Nextdoor CEO: International users ‘a little bit more neighborly’

Nextdoor CEO Sarah Friar joins Yahoo Finance Live to discuss company earnings, stock performance, active users, hiring amid economic uncertainty, advertising, and the outlook for growth.

Video Transcript

BRIAN SOZZI: Shares of Nextdoor are sharply lower today after the company revised its outlook on macroeconomic headwinds. The neighbor-focused social network now expects full revenue between $220 and $225 million, around $30 million below its March view. It plans to sharpen focus on weekly active users and limit hiring to critical roles.

Nextdoor's CEO Sarah Friar joins us now. Sarah, always nice to get some time with you. I had a bunch of questions planned, but maybe we can just start on the stock price here. What are your thoughts on what we're seeing here in the early going?

SARAH FRIAR: Yeah, I mean in the end, we're building a big company that we think will be globally impactful so we don't tend to overfocus on the stock price. First of all, in Q2, we grew revenue 19% -over-. We actually did well in the quarter, despite that macro uncertainty.

What drove it? Well, the good news is neighbors are coming more frequently to the platform. And overall, our weekly actives grew 26% year-over-year. So we're feeling very good about what neighbors want and why they're coming. And then our ability to meet advertisers and give them a really unique hyperlocal platform. So if we keep focused on that, and keep building that, in the end, the stock price will do what it needs to do.

JULIE HYMAN: So Sarah, it seems as though investors are reacting in part to your sales outlook, which came in below what folks were looking for. From where you sit, how long do you think that this sort of macro uncertainty or this potential sort of slowdown in sales growth is going to last for the company?

SARAH FRIAR: Yeah, well, first of all, I mean, let's talk about the guidance itself. We did guide to $223 million at the midpoint. That's 16% year-over-year growth. So it's actually still quite strong growth. Remember, the digital ads market is still growing. It had a phenomenal year, last year. It's growing a little slower in 2022, as of course it's having to face that much more volatile macro environment.

Buy break it down, areas we continue to still see strength-- home services, there's still a lot of folks moving home. So anything to do with a new mover. For example, one of our great advertisers in the quarter is Philo, they're a streaming service. And they're always looking for someone that's just moved house and might be looking for a new provider.

We see strength in areas like travel, as well. And where we're seeing weakness are areas like financial services, a little bit in QSR, somewhat in areas like technology. So it's always a balance. For Nextdoor, we're still young, remember, in our growth as an ad platform. And so what we have been going after is the midmarket. So think about if advertisers who are not national, but want to get a hyper-local message out.

And SMBs. We know that they're going to hurt if the macro environment keeps getting worse. They're gonna have to get in front of their best customers, their neighbors. And this is exactly the platform to do it on.

JULIE HYMAN: And Sarah, when you talk about, you know, the catering to advertisers, right? And growing ad sales, that has to do with growing folks on the platform. And you talk about engagement among the existing users. But you also have to grow the number of users, right? Your weekly active users were only up 1% quarter over quarter. What steps are you guys trying to take to get people onto the platform, new people onto the platform?

SARAH FRIAR: Yeah, it's a great question. So in the first half of the year, we really focused more on the people currently on the platform and how can we get them more engaged. So moving them from becoming a verified neighbor, so a real person and in that real neighborhood, to becoming a monthly user, to weekly, ultimately to daily. And we feel really good about the outcomes there.

So for example, today on Nextdoor, 50% of our verified neighbors come back every single week. On an average, they come back four times a week. And in fact, we saw over 50% year-over-year growth in our most engaged segments. So really, our dailies. So that tells us that, good, now, when we get you to join, you're gonna stick around and you're gonna be really active and engaged in your neighborhood.

So for the second half, we're moving to now, how do we drive net new neighbors to the platform? So a couple of ways. One, we've done a big investment in something called Connections. This allows us to help you find the people-- not just on Nextdoor today, but who live in your neighborhood that you may know. By syncing your contacts, you allow us to make that warm intro out to invite them in. We saw about a 90% lift in contact sync in the quarter.

And then the second is we revamped our whole user interface. With that, we've created a service called Discover. It allows you to find events, groups, new neighbors, local businesses all around you. And we see that as a big part of attracting new people to the platform.

Finally, international. International remains a big growth area for us. In fact, in the quarter, we saw it grow over 50% year-over-year. And interestingly, countries outside the US tend to be more active, maybe it's a sign of being a little bit more neighborly.

BRIAN SOZZI: Given the trends you are seeing in the business, Sarah, have you had to push out your profitability timeline?

SARAH FRIAR: Well, if you look at our overall results, last year, we showed about an 18-point improvement in overall margin. Coming into 2022, we knew we wanted to go back and reinvest into growth, right? We just raised over $700 million at the end of '21. We still have $666 million on the balance sheet. And so we're trying to strike that right balance of investing for growth but also being prudent, given the economy.

First half of the year, we hired quite a few folks. We have a lot of capacity and waiting now. Second half of the year, we're gonna be more mindful, a little bit more focused on mission critical roles, particularly in our prod dev area, which is the lifeblood of a tech company. In Q4, we'll get back to year-over-year margin improvement because we want to show investors that even as we're growing and investing, we will show margin improvement.

JULIE HYMAN: Sarah, good to catch up with you after these numbers. Nextdoor CEO Sarah Friar, thanks so much.

SARAH FRIAR: Thank you.