Problem 1: Nextdoor Is For Profit So It Must Generate Income
HOW IS MONEY TO BE MADE FROM NEIGHBORLINESS?
Even with zero income, according to the New York Times Nextdoor.com Inc. is already valued at over one billion dollars. (For insight into how no-income start-ups are valued read How Startup Valuation Works on the Funders and Founders website).
Someone, somewhere is confident that Nextdoor.com will figure out how to make money from neighborliness, or, to be more precise, from the messages posted by its members and the engagement they have with the site. But how?
According to Nextdoor's CEO, Nirav Tolia:
Even with zero income, according to the New York Times Nextdoor.com Inc. is already valued at over one billion dollars. (For insight into how no-income start-ups are valued read How Startup Valuation Works on the Funders and Founders website).
Someone, somewhere is confident that Nextdoor.com will figure out how to make money from neighborliness, or, to be more precise, from the messages posted by its members and the engagement they have with the site. But how?
According to Nextdoor's CEO, Nirav Tolia:
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"In all likelihood, our business model will focus on working with local businesses to provide special offers to members. This will not only benefit members by giving them access to deals they would not find elsewhere, but it also helps generate support for local businesses and in turn strengthens their own neighborhoods."
(Nirav Tolia, interviewed at CNBC.com. Viewed March 23rd. 2015.) |
So one way for Nextdoor to make money might be by enabling local businesses to promote themselves within a neighborhood. Another, speculated upon by the NYT, would be for Nextdoor to use the recommendations made on Nextdoor for local businesses - perhaps by providing a convenient button to click if one needs a local plumber and then taking a cut from the transaction.
There may also be "back-end" ways to generate income, as can be seen by looking at how Twitter does it. Twitter certainly sells advertising but it also does more.
There may also be "back-end" ways to generate income, as can be seen by looking at how Twitter does it. Twitter certainly sells advertising but it also does more.
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"Data licensing is Twitter's second major revenue stream.
The micro-blogger sells something known as the "firehose", its public data, which often adds up to about 500 million tweets each day. Companies can dive deep into the data to analyse consumer trends and sell their insight on to other brands and companies. Because the tweets are public, consumers also have access to this data. But Nick Halstead, founder of DataSift, one of the only two companies with access to the firehose, says that with sophisticated analysis companies can learn detailed and specific information about their users that, because of the volume of data, an ordinary user or company would not be able to get." (Source: BBC.com. Viewed March 23rd. 2015. Emphasis added) |
Whatever way they come up with one thing is certain, they need people to join and to stay engaged.
FUNDAMENTALS FOR MAKING MONEY FROM SOCIAL-MEDIA
Marketers have had quite a few years now to study attempts to start social-media businesses. Some have succeeded, (Facebook), and many have failed, (remember MySpace or Second Life?).
All social-media companies are trying to create an environment in which people spend time and become engaged, which in turn gives the company an opportunity to make money by capitalizing on their presence, (e.g. exposure to advertising), or output, (e,g, data-mining and analysis) or by influencing decision-making, (e.g. offering a convenient way to find a local business).
Common to all these is to get people to join and keep them engaged and marketing research firms such as Forrester Research recognize gradations in the degree to which people become engaged with a social-media product. Sean Corcorans's 2011 online article Revisiting The Meaning Of "Engagement" defines engagement as:
"the level of involvement, interaction, intimacy, and influence an individual has with a brand over time."
Keep that idea in mind in reading the rest of this article as the degree to which customers are either engaged, or disengaged, with a social-media brand is regarded as critical to its value and success and we believe that how Nextdoor is designed and run raises significant questions about the level of engagement its members have with Nextdoor over time.
A sense of how these issues can play out can be seen in a BusinessInsider.com article about Twitter, which points out that although in 2013 it had 232 million "monthly active users", enough to go public and make its founders billionaires, it actually had had 883 million registered users, meaning that:
"... 651 million accounts ... have been registered and then been abandoned by their owners." (Emphasis added).
Whether any social-media business can afford to lose three of every four people who join it and still turn a profit is unknown as, at the time of writing, although Twitter does have some income, it is not yet known whether it is profitable.
However, one might ask why would people register with a social media business and then abandon it? We think that's also a good question to bear in mind as we consider the experience of people who have signed up and become deeply engaged with Nextdoor.
Marketers have had quite a few years now to study attempts to start social-media businesses. Some have succeeded, (Facebook), and many have failed, (remember MySpace or Second Life?).
All social-media companies are trying to create an environment in which people spend time and become engaged, which in turn gives the company an opportunity to make money by capitalizing on their presence, (e.g. exposure to advertising), or output, (e,g, data-mining and analysis) or by influencing decision-making, (e.g. offering a convenient way to find a local business).
Common to all these is to get people to join and keep them engaged and marketing research firms such as Forrester Research recognize gradations in the degree to which people become engaged with a social-media product. Sean Corcorans's 2011 online article Revisiting The Meaning Of "Engagement" defines engagement as:
"the level of involvement, interaction, intimacy, and influence an individual has with a brand over time."
Keep that idea in mind in reading the rest of this article as the degree to which customers are either engaged, or disengaged, with a social-media brand is regarded as critical to its value and success and we believe that how Nextdoor is designed and run raises significant questions about the level of engagement its members have with Nextdoor over time.
A sense of how these issues can play out can be seen in a BusinessInsider.com article about Twitter, which points out that although in 2013 it had 232 million "monthly active users", enough to go public and make its founders billionaires, it actually had had 883 million registered users, meaning that:
"... 651 million accounts ... have been registered and then been abandoned by their owners." (Emphasis added).
Whether any social-media business can afford to lose three of every four people who join it and still turn a profit is unknown as, at the time of writing, although Twitter does have some income, it is not yet known whether it is profitable.
However, one might ask why would people register with a social media business and then abandon it? We think that's also a good question to bear in mind as we consider the experience of people who have signed up and become deeply engaged with Nextdoor.
