well, I'll let you off the hook, but thanks for that clue. So all the Internet sleuths go. Go and find the Duran Duran clip.
- [60:49]
Nirav Tolia
Thanks to Activision Blizzard Media for supporting ad exchanger podcasts. If you're interested in learning more about the research you heard from Activision Blizzard Media or in seeing what's possible for you, your next in game campaign, head over to its website, www.activisionblizardmedia.