Q4 2024 Nextdoor Holdings Inc Earnings Call
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Elliot: Good afternoon. My name is Elliot and I'll be your conference operator today. At this time, I would like to welcome everyone to Nextdoor's fourth quarter 2024 earnings conference call. All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star then two. Thank you. You may now begin your conference.
Speaker Change: Thank you, Operator. I'm John T. Williams, Head of Investor Relations. Good afternoon and thank you for joining us to review Nextdoor's fourth quarter and full year 2024 financial results.
Speaker Change: With us on the call today are Nirav Tolia, Chief Executive Officer, and Matt Anderson, Chief Financial Officer.
Speaker Change: During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties. Our actual results could differ materially from expectations reflected in any forward-looking statements.
Speaker Change: For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and in the Investor Relations section of our website, as well as the risks and other important factors discussed in today's earnings release.
Speaker Change: Additionally non-GAAP financial measures will be discussed on today's conference call. A reconciliation of these measures to their most directly comparable GAAP financial measures can be found in the Q4 2024 shareholder letter released today. With that I'd like to turn the call over to Nirav.
Nirav Tolia: Thank you, John T. Good afternoon, everyone. I'm happy to be with you today to discuss our fourth quarter 2024 financial results and outlook.
Nirav Tolia: When we created Nextdoor, we did so with the belief that connected neighborhoods create stronger communities.
Nirav Tolia: Today, 14 years later, more than a hundred million verified neighbors have joined our platform to improve their local lives.
We've definitely made a real impact.
Nirav Tolia: At the same time, we haven't come close to fulfilling our potential, both as a business and, more importantly, with our product. So about a year ago, I came back as CEO to drive a complete transformation of our user experience. We call it Next, a reimagined and significantly improved version of Nextdoor.
Nirav Tolia: Since my return, our team has worked hard to create a robust foundation for future growth and while there is much more work to do, I'm encouraged by our progress and excited to share some specific details about the emergence of NEXT on today's call.
Nirav Tolia: But before setting the stage for what's next, no pun intended, let's talk about our Q4 and full year 2024 results.
Nirav Tolia: Q4 marked a strong finish to the year. Weekly active users increased 10% year over year reaching 45.9 million. Revenue grew 17% year over year to 65 million. For the first time we achieved positive adjusted EBITDA and operating cash flow, an important milestone.
Nirav Tolia: Throughout Q4, and really all of 2024, we showed that a disciplined balance between strategic investment and cost controls can drive sustained productivity gains.
Nirav Tolia: All of these results were made possible by an unwavering focus on execution and reinforced my most important belief about winning organizations.
People are the core asset.
Nirav Tolia: Establishing the team was a key focus in 2024 and I'm confident that we now have the right talent in place across the organization to drive Nextdoor forward.
Nirav Tolia: This includes our editions of George Petschnig from the New York Times as Chief Design Officer and our promotion of Michael Kiernan to Chief Revenue Officer.
Nirav Tolia: Our entire company has embraced the challenge of transforming next door, and last year's financial and operational results are clear evidence that we're making progress.
Nirav Tolia: But the most important piece of the transformation is next. And our top priority is very clear. Delivering a new and radically improved user experience.
Nirav Tolia: To do this right, we are moving away from incremental optimizations of our existing product and fully committing our focus and energy to iterating, refining, and ultimately launching next.
Nirav Tolia: While we expect this switchover will impact short-term results, it is a necessary step to secure our long-term success.
Nirav Tolia: So let's talk in a little bit more detail about Next.
Nirav Tolia: Our vision is to unlock the full promise of the neighborhood and we've spoken to our users a lot over the last year to understand exactly how we can do that for them.
Nirav Tolia: They've told us that they want to use Nextdoor, but they need it to work better for them.
Nirav Tolia: Simply put, they want the local information to be more relevant, the interface to be more intuitive, and the notifications to be more high value.
Nirav Tolia: Next is purpose-built to meet these needs and it focuses on three key areas richer local content, timely local alerts, and community-powered local recommendations.
Nirav Tolia: These are the three pillars that comprise the foundation for our High Conviction Strategy for NEXT and deliver on the core needs of keeping users informed, safe, and smart.
Nirav Tolia: I would like to explain each of these in a little bit more detail.
Nirav Tolia: First, we are adding new sources of local content to help keep users informed.
Nirav Tolia: Richer local content means providing all of the news and information related to what is happening locally.
Nirav Tolia: In the past, user-generated content has been our primary source of local updates.
Nirav Tolia: Next we'll now integrate third-party non-neighbor publisher content alongside these neighbor discussions, creating a richer and more reliable local news experience that delivers daily and predictable value.
Nirav Tolia: Second, we are upgrading live local updates to help keep users safe.
Nirav Tolia: Weather, power, traffic, these are alerts that are essential for our users.
Nirav Tolia: In the past, these critical pieces of information might be hard to find or quickly become outdated.
Nirav Tolia: Next, we'll deliver alerts in a more prominent design that prioritizes real-time delivery and accuracy, serving as an essential lifeline for neighbors during crises such as the recent L.A. fires or for everyday needs like your daily commute.
Nirav Tolia: Third and finally, we are surfacing community-powered local recommendations to help keep users smart.
Nirav Tolia: Neighbor recommendations are at the heart of Nextdoor and have always made up a significant portion of our posts.
Nirav Tolia: In the past, this knowledge lived only in the feed, making it difficult to find. Next, we'll use AI and ML to centralize recommendations in a new neighborhood hub, where we can showcase the most valuable evergreen content contributed by users over many years.
Nirav Tolia: In the last six months, we have prototyped and tested parts of NEXT in six markets around the country.
Nirav Tolia: We've seen some useful early signals and initial feedback gives us confidence in our strategy.
Nirav Tolia: Given these learnings, our product development teams have materially shifted their efforts during Q1 to prioritize next related development work, officially initiating the switch over to next.
Nirav Tolia: Now I've said many times that product transformation is not a straight line and we have always anticipated the uncertainty in shifting from vision to execution.
Nirav Tolia: But we're now ready to embrace this uncertainty because NEXT allows us to directly address our users core needs.
Nirav Tolia: Delivering a materially better product is the only way to build the successful business that we all envision for next door.
Nirav Tolia: With that in mind, we are intentionally making short-term trade-offs to prioritize long-term value.
Nirav Tolia: This may include things like focusing on existing users over acquiring new ones, reducing ad load to deepen engagement, or other strategic shifts that certainly will influence usage patterns.
Nirav Tolia: As a result, we do expect impacts on weekly active users and impressions, which will affect near-term business results.
Nirav Tolia: This is not a decision we take lightly, but we believe it is the right one.
Nirav Tolia: Embracing this switchover period of feedback and transition is essential to delivering a transformed product and ensuring Nextdoor's long-term success.
Nirav Tolia: With all that said, I'm pleased to share that we remain on track to launch NEXT as promised by mid-2025. We validated the product vision, built much of the technology, and are now beginning the switchover process.
Nirav Tolia: While we expect some ups and downs in the coming quarters, this work is laying the foundation for our long-term success.
Nirav Tolia: Nextdoor has tremendous potential, and we look forward to keeping you updated on the rollout of Next in the months ahead. I'll now turn it over to Matt to discuss our financial results.
Thank you, Nirav. Good afternoon, everyone.
Matt Anderson: In both Q4 and 2024, we saw progress across key measures of engagement, revenue, and profitability.
Matt Anderson: In Q4, nearly all of our new verified users joined organically.
Matt Anderson: Among these new users, we saw the fastest growth from those aged 18 to 34.
Matt Anderson: These younger users tend to have different usage habits when compared to our overall user base, but we believe that our expectations will increasingly align with the next user experience.
Matt Anderson: Q4 Wow of 45.9 million grew 10% year-over-year driven by a few factors.
First, new user acquisition remains strong, particularly in the U.S.
Matt Anderson: Second, we improved notification delivery and relevance, prompting many previously inactive users to re-engage.
Matt Anderson: As we have noted in past quarters, when users come to the platform, they are engaging with more content in each session.
Matt Anderson: These optimizations drove positive business impact, but we now look ahead to bolder transformation in 2025.
Matt Anderson: Many verified users have joined Nextdoor, but are not as engaged as they could be.
Matt Anderson: With Next, we see a big opportunity to reconnect with them.
Matt Anderson: to richer local content, timely local alerts, and community-powered local recommendations.
Now, on to monetization.
Matt Anderson: Q4 revenue of $65 million grew 17% year-over-year, driven by growth from self-serve advertisers and improved revenue retention.
Matt Anderson: Q4 average revenue per weekly active user or ARPU grew 7% year-over-year to a dollar and forty two cents
reflecting our ability to deliver more relevant ads to users.
Matt Anderson: As a result, we delivered more ad impressions, more clicks, and higher effective CPMs.
Matt Anderson: Within our self-serve channel, revenue growth, account retention, and net revenue retention were all strong.
Matt Anderson: Self-Serve Advertisers in particular continue to embrace our click optimization capabilities.
Matt Anderson: and represented more than 40% of our self-serve revenue in Q4.
Matt Anderson: As we entered Q4, 100% of our U.S. self-serve revenue was being delivered via our next-door ad server.
Matt Anderson: Many of our large managed advertisers have now migrated, getting access to improved targeting and performance.
Matt Anderson: Looking ahead, we also expect to scale those same benefits to some international advertisers later this year.
Shifting to profitability.
Matt Anderson: In Q4, we continue to be intentional in our resource allocation, driving to positive quarterly adjusted EBITDA and operating cash flow for the first time.
Matt Anderson: Q4 adjusted EBITDA was $3 million or a 5% margin representing 30 percentage points of year-over-year improvement.
Matt Anderson: Operating cash flow was 11 million dollars, reflecting strong cash flow conversion given our asset light model.
Matt Anderson: Increasing revenue scale, lower sales and marketing and personnel expenses, and rigorous management of hosting and data related expenses drove this improvement.
Matt Anderson: We expect these efficiencies to sustain, providing us with a path to further leverage in the future.
Matt Anderson: We ended the year with $427 million in cash, cash equivalents, and marketable securities, and zero debt.
Matt Anderson: In 2024, we repurchased 31 million shares and reduced our fully diluted share count by 5% year-over-year.
Matt Anderson: As a result, our fully delivered share count is now lower than at the time we went public in 2021.
Matt Anderson: Our strong balance sheet provides strategic and financial flexibility, and we remain committed to disciplined capital allocation, including through more focused operating expense profile and share repurchases.
Now, on to our Outlook and financial guidance.
We started the year on solid pudding.
Matt Anderson: But we are also embracing changes that will affect our guidance.
Matt Anderson: First, with our decision to move more ambitiously towards developing a transformed product, our revenue outlook reflects initial reductions in ad impression supply tied to our next initiative rollout.
Matt Anderson: This reflects shifting usage patterns and expected reductions in ad load as we redefine the user experience.
Matt Anderson: Second, we have observed reduced spending among certain large advertisers as we progress through the quarter, partly tied to large advertisers shifting budgets towards programmatic ad buying.
Matt Anderson: While our ad delivery is improving and our self-serve advertiser spending remains strong quarter to date, these are only part of the advertiser value equation.
Matt Anderson: Ease of use is also critical, especially for large advertisers looking to buy through both direct and programmatic channels.
Matt Anderson: In response, we have accelerated our efforts to integrate new supply-side and demand-side platform partners.
Matt Anderson: and expect these new partnerships to contribute to growth in late 2025 and beyond.
Matt Anderson: We expect these two factors will reduce Q1 revenue growth by approximately $7 million, with a corresponding flow-through impact to adjusted EBITDA.
Matt Anderson: We also expect year-over-year revenue growth in the first half of 2025 to be approximately flat.
Matt Anderson: For Q1 2025 specifically, this translates to revenue of approximately $53 million and an adjusted EBITDA loss of approximately $13 million, implying approximately two percentage points of year-over-year margin improvement.
Nirav Tolia: As Nirav noted earlier, we remain on track to deliver next by mid-2025.
Now, for a few final thoughts.
We saw multiple signs of progress in 2024.
Nirav Tolia: We drove continued user growth over the course of the year.
Next began to take shape.
Nirav Tolia: Our next-door ads platform drove performance gain for advertisers and our more focused resource allocation drove consistent productivity improvement.
Nirav Tolia: We expect many of the drivers of our improvement last year, including an organic user growth acquisition and ad platform driven growth, to persist this year.
Nirav Tolia: In 2025, we are making the decisions we expect will drive durable growth for the long term.
Nirav Tolia: We know some of these decisions, including our efforts on NEXT, will affect our near-term results.
Nirav Tolia: But we are confident that our path is the right one.
Nirav Tolia: Nextdoor is already a key resource for users seeking everyday utility.
Nirav Tolia: With Next, we have the opportunity to reaffirm Nextdoor's role as the go-to resource for everything local.
Speaker Change: Thanks for joining our earnings call today. I'll now turn it over to the operator to begin Q&A.
Thank you for watching!
Speaker Change: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally.
Speaker Change: First question comes from Eric Sheridan with Goldman Sachs. Your line is open, please go ahead.
Eric Sheridan: Thanks so much for taking the questions. It would be too if I could, first on the user side of the equation, maybe talk a little bit more about the decision process around focusing on maybe going deeper and on the engagement side with...
Speaker Change: the current piece of users or a subset of current piece of users rather than investments on the gross side in stimulating the broader piece.
on Facebook.
Speaker Change: micro-question would just be on the ad impression headwind. So it sounds like that's fully reflected in Q1. Does that remain a headwind, meaning you expect to bring down ad impressions on a continuous basis deeper into the year, or will that headwind will mostly be absorbed by the time you exit?
Speaker Change: Q1, just thinking about the supply side for the advertising business. Thanks so much.
Nirav Tolia: Eric this is Nirav here. Thank you for both questions. I'm going to take the first one on users and then I'll let Matt comment on the ad impression question that you asked at the end. So when it comes to users let me kind of take a step back and and tell you where we are in our process of launching next.
Nirav Tolia: The way that internet software is developed is never a big bang. It's always a series of iterative movements where you learn, you listen, you get better, you improve. And then ultimately you may do a PR event that signals a big launch, but you're shipping all along.
Nirav Tolia: That is the process that we've been in for some time now, as we mentioned in the letter.
Nirav Tolia: We actually have been testing in six markets around the U.S.
Nirav Tolia: It is the best practice to cohort users that way and learn, and learn against the current base.
Nirav Tolia: And so this is a very standard thing that we're doing. Ultimately, we will get to the point where we flip the switch for everyone. And that's what we talked about as we say we're initiating the switch over to completely all users getting next.
Nirav Tolia: As it relates to engagement, particularly the question you asked around 12 to 18 months, what we're looking for is deepening engagement with an already sizable user base. So over 100 million verified neighbors, but what we need is more frequent engagement.
Nirav Tolia: and deeper engagement. And so those are some of the North Star metrics for us. They can actually ultimately translate into more visits over a shorter frequency of time and more time spent on those visits, whether it's a minute metric or whether it's a number of stories read. That's the goal.
Nirav Tolia: We are very optimistic given the early things that we've seen, but this is going to be a process, and that's why we talked about this idea that for the next few quarters, the optimal thing for us to do is to learn and optimize.
Nirav Tolia: And so that's where our focus is, and we're excited about where that takes us. I'll turn it over to Matt for the ad impression question. Yeah, thanks, Eric. So a couple of pieces. I'll start with where we came into 2025, which is over the last several years.
Matt Anderson: actually had a really strong and consistent ad supply growth that's been really the core driver of our growth as we've been building our ad stack.
Matt Anderson: Now, as we look internally and we look ahead to 2025 and beyond...
Matt Anderson: Our core discussion is, what do we need to do today to ensure that growth sustains?
for many years to come.
Matt Anderson: And that led us to the intentional action related to NEXT. And really specifically, and we talked about the first half of this year, we're really focused on ambitiously testing a number of different efforts that we think can give us the signal we need to drive durable growth. And Nirav talked about that for a few minutes.
Matt Anderson: And so really, as you look at the first half, we do expect limited supply growth relative to our current baseline because we're doing those tests with a deliberate focus on learning, understanding how those dynamics play out. And then this next really becomes
Matt Anderson: launch as we get into the mid-years we've talked about in the past, that's where we can expect to see
Matt Anderson: and observe all the different things that we're focused on. And so we think that'll play out in a number of ways, but one of the things will be early signals around increasing that frequency that Nira mentioned. And so we're going to be driving ambitiously towards that, but a lot of the supply dynamics that we're talking about today are deliberate, they are tied to next, and they are tied towards long-term growth.
Great, thank you.
Speaker Change: We now turn to Jason Crayer with Craig Hallam. Your line is open, please go ahead.
Jason Crayer: Alright, thank you guys. So obviously you're integrating with a bunch of different publishers to bring in kind of that local community content. Just curious where you're at in that continuum of securing that kind of information across, you know, various markets across the country.
Nirav Tolia: Okay, Nirav here, and that's a great question. I just want to remind everyone on the call that we have three pillars of NEXT. We have a news pillar, an alerts pillar, and a recommendations pillar. You are talking about the news thing, and specifically you're talking about the fact that, for the first time, we are moving beyond primarily using user-generated content from neighbors as the news source.
Nirav Tolia: to going and getting content and really establishing distribution for existing third party publishers.
Nirav Tolia: By our estimates, there are probably anywhere between 8,000 and 10,000 local news publishers across the U.S. We already have several thousand, so I don't think getting coverage
Nirav Tolia: is ultimately the long pole. The thing that we're gonna do that we think is different and better and ultimately the most useful for our users is not just show them the articles.
Nirav Tolia: It's to bring them the articles and then allow them to have discussions with verified neighbors about the issues in those articles. And so if we take a step back, the hard thing here is not actually delivering the content to our users. The users can actually get the content today.
Nirav Tolia: It's actually not something that's unique to Nextdoor. What is unique to Nextdoor is over 100 million verified neighbors that you know are thinking about the same things you are because they live in your local community.
Nirav Tolia: And so, to have the content bolstered by the neighbor conversation, that's what we think is really special. And we're excited to show that to the world.
Speaker Change: Okay, appreciate that. And then just going back to the comments you made on the moves by large advertisers, just wondering if there's additional detail you can provide, or if there's conversations, feedback you've gotten from those advertisers, and how you gain comfort that this is macro-related and not necessarily micro-related.
Yeah, Jason, I'm happy to take that one.
Jason Crayer: Really, it starts with something that I referenced in my comments, which is a focus on the advertiser value equation. And one thing that we've talked about quite a bit over the last couple quarters is driving performance for advertisers. This is where when we talk about things like improving cost per click, including retention, increasing self-serve, that's been a key part of this.
Jason Crayer: Now, as we've entered the year, one of our big focuses is understanding how do we get better at meeting more advertisers where they need to be, particularly with larger advertisers. And we do have feedback from both new and potential advertisers.
Jason Crayer: that they ultimately want the option and ability to buy programmatic.
Jason Crayer: And so we see that as we look across our base, we've just seen advertisers.
Jason Crayer: is a real opportunity to make it easier for them to buy, to have multiple channels.
And so it's really based on that feedback.
Jason Crayer: Now there are other factors as well, I think it's too early to try and discern between macro versus idiosyncratic customer specific dynamics. But we are very much focused on making it easier, especially for larger advertisers to buy, to come onto the platform. And then ultimately, as we move further towards the next, we think we have an opportunity to deliver more value to them.
Speaker Change: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now.
Speaker Change: We now turn to James Michael Sherman-Lewis with Citi. Your line is open, please go ahead.
Speaker Change: Hi Nirav and Matt, thank you for taking my questions. First from me, with 10% year-over-year WOW growth of flat net ads sequentially, as we think about next supporting session depth and retention, can we also revisit your levers to drive POPL funnel WOW growth?
Speaker Change: as well as the impact on newer notification delivery strategies, feed ranking models, and how you're driving usage with younger users.
Nirav Tolia: Okay, Nirav here, James Michael, thank you for the question. So the first is, I think you probably have noted that a lot of the growth that we saw in Q4 in new verified neighbors was from a younger demographic, and so that's actually a really encouraging sign, and we think much of what we've built with NEXT will broaden our value proposition across our existing base of users and also for younger users, for urban users, for segments that maybe we historically have not served as well as we can. So that's
Nirav Tolia: kind of the first thing. As it relates to ad inventory, I just want to get specific because this question has actually been asked a couple of times. We are in the phase for the next few quarters where we are optimizing learning and specifically learning about engagement.
Nirav Tolia: As we learn more and we drive more engagement, that obviously gives us the opportunity to start to increase ad load, or to create new ad units, or to do all of the things that we can do to make sure that we are serving the needs of our advertisers. But that's something that comes after we understand the best way to serve our consumer base.
Nirav Tolia: The last part of the question when you asked about new users versus existing users, we have a really large base
Nirav Tolia: that large base is very familiar with Nextdoor. The first thing we wanna do is understand how they are comparing before and after. It's really important for us. We think the new experience is dramatically better. We wanna learn the ways that our existing users feel that as well.
Nirav Tolia: Within that existing user experience, there are lots of opportunities for our existing base to take the content on Nextdoor and share it with neighbors who are not yet on Nextdoor.
Nirav Tolia: So, the way these social networks typically grow is through virality. We know that if we do a good job of serving our existing user base, we will also drive new user growth. That is why we're focused on our existing base.
Speaker Change: And James, I'll just add one other note to acknowledge your comment on Q4 specifically. Typically in the fourth quarter we see some seasonal flatness, particularly around the Christmas and New Year period when engagement tends to be lower. That's been obscured in past years, but ultimately I think the year-over-year growth is a good indicator of our progress in the quarter.
Speaker Change: Very clear. Thank you. I have a follow-up and then it's encouraging to see the positive inflection with leverage across expenses but led by S&M savings particularly cuts in branded performance marketing. Can you shed some light on the strategic shift here in your customer and advertiser acquisition strategies?
Speaker Change: Thanks James, just to clarify, you were talking about operating leverage and sales and marketing expense, did I hear you correctly?
Yeah, Operating, Leveraging, Sales, and Marketing.
Speaker Change: Yeah, so there's a couple pieces there. One, I actually want to start with an overall comment, which is...
Speaker Change: The leverage we see in the business, including the 30 points of year-over-year margin improvement in Q4, is broad-based.
across every function, across every type of spend.
Speaker Change: And so that is, I think, an important point. Now, the area...
Speaker Change: As we think about how some of these strategic decisions will flow through our model, sales and marketing is a good example.
Speaker Change: It partly reflects the lower personnel costs, which is true across the company, but importantly it reflects a couple different things. It really shifts towards organic growth. So one we've talked about before, which is with substantially all of our neighbors coming to the platform organically.
Speaker Change: we effectively do not spend on neighbor acquisition. So over the course of the last couple of years, that's a real source of leverage.
Speaker Change: As we look forward, we then look to where are the areas where we can apply that same approach.
investing in a better product, investing in scalable growth.
Speaker Change: And so we look to other areas, for example, for SMBs.
Speaker Change: We do spend with some pay channels to acquire S&P customers to the platform, but we're actually shifting our focus to invest in product.
Speaker Change: to improve our roadmap so that we can help those S&Bs have better tools, build a better organic presence. And so as we look forward over 25 and beyond, we are very focused on getting further leverage from S&B because we will really be based on improving products. And so.
Speaker Change: Step backwards looking improvement around neighbor acquisition. We think there's an equal opportunity as we look at S&Bs over the next couple years.
Thank you.
Thank you for watching!
Speaker Change: We now turn to Rohit Kulkarni with Roth Capital. Your line is open, please go ahead.
Speaker Change: short-term trade-offs versus long-term wins. Any more colors you can give Nirav on?
Speaker Change: over the last six months, what is it that you're seeing that gives you greater confidence that that the next six months.
Speaker Change: pain is going to lead to a lot bigger win in the longer term with regards to users or advertisers. We'd love to get more color on kind of the tea leaves that you're reading through the data as to the next switch over as such.
Speaker Change: It's a great question. So let me actually take a step back and say that when we look at our feedback We're really trying to pull together three different things
Speaker Change: We have qualitative feedback directly from our users, and we have a great research team, and our entire product development organization is always trying to listen to users to understand what we can do to better serve them. We have quantitative feedback, which is typically just dashboards and metrics and things that we can look at to understand, with a system of our scale, how are the knobs and dials being moved. And then the third thing is we have our intuition.
Speaker Change: because when you create a new product vision, you are actually creating something that you believe users need, but they haven't necessarily told you that they want those things because they don't even know necessarily that they want them, right? So it's balancing those three things. I will give you one example of something that we've seen.
Speaker Change: as an early indicator that we are on the right track. And it's still early. The reason that we've taken.
Speaker Change: The next few quarters to really learn and understand the impacts is because we're now at a stage where we can initiate the switch over and do so without having to incrementally optimize the current system. But one example is we have seen the third party publisher content.
is resulting in infrequent users using the platform more.
Speaker Change: That's just one example. It's still early. We can't even really quantify it, given the size of the audience that we're experimenting against and the different types of content that we're showing, but that is a very specific example of the fact that when we show more relevant local content
Speaker Change: we know that Nextdoor begins to turn into a more habitual service.
Speaker Change: Okay, okay, got it. And then a finance question on first half 25 guide. Maybe to the extent you can provide more color on the drivers underlying the number of advertisers, number of users, revenue per user on the kind of first half revenue guide that you have.
Speaker Change: And as a sub-question to that, what can you do to get the large advertisers?
Speaker Change: for shifting towards programmatic back onto the platform. Are there specific go-to-market things that you could do or some tech upgrades that you need to do to kind of reignite that spend bucket?
Thank you very much.
No, thanks.
Speaker Change: So happy to break down to a couple pieces. So, with regard to the first half, it goes back to something we've talked about a bit on this call, which is
Speaker Change: Very simply, we have the total ad supply and ad inventory, which is tied to our user growth, but also decisions around frequency, depth, testing, ad load. And we have never increased our ad load over the last couple of years.
Speaker Change: and it's really been come through organic feed item views. Now, as we've talked about, we are going to test the different ways we can do things that might affect supply.
Less frequent or more dynamic notifications.
Speaker Change: certain dynamically changing ad load, thinking about those types of dynamics will affect the total supply, but as I mentioned earlier, that is intentional.
Speaker Change: Now, that does mean that as we flow that down through the model...
Speaker Change: That will constrain growth more than it would have all else equal if we just proceeded with our continual optimizations through the quarter. So a lot of it really is tied towards those changes, those optimizations, those tests, and that's why it is linked to that effort to drive towards next in mid-2025.
Speaker Change: As we move into the second half of the year, we'll be looking closely to see where those can start to drive things like supply growth, user growth, and we'll certainly share more on those as we go.
Speaker Change: And as it relates to large advertisers, it is certainly, as I mentioned earlier, making it easier for them to buy. It's also making sure we're continuing to deliver performance. And so there's been an effort that's been underway and continues to progress, which is making sure.
Speaker Change: there's those larger advertisers, including ones with whom we have a more active relationship, that they are getting benefits from our ad server as well. And so
Speaker Change: The same way our self-serve advertisers are seen leveraging better performance.
Speaker Change: From the ad server, we're gonna make sure that our larger advertisers see those same benefits and we're continuing to march.
Speaker Change: As expected, through that outside transition. And so when you pair that with the going forward efforts around programmatic partnerships
Speaker Change: really just to focus on helping them reach the audience and evolving our go to market. We think there's an opportunity. It's not something that will change in a quarter. But in conjunction with next, in conjunction with the new ways of buying, we think there's a real opportunity to show progression here over the course of the full year.
Thank you.
Okay, great. Thanks, Neerav. Thanks, Matt.
Speaker Change: Okay I think we've taken all of the questions and so before we close I'd like to take a minute to briefly recap and reinforce the things that matter most about where we are today and where we're going.
Speaker Change: First, in Q4 and in 2024, the team executed well. We created a solid foundation. We were able to balance strategic investment with cost controls, and that's why you saw sustained productivity gains.
Speaker Change: But second, we are now intentionally going to make short-term trade-offs to prioritize the long-term. This will impact metrics, it will impact performance, but it's in the near term. And it's not something we take lightly. But it is the right thing to do because we are building this company
to be a company for long-term investors.
Speaker Change: Third, and most importantly, we are moving very ambitiously on the switch over to Next. The three pillars of Next, we talked about them, adding new sources of local content to help keep users informed, upgrading live local updates to help keep your users safe, and finally, surfacing community-powered recommendations to help keep users smart.
Speaker Change: We are excited to share more with you about NEXT in the coming months. We appreciate you joining the call and thank you for your interest in NEXTdoor.
Speaker Change: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.