Q1 2025 Nextdoor Holdings Inc Earnings Call
Title Microsoft Word 97-2003 Document NB6W Word.Document.8 Microsoft Word 97-2003 Document NB6W Word.Document.8
Joel: Good afternoon, my name is Joel and I will be your conference operator today. At this time I would like to welcome everyone to Nextdoor's first quarter, 2025 Learning's Conference
Joel: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Joel: If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star two. Thank you. You may now begin your conference.
and Matt Anderson. Thank you. Thank you.
Speaker Change: Thank you, operator. I'm John T. Williams, Nextdoor's Head of Investor Relations.
Speaker Change: Good afternoon and thank you for joining us to review Nextdoor's first quarter 2025 financial results With us on the call today are Nirav Tolia, Chief Executive Officer, and Matt Anderson, Chief Financial Officer Thank you for joining us to review Nextdoor's first quarter
Speaker Change: During this call, we may make statements related to our business that are forward-looking statements under federal securities laws.
Speaker Change: 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. [inaudible]
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 Q1 2025 Nextdoor Investor update 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 first quarter 2025 financial results and provide a preview of Next, our initiative to transform the Nextdoor product. Before diving into that preview, here are some brief comments on our Q1 results.
Nirav Tolia: Weekly active users grew 6% year-over-year to 46.1 million. Revenue rose 2% year-over-year to 54 million dollars.
Nirav Tolia: We maintain expense discipline achieving continued year-over-year adjusted EBITDA margin improvement.
Nirav Tolia: That said, our most significant progress in Q1 was product related as we further the transition to next and continue to make its upcoming launch our top priority.
Nirav Tolia: This means that any short-term trade-offs we have made and continue to make are intentional and aligned with our plan to maximize long-term value.
Nirav Tolia: Okay, so let's get to that top priority, the next next door.
Nirav Tolia: For just about a year now you've heard me talk about how we need a better product to unlock our full potential as a company.
Nirav Tolia: And since I return to CEO , that has been our primary focus to build a substantially enhanced offering, one that delivers greater value to our neighbors, advertisers, and ultimately our shareholders.
Nirav Tolia: Next is more than a redesign. It's a refounding of our vision, an opportunity to take the core elements that once defined our success and bring them the life in a more powerful and future ready way.
Nirav Tolia: I'm excited to show our vision to you today, but first let me outline three clearer goals each building on the last for this first version of the next next story.
Nirav Tolia: It starts with connecting neighbors to the most timely and relevant local content.
Nirav Tolia: That's what brings people back more often leading to deeper and more frequent usage
Nirav Tolia: As engagement grows, it opens the door to more supply as well as new ways to monetize.
Nirav Tolia: But because everything starts with delivering high value content, let me explain why we're confident this is exactly what our users want.
Nirav Tolia: It's not just our hypothesis. It's what our users consistently and explicitly tell us they value the most.
Nirav Tolia: They want timely updates, local insights, and real neighborhood news. Things they can't currently find on the open web or in other apps. It's neighborhood word of mouth, and from day one, that's what Nextdoor was purpose-built to digitize.
Nirav Tolia: We do know that the current product, however, isn't fully delivering on that promise.
Nirav Tolia: There are several reasons why content on our current platform fall short, but we've identified three areas where we know we can and will do better.
Thank you.
First, user do want hyper-local updates.
But what's hyper-local depends on the topic.
Nirav Tolia: A lost pet matters within a few blocks while a local election affects the entire city.
Nirav Tolia: With smarter machine learning and geospatial targeting, we can match content to users based on relevance as well as distance.
Nirav Tolia: Second, Nextdoor was built as a utility, not a place for self-expression like other social platforms, but over time, conversations drifted [inaudible]
Nirav Tolia: With next, we're re-centering the experience all around content that helps neighbors solve real-world problems, the kind of high-value information that people really need.
Nirav Tolia: Third, the old user interface and in particular the feed, sometimes buried important updates.
Even when we sent notifications, they weren't always timely.
Nirav Tolia: With a more structured feed and fewer more relevant notifications, we'll make it easier for users to get what they need when they need it.
The bottom line is we listen deeply to our users.
Nirav Tolia: And we put their feedback into action to build a product that we believe can become indispensable.
Nirav Tolia: So let me show you some of the biggest shifts between the next door of today and the next next door.
We are shifting from reactive to proactive.
Nirav Tolia: No more wondering, is the power out? Next surface is critical information in real time, and is it the user interface prominence it deserves?
Nirav Tolia: While neighbor-created content will always be at the heart of our platform, Next will layer in high quality information from more sources, like local news and official alerts, giving users a richer, more complete view of what's happening around them.
Nirav Tolia: The feed remains, but it will be supported by smarter search and a powerful new AI-driven agent that brings neighborhood favorites right to user's fingertips.
Nirav Tolia: All of this comes to life through three poor pillars of version 1.0 of next, news, alerts, and recommendations.
They are just product features they meet real everyday needs.
Nirav Tolia: People may not wake up looking for local news, but they absolutely want to know what's happening around them.
Nirav Tolia: People certainly don't seek out alerts, but they absolutely want peace of mind when something important is happening nearby.
Nirav Tolia: And while you may not crave recommendations, all of us want to make smart decisions around our homes and our families.
Nirav Tolia: So now let's take a closer look at how each of these pillars come to life in the next next door.
Nirav Tolia: Local news matters to our users, so we are building a new foundation for local content.
Nirav Tolia: We've already partnered with thousands of publishers to embed high-quality local news directly in the feed.
Nirav Tolia: This enables users to discover what is happening around them, read perspectives from verified neighbors and join real-time conversations from city council debates to restaurant openings to local sports.
Nirav Tolia: A redesign feed will make all of this easier to discover and build daily habits around its usage.
Nirav Tolia: The goal is to create a proactive, reliable experience where neighbors know that they can come every day to find the local news that truly matters to them.
Nirav Tolia: In our test version, three content categories consistently drive the most engagement, local politics, safety, and lifestyle. That's no surprise. These were once some of the cornerstones of the local newspaper.
Nirav Tolia: With Next, we aim to become a modern version of that trusted resource, delivering the same essential information, but in a faster, more relevant, more personalized way.
I'm Matt Anderson. Thanks for watching. I'm Nirav Tolia.
In moments of need, wildfires, severe weather, power outages.
Nextdoor has always become a trusted lifeline.
Nirav Tolia: We've seen this throughout our history and saw it again during the recent LA wildfires when usage surged as neighbors looked for real-time updates on evacuations and service disruptions.
Nirav Tolia: But in the past, those alerts sometimes arrived too late. We got lost in the noise.
Nirav Tolia: With Next, we are building an alert system from the ground up with a clear visual design, urgency indicators and an interactive map that enables neighbors to track events as they unfold.
Nirav Tolia: This is one of the most meaningful upgrades we've made because when it really counts, people will need to trust that Nextdoor will keep them informed and safe.
Alerts don't have to be severe to be useful.
Nirav Tolia: With three levels of urgency, green, yellow and red, we're aiming to be able to notify users in one place about everything from weather and traffic to utility outages, construction, public transit delays, trash pickup, school events, and even open houses.
Nirav Tolia: It's a broad range of topics but all with one goal.
Nirav Tolia: Keeping neighbors safe and providing the peace of mind they need in their daily lives.
Nirav Tolia: And because ALERTS is built on our proprietary geospatial platform, we can deliver them with precision, targeting the right people in the right place at the right time.
Nirav Tolia: And it doesn't stop there. With next, users can track alerts across their broader community, whether it's checking wildfire conditions nearby where family members may live or staying informed about traffic disruptions along their full commute.
Nirav Tolia: What sets Nextdoor apart, however, is the layer of real-time conversation with verified neighbors, adding the context, insight, and local relevance that turns these alerts into action.
Our final pillar is recommendations.
Nirav Tolia: which already make up around 30% of the conversations on Nextdoor. It's a vital way that neighbors share trusted advice to make smarter purchasing decisions for their homes and families. It's one of our most frequent and highest potential use cases.
Nirav Tolia: You've heard me talk about the potential for AI on our platform.
Nirav Tolia: This is where much of our investment in this critical new technology comes to life.
Nirav Tolia: I'm excited to introduce the new phase section of Nextdoor, where AI and recommendations come together to simulate one of the most valuable local experiences.
Asking a Trusted Neighbor for Advice [inaudible]
Nirav Tolia: Powered by our proprietary data, technical expertise and insights from over 100 million verified neighbors, we are building a truly innovative way to scale local word of mouth.
Nirav Tolia: and make it smarter, faster, and more useful than ever before, all with the power of AI.
Nirav Tolia: Drawing on 14 years of unique community data from verified neighbors, we aim to deliver fast trusted answers that move users from discovery to action.
Speaker Change: Reaching a high intent audience that's often ready to make purchasing decisions.
Speaker Change: And like many of the agentic AI experiences that are now becoming mainstream, we believe this will be quite simply a better user experience, not to mention a powerful new surface for local commerce.
Speaker Change: By connecting intent with Discovery in a seamless way we can help neighbors make smarter decisions and in the process unlock meaningful monetization opportunities.
Speaker Change: The possibilities here are endless and uniquely next door. We've always been a platform where neighbors ask free form questions, not just type queries into a search bar.
Speaker Change: With this upgraded surface, we aim to respond faster and more powerfully using AI to surface and summarize years of verified neighbor insights in a way that only we can.
Speaker Change: It's the next evolution of local knowledge and it's made possible by truly effective AI.
Speaker Change: The user feedback on this vision has been overwhelmingly positive and we plan to make the feature available in five DMAs at launch and are very eager to expand it more broadly later this year.
Thanks for watching!
Speaker Change: To hopefully you can see now why we are so optimistic about next, not just for its potential to deliver better local information, but to deepen engagement and drive increased monetization.
Speaker Change: That focus on monetization will ramp up in the second half of the year, as we expect to roll out new ad formats and services, but that's all after the launch of next.
Speaker Change: It's still too early to go into detail, but initial interest from advertisers has been encouraging, reinforcing our belief that next will deliver marketers with a more engaged and valuable audience across the board.
Okay, we've talked about what? Now let's focus on when.
Speaker Change: We're already making solid progress with news and alerts being tested so we can continue to improve them as we prepare for a full next launch by the end of July .
A transformation of this scale naturally comes with some variability.
Speaker Change: While we believe financial impact will follow product milestones, we're confident that the foundation we're laying will position us for long term success.
Speaker Change: We believe Nextdoor has the potential to become a daily habit, that deeply engaging product with strong monetization potential, and next is what we believe will make this possible.
Speaker Change: It's more than just a product update. It has sparked a company wide shift in how we build, think, and operate. And we're just getting started.
Speaker Change: With that, I'll hand it over to Matt to walk through our financial results.
Thank you, Nirav, and good afternoon, everyone.
Speaker Change: During Q1, we continue to make progress ahead of our upcoming next rollout.
Speaker Change: Q-on-wow of 46.1 million to 6% year-of-year, reflecting steady new U.S. user acquisition.
Speaker Change: Many of those new verified neighbors will experience the new version of Nextdoor during their early days on the platform.
Create an opportunity to reset user expectations and engagement.
Speaker Change: Additionally, in Q1 extreme weather events drove increased usage, reinforcing Nextdoor's value as a real-time local resource.
Speaker Change: While we have shown progress growing well, the introduction of Next creates an opportunity for us to align our key external metrics with our strategic and operational focus.
Speaker Change: Beginning Q2, we will fully transition to platform while as our primary user metric.
Speaker Change: platform while includes users who engage directly on the Nextdoor app or website.
Speaker Change: I'll make why I was currently reported this figure does not include users who only engage with emails with monetizable content.
We are making this update for three primary reasons.
Speaker Change: First, it aligns with changes in consumer expectations towards in-app experiences and away from email.
Speaker Change: We will meet users where they want to channel the expect with content they need.
Speaker Change: Second, it aligns with a strategic focus to deliver richer, more engaging content across services, delivering more value for users and advertisers.
Speaker Change: Third, it aligns with where next delivers value. This is true for both users and advertisers, since substantially all monetization will happen on platform.
Ultimately, Next is about building a better user experience.
Speaker Change: With a focus on the features and metrics that best reflect that experience, we can also build a better system, one built around structured, timely and high utility content that can increase frequency across all cohorts and make growth durable.
Speaker Change: With that in mind, Q1 platform wow of 22.5 million grew 5% year-of-year [inaudible]
Speaker Change: Disgrowth reflects the same user after the shane engagement trends that drove Wow in the period.
Speaker Change: Additionally, in our thank you and investment materials, you will find further information regarding wow and platform wow trends over the past six quarters.
Now, Automatization.
Q1 revenue of $54 million with up 2% Eurorear [inaudible]
Speaker Change: As noted last quarter, some large advertisers reduce their spend year over year.
Speaker Change: This was due to shifting budgets towards programmatic ad buying, which reflects an opportunity to unlock new demand.
Speaker Change: At the same time, we are getting more leverage from the Nextdoor ads platform, which serves 100% of US large advertisers as of early May.
Speaker Change: Large advertisers that continue to buy our inventory directly in the dot click optimization are seen in approximately 50% improvement in click-through rate.
Speaker Change: We also take confidence in our growth potential based on progress we saw across all other revenue channels.
Speaker Change: Outside of our advertiser sales, our other channels together deliver double-digit year-rear growth in Q1.
Speaker Change: Disreflex continued product improvements that are helping advertisers using the Nextdoor Hldg platform reach users with more relevant messages and drive stronger campaign performance.
Speaker Change: Specifically, we drove down cost per click by 20% year-to-year as usage of performance features continues to grow.
Speaker Change: Self-served option mode, accounting for over 60% of revenue of Q1.
Speaker Change: And finally, we recently launched AI campaign creation and targeting tools in the next door ads manager, further reducing friction for advertisers.
Moving to Profitability.
Speaker Change: Q1 net loss was $22 million, or a negative 41% margin, represented 13 percentage points if you're of your margin for that.
Speaker Change: and reflecting the benefit of a 12% year-rear decline in stock-based competition expense.
Speaker Change: Q on adjusted EBITDA loss was $9 million, or a negative 17% margin, representing 9% of
Speaker Change: We also generated positive operating cash flow, reflecting our focus on cost management and cash flow conversion.
Speaker Change: This year of your operating leverage came in three primary areas, improved scheme for activity, more efficient marketing spend, and reduced hosting and data-related costs.
Turning to our balance sheet.
Speaker Change: We ended the quarter with $418 million in cash, cash equivalent, and marketable securities, and zero debt.
Speaker Change: Over the last year, we were purchased approximately 36 million shares, including 4.7 million shares
Speaker Change: These continued expense reductions to share references are core pillars of our capital allocation approach.
Now on to our Outlook and Financial Guidance.
Speaker Change: Our focus on Next and evolving market trends have influenced our Q2 Outlook in two ways, both of which we noted at our last earnings column
First, Change Related to Next, including the updated UX,
Speaker Change: In the introduction of local news, prioritized the long-term attention ahead of immediate increases to session depth
This concludes the comments for this time.
Speaker Change: It doesn't turn affect the total impression opportunities we expect to generate in Q2.
Speaker Change: Second, we expect large advertisers spending to continue to be down year-rear, off-setting continued growth in other channels.
Speaker Change: Given those dynamics and barring any new changes in advertiser sentiment, we expect Q2 2025 revenue of a proximate $60 million and then adjusted EBITDA loss of approximately $10 million.
Speaker Change: We anticipate enabling programmatic ad buying later this year, which together with the near-complete adoption of our ad platform to support a return to revenue growth.
Speaker Change: All closed by reiterating our focus on driving sustainable, profitable long-term growth.
Speaker Change: We believe the changes we are making to the Nextdoor user and advertiser experience will enable stronger engagement, better monetization, and ultimately more shareholder value.
Speaker Change: Thanks for joining our Marines call today. I'll now turn it over to the operator to begin Q&A.
Speaker Change: Thank you. We will now begin the Q&A session. If you would like to ask a question, please dial star one on your telephone keypad. If you need to remove your question, dial star two.
Speaker Change: The first question is from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
I'm Matt Anderson.
Speaker Change: Thanks for taking the question. Maybe two if I could, you know, when you think about the rollout of Next, and how to think about the duration of some of these initiatives impacting the business, how's it be thinking about the different duration over which Next will have an impact on user growth and engagement growth as opposed to monetization growth as you think about it in maybe multiple steps in the 12 to 18 months ahead. Thanks a
Speaker Change: Okay. Hi, Eric. That's a great question. Thank you. And I would say that obviously the monetization needs to follow any growth in usage and engagement. Right. So the usage growth and engagement growth is what we're going to look for first. And then that ultimately should translate into stronger story on the monetization front. We expected by the end of July , as we've said, we will have released next to everyone in the US. And I think that we are also releasing it to the
and other US-speaking countries where Nextdoor is live.
And so, by the end of July
We will have a pretty good sense of-
Speaker Change: What you first said, which is the disruption or potential disruption, right?
Speaker Change: From there we'll actually just be looking at what we're seeing in terms of green shoots.
Speaker Change: and what we're seeing in terms of things that make us optimistic about the future. We expect that we'll be able to come to the next earnings call with a lot of that information.
Certainly when you talk about-
Speaker Change: 12-month time frame. I would say this is version 1.0, it's a starting point, it's not the end point and so we'll be working through. I would save the rest of this year to understand really how to optimize the good things that we see.
I wouldn't put the time frame as-
Extended As 18 Months
Speaker Change: As you said, in terms of when we expect to see some real legitimate business results here, right? But we'll know a lot more at the next turn he's called because until the thing is completely released and all of our users have it in its full entirety.
Speaker Change: We won't really have the full picture, it's just a guess.
Great. Thank you for the color.
Speaker Change: Thank you. The next question is from Jason Kreyer with Greg Hallam. Your line is now open.
Jason Cryer: Wonderful. Thank you guys. I just curious, how are you thinking about monetization differently in a post next world relative to kind of just this traditional ad impressions we're seeing on the platform today?
Speaker Change: You know, that's a great question, and I would say that there are kind of three ways that we think about it. The first is with more engagement, which is the number one goal of NEXT, we should actually have more supply.
Speaker Change: Right, so we should be able to take our existing monetization mechanism and generate more revenue, right? That's the very very simple kind of one plus one equals two, right? If you have more supply, you should be able to sell more ads that should generate more revenue. Thank you.
Speaker Change: But I think what we're probably a little more excited and interested in is that we believe that next will ultimately give us more surfaces to monetize. And so to give you a very specific example, we never had a dedicated space for alerts. Alerts only showed up in the newsfeed.
Speaker Change: Now we have a more dedicated area, and in speaking with a number of CMOs that are existing in clients of ours.
Speaker Change: They have expressed interest in exploring what would it be like?
Speaker Change: to think about advertising in that area, first is just a simple infeed advertising.
Speaker Change: So that's the second category and that's really thinking about not just more supply.
But New Add Opportunities, New Add Surfaces Youssef Squali,
And then I think the third third
Speaker Change: Area, and it's probably the one that is least developed is when we showed you the AI implementation of the local AI agent.
Speaker Change: That's something that as you think about the entire industry of AI starting to move towards task completion versus just market making we think there will be some opportunities there for us as well because
Speaker Change: It's our belief that consumers are ultimately going to want to ask a question to the agent and then have the agent deliver the solution.
instead of having to go several hops.
Speaker Change: to find that solution. And that's very different than just scrolling a newsfeed and seeing advertising.
Speaker Change: It's the furthest out because it is the most trailblazing from our perspective, but we think there's a lot of potential there so number one more supply
Speaker Change: Number two, more advertising surfaces and number three, using that fave section and the way that people are starting to interact with our local AI agents to think about a complete closing of the loop on local needs.
Speaker Change: Appreciate that. Followed for me on the programmatic side just
Speaker Change: Any changes that you've seen on that side, you know, over the last couple of months and as we last spoke, and then, um...
Speaker Change: As you look to roll out something on the programmatic side, does that happen in parallel with what you're doing? Like do you have to get all of the next roll out along the way? And does that kind of become a phase two implementation to open up that programmatic thing? Ready?
Speaker Change: Yeah, thanks very much for that. So on the first point, I'd say it's very similar update in February , which is
Speaker Change: We've got clear demand, we've gotten clear feedback from customers and we're acting on it and so we are in the process of standing up relationships with a few three parties. We're executing as expected and as we referenced briefly previously, we expect this can contribute to growth. Thank you very much.
Speaker Change: as we get to the later in the year. Now next is going to be the most important driver overall. But that gets to your second question, which is, this is something that we can advance in parallel. We can continue to enhance not just.
Speaker Change: The programmatic capabilities we have, but all aspects of our adsorbing and adflary. So we'll be doing that in parallel as we roll out.
Alright, thanks guys, appreciate it.
. . .
Speaker Change: Thank you. The next question is from Jamesmichael Sherman-Louis with City, Your Lannis No Open.
Speaker Change: I know other than that, encouraging us to see the early looks here at the next platform.
Speaker Change: on Alerts. Can you help us understand this new hyper-local alert strategy and how it can strengthen usage? Please focus more on session count or over usage procession. As Nextdoor becomes this daily use case, and how do alerts impact your previous education strategy given in this strategic focus on platform life?
Speaker Change: It's a great question, because the new alert surface is really at the heart of the value that Nextdoor has always provided, which is that lifeline in times of crisis, but we will be implementing it in a way that we believe will give users and advertisers more leverage. So very, very specific example.
Speaker Change: Typically, what happens on Nextdoor is there is a user generated post that's submitted by a neighbor and that's hitting a neighborhood or a series of proximate neighborhoods.
Speaker Change: With the Alerts platform, we now have the ability to define a region which we can notify.
Speaker Change: versus an entire neighborhood. So for example, with a power outage.
Speaker Change: Before someone may have posted to the entire neighborhood, a neighbor's, my power is out, how about yours? And that's going to a lot of people that may actually be also experiencing the power outage, but it may also be going to a lot of people that have perfectly fine power. [inaudible]
Speaker Change: Now, because we're getting authoritative content from the utility itself, we know the region of the neighborhood that is being directly affected by the outage, and we can message directly to them. We expect that to be a much higher performing notification. You could imagine a notification that says, is the power out?
Speaker Change: and how that performs versus a notification that says we know the power is out at your house.
Speaker Change: And then someone clicking through to find out what her neighbor's saying about it, when do they think the outage is going to come back online, etc. Now how does that affect sessions and wow and all of those things?
Speaker Change: We haven't thought so deeply about that because it's really about just delivering more hyper-local content.
Speaker Change: Making it as relevant as possible, and we have a core belief that if we do that, people will use the platform more. The other thing I'd say about alerts is it was important for us to talk about the range of alerts severity is not the only thing that makes an alert relevance. [inaudible]
Speaker Change: We have this idea of green, yellow and red alerts, where green alerts could be things like...
Speaker Change: Arrange Storm, which would make you go and get a raincoat or an umbrella and is actually pretty useful and again we can target that based on where the weather is occurring versus just a neighborhood or a series of neighborhoods. [inaudible]
Speaker Change: The yellow stage of alerts are things like the power outages and then obviously the red ones are extremely critical. That's when you have a hurricane, a tornado, a fire, et cetera. And so.
We're very excited about the Alerts surface.
Speaker Change: I would say there are a couple of reasons why I wanted it reinforces what has always been one of the core benefits of Nextdoor, which is in times of crisis.
Speaker Change: When something's happening locally, Nextdoor is a place where you can find out what's going on.
Speaker Change: But the surface is now easier to find. It's more consistent. It's initiated by authoritative content and it can be targeted to exactly who is experiencing that condition. [inaudible]
Speaker Change: So stay tuned, but we're very excited to see how our users respond to this and ultimately think we think that will translate into advertiser interests as well. Yeah, and Jim, my go, I'll make a more general comment as it relates to platform well. Thank you.
Speaker Change: It's not about looking back, it's something that's transpired or left to record, and you'll see in the data it's relatively consistent relationship with Wow. It's really about looking forward and capturing all the elements that we just talked about. So the feedback from customers. Thank you very much.
feedback from consumers, and ultimately...
Speaker Change: This is where the value on the platform is being created. This is where the usage is. This is where the YouTube is going to be growing and then ultimately this is where we'll be monetizing. So as you look forward, more and more of this work is it starts to unfold. We'll be present in platform wow and that's what we think this is the right time to really start.
Speaker Change: Very helpful. My follow-up is on recommendations, the 30% of those today. Walk us through your visions from the balance of user-generated content, publisher content, continue to generate a AI with the Ask a Neighbor, basically integrated. How does that call recommendation function involved as we integrate more voices?
Speaker Change: And that's your great question as well. So let me be very clear, the publisher content is not something that's actually being fed into the LLM that generate the AI responses.
Speaker Change: So there's been a lot of talk in the AI world about licensing content, ownership of content, etc. What we're using to generate our AI results is our proprietary content that we owe that no one else has access to. So that's maybe the first thing.
Speaker Change: When we talk about 30% of our conversations being around recommendations,
Speaker Change: That is over the last 14 years of our existence in neighbor user generated content that is proprietary owned by us. What are people talking about and the neighbors are asking each other for recommendation so that's what we mean by the 30% what the AI enables us to do. Thank you.
Speaker Change: is to take multiple conversations and string them together into one response, which is actually quite powerful because in the past you could come to next door if you were looking for a trusty plumber and you could post. [inaudible]
Speaker Change: And you would wait for responses, but it might be a question that had already been asked even a day before or you could search.
Speaker Change: If you searched, you would see a variety of results that all related to individual conversation threads, and you would have to read each one of them, and then you would do the work that the AI is now doing, which is you would take all the different results, you would figure out a way to interpolate them, and then you would decide which plumber to call.
Speaker Change: The AI essentially takes it from I'm looking for a plumber to here is a summary of what my neighbors believe is the best recommendation for that plumber and does it based on our proprietary content so nothing from the outside it's all things that neighbors have already said and it comes to you so quickly if you want to drill into that summary of course. [inaudible]
Speaker Change: The summary can be broken down into all of the different conversations and a user can read every single one of those so you're not losing anything you're just gaining something more and we think ultimately that will actually end up creating more user generated content as well because when someone does the local AI query and then they read the answer they may want to ask a follow-up question which in some cases may be answered by the AI that we have or in some cases it may result in another post to the feed so we think this
Speaker Change: This is part of the overall viral loop inside Nextdoor content creation and will be very powerful because it's instant results and it's summarizing over a decade of valuable content in a way that is immediately usable.
Great. Thank you.
Thank you.
Speaker Change: The next question is from the line of Youssef Squali with true securities. Your line is now open.
Speaker Change: Great. Thank you very much. I'll put you in the question. So maybe um...
Speaker Change: That's the take forward to end of July and you're up. How would you, he, um,
Speaker Change: Your ability to drive awareness of the new UI, of the new functionality, and does that come at a short term?
Speaker Change: Marketing Cost, basically you just use words of mouth to try to drive it. Just help us think through how you guys are thinking about it at this point.
Speaker Change: Yeah, that's a great question and it's something that we think about a lot because we're obviously trying to be as disciplined as possible in terms of our spending and so we do not anticipate a large marketing expense. I'll start there. The second thing is we have a hundred million verified neighbors.
Speaker Change: And as we reported a quarter of them are active on the platform. That means 75 million we should be able to message to and bring back to the platform in some way. We already have a line of communication to them because the basic construct of next door is one where notifications are a core part of the experience. [inaudible]
Speaker Change: In addition to what we do with our internal audience, we do expect to have a lot of public relations.
Speaker Change: So what we would think of is earned media. We are not doing an advertising campaign. We're not spending marketing dollars in some outsized way But it will be very important for us to get the word out and ultimately the way that we'll get the word out is what we believe to be the most powerful way, which is we'll deliver better notifications.
Speaker Change: And so it's not just a big bang that happens at the end of July . If you think about this alert surface
Speaker Change: If there's a power out, it's that affects you, and that's something that cycles around the country all of the time.
Speaker Change: You will get a notification from Nextdoor that looks different, that feels different, that acts different and so whether you've heard about this thing next which is not even probably a term we're going to use whether you've read any of the articles whether you've been reactivated during July , it really doesn't matter. [inaudible]
Speaker Change: Because you'll get better content from the platform and you will experience it and that's the best way ultimately for us to drive the awareness of the new product.
Speaker Change: Okay, that's helpful. And then Matt, can you just remind us again why the needless closure is around the house, the ones with the mail and the ones without, in the context of the next?
Matt Anderson: Yeah, certainly. So, as I mentioned, this is really about looking forward. So, it's three key things.
Speaker Change: We want to be better aligned with consumer expectations and that really is moving towards in-app and away from email and those experiences the Nirav described.
Speaker Change: It aligns with our strategic focus, so all the different elements that we discuss here are going to live on platforms and that's ultimately we want to capture in terms of our tracking and ultimately it's where an actual deal about both for users and advertisers and so we expect it more and more of the progress we're making will show up.
Speaker Change: in the platform of America. So that's really the core of folks is lying in those areas.
Speaker Change: Does that potentially hurt your standing with advertisers as they see that maybe your scale is not is half of what they saw it maybe or have they always known the breakdown on their end?
Speaker Change: Yeah, I think Nirav mentioned it earlier, but really, what we hear from advertisers is they want to be advertising in the types of experiences that next brings.
They wanna be against. [inaudible]
Speaker Change: More professional content and a more structured experience with a new look and feel as contemporary and so those are the things that we're hearing in terms of customer feedback. Thank you very much.
Speaker Change: And that really, it wasn't the core driver in terms of thinking about this level of discussion, because ultimately our goal will be to bring more and more of the activity on the platform, which will also deliver more benefit. And that's what we're going to talk about.
Yeah, got it. Alright, thank you both.
. . . .
Thank you.
Speaker Change: There are no further questions in the queue. I'll turn the call back over to the management team for any concluding remarks.
Speaker Change: Okay, thank you everyone for listening and before we close I just want to take a quick minute to reinforce the things that matter most about where we are today and where we're going.
Speaker Change: Q1 was all about product progress, about enabling the launch of Next, and we remain laser focused on developing that better product experience, and of course AI is going to play a vital role in that.
Speaker Change: We did drive operating leverage in Q1 even during this period of change, but really next is the future of Nextdoor
It's on track.
Speaker Change: Version 1.0 is going to launch to all US users by late July 2025.
Speaker Change: and will significantly improve the product. We believe for users, advertisers, and ultimately shareholders. We hope you enjoyed the preview. Thank you for joining the call and thank you for your interested in Nextdoor.
Speaker Change: That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Everyone else has left a call.
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