Nextdoor CEO Nirav Tolia Bets on AI Turnaround

The Evolution and Reinvention of Nextdoor

Social networking platforms frequently prioritize expansive reach, yet Nextdoor adopted a distinct strategy from the outset, betting on the potential for growth within smaller, geographically defined communities.

This approach proved successful for many years. The 15-year-old company established itself as a leading platform for neighborhood-level interactions, facilitating connections among users for purposes ranging from reporting lost pets to sharing recommendations for local businesses. However, growth eventually plateaued. Users began to find limited value in the app beyond basic, transactional uses.

Contributing to this decline were issues such as the spread of misinformation, instances of racism, and frequent, unproductive arguments among users – often instigated by individuals lacking awareness or concern for constructive dialogue.

Nirav Tolia’s Return and Vision for Change

Now, Nirav Tolia is spearheading an effort to revitalize the platform. His motivation is deeply personal. Tolia originally founded the company and served as its leader until 2018, when he was reportedly removed from his position by the board following a disagreement regarding a potential acquisition.

In 2021, Nextdoor became a publicly traded company through a special purpose acquisition vehicle, achieving a valuation of $4.3 billion. However, with growth slowing and advertiser interest waning, the board requested Tolia’s return in the previous year.

Tolia also has significant financial investment in the company’s success. He states that he is Nextdoor’s largest individual shareholder, with the company’s current market capitalization hovering around $1 billion. Benchmark, an early venture capital investor in Nextdoor, holds the largest institutional shareholder position. Tolia affirms that “neither of us have sold since the IPO.”

Progress and Proprietary Data

Tolia expresses confidence in the company’s future, citing the strategic initiatives he is implementing. Progress is already evident. Nextdoor reported 45.9 million weekly active users as of September, representing a 13% increase compared to the same period in 2023.

A particularly valuable asset for Nextdoor is the unique data it generates from platform activity – data that, unlike that of Reddit, for example, Nextdoor has no plans to sell to companies like OpenAI or Google.

Despite these positive developments, significant challenges remain. Given Nextdoor’s relatively small size and the difficulties in attracting investment from larger institutional investors, questions arise regarding the timeframe for a successful turnaround and whether a return to private ownership might be a more viable path.

Addressing Product Changes and Content Quality

You’ve been on a bit of a media tour lately. Why?

Initially, my focus upon returning was internal communication. However, as we refine our plan and consider how to realize our full potential, it becomes increasingly important to share our story externally. A key challenge is that Nextdoor has been around for 14 years and boasts 100 million verified neighbors, yet we believe it isn’t fully realizing its potential.

You’ve said that you’re planning to change the product.

We firmly believe our neighbors can greatly benefit from our platform. Staying connected to the local community is vital for staying informed, safe, and making informed purchasing decisions. However, we found the existing product lacked sufficient relevant information and didn’t always present it effectively. The “next Nextdoor” aims to empower users to feel more connected to their communities.

What are some of the specific transformations that you’re going to make?

Historically, Nextdoor has relied almost entirely on user-generated content. However, we realized neighbors don’t always possess the comprehensive information needed. Local entities – schools, businesses, influencers, news publishers – all offer valuable content that should be accessible to neighbors. A major initiative is integrating content from these new sources to enhance the platform’s value.

Combating Misinformation and Utilizing AI

I stopped using Nextdoor because I was a little alarmed by what was [being said by neighbors]. A lot of your challenge is making certain [users] aren’t going off the rails, without also being accused of suppressing free speech.

This is a significant challenge for all social media platforms. We are continually striving to foster more constructive and positive conversations. Furthermore, the advancements in AI offer unprecedented opportunities for improvement. Combining community guidelines with innovative AI tools, I am optimistic about significantly enhancing user experiences.

Would you ever use AI to dampen political conversations?

Our policy prohibits national political discussions. However, these topics inevitably arise. We address this by creating dedicated groups for political conversations, as some users actively seek such discussions and may react negatively to suppression. We also leverage AI to identify and manage potentially disruptive content.

We have implemented a “kindness reminder” feature that utilizes AI to detect heated language or unconstructive expressions before a post is published. Users are prompted to rephrase their content, promoting more respectful dialogue.

In-House AI Development and Data Strategy

Is that AI developed in-house?

Absolutely. We believe we possess the three essential ingredients for successful AI development: skilled engineers, proprietary content, and a large user base for testing and refinement. We’ve developed the AI technology internally and are continuously improving it with data generated on our platform.

Would you ever license that AI?

I strongly believe that platforms with unique, proprietary content should prioritize attracting users directly rather than licensing their data to competitors. While I never say never, my preference is for users to experience the value of Nextdoor directly on our platform.

Relationship with Bill Gurley and Future Outlook

You’ve known [famed VC] Bill Gurley for years. He’s on the board of Nextdoor. According to The Information, he engineered your ouster, then called you back after growth had flattened. Is that an accurate retelling?

That’s not an accurate portrayal. Everyone involved recognized the company’s trajectory was concerning, especially after the stock price declined by 90%. It wasn’t solely a Bill Gurley or Nirav Tolia issue. Bill and I have a long-standing relationship dating back to 1996, and he has been a significant influence on my career. We don’t always agree, but we have a strong working relationship. We all shared a desire to improve the company.

Do you want to do it as a public company? I wonder if there’s any benefit, with all that you want to do, to taking Nextdoor private again. Have you talked to any [private equity] buyers about that?

We don’t comment on those types of discussions. However, the question of remaining public versus going private is valid. Bill and I have discussed this extensively. Public companies face greater scrutiny and pressure to deliver short-term results, while private companies have more flexibility for long-term investments.

We believe remaining a public company will ultimately strengthen Nextdoor, forcing us to build the necessary muscles to thrive in a competitive environment. The cost of going private and rebuilding would be counterproductive.

Ownership and Investment

Who owns Nextdoor at this point? I know you had a sizable position, as did Benchmark. I saw that Cathie Wood’s Ark Investment Management recently brought up something like 4% of your Class A shares.

That information is publicly available. I am the largest individual investor, and Bill and Benchmark are the largest institutional investors. None of us have sold shares since the IPO, demonstrating our confidence in Nextdoor’s potential.

We are pleased to have Cathie Wood’s Ark Investment Management as a significant investor. However, our relatively small market capitalization ($1 billion) limits access to larger institutional investors. We aim to attract more long-term investors as we demonstrate our value and growth potential.

Ultimately, our success hinges on delivering a better product that provides greater value to our users, leading to improved financial performance and attracting further investment.