Good morning. Happy Wednesday morning. We're thrilled to have Sarah Friar and Matt Anderson with us from Nextdoor. Before we get started, let me do the ever interesting disclosures. All important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/resourcesdisclosures.
They're also available at the registration desk. Some of the statements that Nextdoor will make today may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements that Nextdoor makes are based on assumptions as of today, and Nextdoor undertakes no obligation to update them. Please refer to Nextdoor's Form 10-K for a discussion of the risk factors that may impact actual results. Welcome back. Good to see you.
Thanks.
Matt, how are you?
Great. It's great to be here.
Thanks for coming, as always. Maybe I think to kind of level set, Sarah, I wanna sort of start with you at a high level. Talk to us about sort of over the last year or so, the biggest areas of progress you've made on the platform, and as you kind of think about 2024, the strategic priorities to drive further engagement and monetization growth.
Sure. Absolutely. Thanks, Brian. So hopefully everyone in the audience is a good neighbor and is on Nextdoor and doing what they should do for communities. But a quick reminder, Nextdoor, our purpose is to cultivate a kinder world where everyone has a neighborhood to rely on. But there's really three things that neighbors come to Nextdoor for.
First and foremost, to discover and discuss what's going on around you locally. Second, they come to exchange goods and services, so a huge portion of the platform delves into areas like recommendations: "Help me find a local plumber," "I just had a great experience with this dog walker." So really, a lot of the commercial aspects of a local neighborhood. And then finally, they come to belong, to create community.
In terms of progress in the last 12 months, we're particularly proud of, first and foremost, top-of-funnel growth. So we have done a lot of investment in driving growth of new neighbors to the platform. In Q4 that we just announced, we hit over 88 million neighbors on the platform.
That grew quite nicely, 13% year-over-year, but in particular, sequentially, our second quarter accelerating sequential growth and a record for us in terms of new neighbors being added. Second part of that was engagement. So Nextdoor engagement has remained very stable. We see about 50% of verified neighbors come back every single week. But importantly, in Q4, we also saw a re-acceleration in WAU a nd I'm sure you'll come back to that.
That's from the investment that we're doing in those jobs that I just discussed, helping people find things, helping people do goods, to exchange goods and services, and of course, an investment in community. Then finally, from a revenue standpoint, probably our largest investment in the last 24 months, or even a little bit longer, has been our own proprietary ad tech stack.
Why that's important is Nextdoor is a logged-in community, so we know who you are. Importantly, we know where you live as well. We have a wealth of proprietary data, but because we have been working on Google Ad Manager, so using a third party as our ad tech stack, we've not really been able to take advantage of that proprietary data. Secondly, we also weren't able to do self-serve for our customers.
You really had to be big enough to make it worthwhile for us to reach out on that API integration to Google. So in building out our own ad tech stack, and we're there now, we're able to both offer better targeting, better optimization, and self-service capabilities, particularly for SMBs and mid-market customers, and you saw that in our results in Q4.
Got it. Okay. Well, maybe let's talk a little about the advertising business. Maybe, before we get into the ad server transition and the ad tech stack, maybe Matt, a higher level picture. Help us understand what you're seeing in the overall digital ad markets and sort of, you know, pockets of strength or pockets of weakness now. And as we're trying to analyze verticals where you have more exposure and more opportunity, what are the key categories of spend in those buckets?
Yeah. So I'll first start by just acknowledging kind of where we are with Nextdoor, and we'll expand into the broader view. So the first thing is, what we're seeing right now is really significant momentum in our mid-market customers. And so these are the folks that are coming to us self-serve. This specific area of customers is growing over 50% Q4, and we're continuing to see momentum in Q1.
Now, as we look to our enterprise customers, that's where there's really more opportunity to come, and that ties into a lot of Sarah's comments around the same capabilities we brought in 2023 for our SMBs and a subset of our mid-market customers are gonna be key to really being nimble in responding to the macro or vertical specific trends, or to the campaign objectives of those larger advertisers.
Mm-hmm.
I think that ties into the broader view, which is one thing that we see, and we certainly see when we look across the space, is an evolving expectation that advertisers come with their budgets, they come with their campaign objectives, and the platform is expected to deliver. And so that, again, comes back to our focus. It reaffirms the focus on the ad stack, and it really positions us well, to your point around verticals, how they're evolving today. You know, we've talked at length over the last 1-2 years about financial services.
Mm-hmm.
We certainly think that in any changing rate environment, that could be poised for a rebound. We certainly don't build that into how we build our own financial forecasting guidance, but we think we're as well positioned as ever in areas like that. There's areas like home services. We commented on this in our earnings. So in the fourth quarter, that segment grew 16% year-over-year.
Yeah.
Still a core vertical for us, but I think really the key thing there is that we started to see a turn from what was a little bit slower and more volatile trends in the second half of Q3 and early parts of Q2. And so seeing that start to turn is a good early signal. There's still more to come as we look ahead, but I think really, that core focus on building our ad platform, meeting advertisers where they are, and being well-positioned for the verticals is really something we feel excited about in 2024.
Got it. We certainly hope financial services does turn-
Yeah.
for a lot of reasons.
Right.
So maybe, Sarah, to you on the advertising side and the ad server transition, the new tech-
Mm-hmm
-stack you talked about earlier. What, what can you tell us about the, the uplift you're seeing in spend or the uplift-
Mm-hmm
You're seeing in return on ad spend from the advertisers who have adopted it? And the ones who haven't yet, what are sort of the gating factors you have to get through?
Yeah. So the easiest way to talk about it is almost in terms of the scale of customers. So if you look at the journey we're on, at the end of Q2 of 2023, we had moved all of our SMB customers over onto that platform. And what you saw in Q3 was a very nice rebound in SMB spend, 23% year-over-year, and another strong quarter in Q4 from SMB. Why are they doing better? Why are they growing faster? I don't think that they're particularly seeing a different macro environment to larger enterprises, so I actually do think this is helping us really kind of narrow in on why it's the ad tech stack.
Mm-hmm
Performing better. And I think it's a couple of things for them. Number one, there's just lower latency. As you can imagine, in a news feed type of offering, like Nextdoor, when you hit those impression moments, you want. And you have to do a call out to someone else's platform, there's always some latency. And if you're in an environment where maybe you have lower Wi-Fi or something, you can even almost miss the impression.
Now, that's more how it accrues to us. It just means we're more efficient, better use case of the total impressions that we have. But even for the SMB, it allows us to do a better job of, first of all, making sure that the ad renders, but then importantly, that we're serving that ad across the day, in a much more sophisticated way. Second thing is targeting.
You're starting to see that even for our mid-market now, that's now moving on to the ad stack, we can give them much more sophisticated targeting. Now, in the end, particularly for smaller businesses, they don't want to get into massive targeting. They just want to get a new customer, or they want to get their brand better recognized.
We want to move to a place where we're actually more offering, finding out what is it that they're trying to get done, and solving that on the back end through our targeting, that we know how to do best, rather than per se, putting it right in front of them. But there's always an option to do a more advanced option. And then third, and finally, for those businesses, it's also helping them understand the reach of Nextdoor.
I would say, generally speaking, in ads, Nextdoor is still not that well known, and we have work to do to keep building our brand awareness. But to give you that final sense of the ad stack, so SMB moved over mid-2023. We saw almost an immediate, better revenue growth there. Mid-market is now there as of the end of Q4, the self-serve portion of mid-market. And in total, what that's done, it's now, we're now seeing about 60% of total revenue that is all self-serve, is on the platform. In terms of where we're going-
Mm-hmm
which is your question, so what that leaves us with is our enterprise customers, really larger enterprises. Think, Home Depot, Verizon, right? These big, big global even, but very big national brands. So what do they need to make that move? A lot of them are probably ready to make the move, and it's really about us managing it.
Mm-hmm.
However, many of them want some specific API integrations to other vendors. It might be around things like brand safety. We integrate today to Moat, to Oracle's platform. We're working on our integration to IAS. So if we're not there yet with our platform in IAS, then that might be a reason why they might wait.
So this will be a managed move as we get through the end of this year. However, we want to really start talking to you all about the fact that we are on our own ad tech stack, and in particular, we're going to talk much more about managed and self-serve, as the way that we'll talk overall about our spending.
Got it. Okay. There's more I want to talk about on the ad side when it comes to sort of generative AI and even, you know, old school machine learning, if you will. But maybe just to kind of go back to your point earlier about engagement-
Yeah
...because it is so important to the advertiser-
Mm-hmm
Value proposition as well. Can you give us some examples of, of use cases or user behavior on the platform that have been growing faster or slower? As to what, what are people doing more of that has sort of driven this strong wow growth that you've seen? And sort of what investments are you making to sort of continue to drive that, that wow growth?
Yeah. So for wow growth, I do want to start at the very top of the funnel, because clearly, one way to drive wow is just to have more new people coming to Nextdoor. And so, last year, we really did a big investment in and around digital invites. Historically, Nextdoor had often grown through paid marketing, and one of the things we'd realized is that when we send you literally a postcard or a letter in the mail, it was a very high converting way to bring you to the platform. It's actually a very good CPA. However, it still had some CPA associated with it. In digital invites, we've effectively taken that motion and moved it into the virtual world.
N ow through email, through text, we're able to reach out to say, "Hey, come join Nextdoor." And we're experimenting further there, not just with blanketing, sending out invites, but also trying to be much more surgical. For example, if there's a big weather event, that can be a really good moment in a particular DMA to do a reach out and say, "Hey, neighbors, you won't need to be on Nextdoor, perhaps to look after yourself in the flood that's coming, or more importantly, perhaps to look up for the neighbors that are around you.
Mm-hmm.
We're also being more pointed about things like a neighborhood versus a building . We're starting to see some early signs-
Mm-hmm
that when we attack it from a building perspective, there's a real need there. And that's one of the reasons why we are leaning in right now and investing in what we call our communities product, which is really an evolution of growth. When you consider the funnel into WOW itself, there's the almost mechanistic way that you can drive it, which you started to allude to, which is the investment in data and ML.
S o of course, getting the right notifications to the right person at the right time brings them back to the platform, and there's tons of optimizations we can do there. We've done a big investment in AI in the last two years, and that's borne fruit. There's also, once people hit the feed, making sure that feed is very personalized for them.
Understanding our content better is more and more important. Prior to being able to do larger investments with things like Gen AI, that was a very expensive, laborious task, and even when you pushed it, you were still not getting to all of your data being correctly labeled. You know, if you look kind of historically, we've probably been able to label about 60% of the posts on Nextdoor to know that this is a recommendation, or this is about a lost pet, or this is about local knowledge, for example. Today, with Gen AI, we're starting to see a way to do this much faster, much more accurately, and without that human intervention that's needed. So what does that mean?
If your content is better labeled, you now are better able to put the right personalized content in front of the right neighbor, which is then driving them deeper into the news feed itself. And so one of the things we saw in Q4 was that session depth was up 36% year-over-year. So beyond just wow growth, those people are still coming back weekly, but now they're going much deeper.
We have a ton of opportunity here, and of course, when they go deeper, that provides us with more impressions, more impressions leads to higher revenue growth as well. And then finally, I think where you're going is just what are some of just the, you know, the use cases that a human being would talk about, not all the-
Mm-hmm.
the more mechanistic optimizations. So the things that we are investing in in 2024, one is certainly our For Sale & Free platform. We know we have something there that is very unique and differentiated. People come to Nextdoor for that marketplace because it's a high-trust environment. I'm gonna come to your house to buy your table from you, Brian.
Mm-hmm.
I wanna know who you are, and you definitely wanna know who I am.
Yep.
It's hyperlocal. You're not gonna send that table out on FedEx or whatever, right? It's something that comes to your house. And there's also an element of community. I've talked many times about how we see things like moms giving away kids' bikes or kids' clothes or whatever-
Right
... because it's actually an incredible way to invest back in your community, to upsell, recycle, upcycle, recycle, and actually invest back into that community. So that's an area. The communities product I alluded to already, it's effectively groups on steroids, but in particular, with an angle around buildings, cul-de-sacs, so smaller areas than perhaps the whole neighborhood.
We launched real-time messaging at the end of last year, and that sounds kind of simple, but to date, on Nextdoor, you could only DM one to one, and now you can do a group message. And that means that when you think about folks who might have gone off to a WhatsApp group, they're now staying within the Nextdoor fold to have that messaging going on, maybe about their street or their building. Those are just some of the ways we're both using big data-
Mm-hmm
... more mechanistic ways to grow, combined with deep investment in customer value to ultimately say, Nextdoor is the local knowledge graph. Nextdoor is the local place, and it's the only as well. Incredibly unique.
Got it. I have closets full of items to sell you. You know, the other aspect. I guess there are two other lanes we could take with Gen AI. I'd be curious for you to choose. It's a jump ball for either of you. Either, you know, the early investments or things you're seeing on the efficiency side-
Mm-hmm
... whether it's coding or other areas of efficiency in the PNL.
Yep.
See if, I don't know, maybe you can take one on that.
That sounds like a three-
On the revenue side-
Yeah.
Yeah, exactly. And on the revenue side, you know, there's a lot of, you know, potential on improved targeting, but then also creative-
Yeah
... you know, text to image, etcetera. So maybe like you know, unpack both of those for us and kind of, you know, break them up however you want to.
Okay, well, I'm gonna go first-
Yeah, go for it.
... 'cause then you can bring it home on efficiency. So on the Gen AI front, we saw the opportunity very early, recognizing that we own that local knowledge graph. And so in April of last year, we launched our first foray with Gen AI, which was actually to help neighbors make more engaging posts.
So very quickly, today, if you're posting on Nextdoor, I need, you know, help, I need a plumber, or I need a cake designer, forgot my daughter's birthday, I need an ice cream cake, what have you got out there? You can write a pretty kind of messy post. You'll very quickly see the assistant pop up-
Mm-hmm
... and it will rewrite it for you. But it's rewriting it on training that's been done on Nextdoor data. We do link to OpenAI, we're using their LLM, but our data in order to be able to create that post, and we can see that it is more engaging. I think, very constructively, over 70% of people who see the post that's recommended, accept it. So that was step one.
Mm-hmm.
You wanna make sure that neighbors actually are interested. The other thing I get excited about is there's almost a 2-to-1 ratio of a business that sees a post being rewritten for them, is 2 times more likely to accept it than a neighbor even. So I think it's the kind of commercial, commercial gene of businesses kicking into gear. That's led us to now deploy Gen AI on the front end of our new ad tech stack. So the benefit of being on a modern, proprietary ad tech stack is, of course, now you can move really fast when you want to add new things in. You don't have all the kind of tech stack legacy to go after.
What we're using it for is, as copy is being created, today it's more the copy and not the image, but you can imagine that we're close to thinking about images as well.
Mm-hmm.
I f I'm the landscape gardener coming to Nextdoor, wanna put up that ad, I can just say, "Hey, I'm a landscape gardener," and it will create a whole copy for us.... and I can see ways where we get more and more sophisticated there, because what we have is a lot of data being written about your business, often before you've even come to Nextdoor to claim it.
Right.
W e wanna get to that point where that claimed page, today we're up to, I think, about 4.8-4.9 million claimed pages. Matt, keep me right.
In that neighborhood, yeah.
In that neighborhood. But it's grown very nicely from about 2 million when we went public, so you're almost, you know, getting to about 2.5 times from when we went public. But still, claiming that page takes some effort.
Right.
Our overall goal when we think about advertisers is: how do we reduce advertiser effort? We want you to show up and be deli-- You were like: "Wow! It exists for me already. Click, I'm in-
Right.
L et's go. Let's spend some money to get me customers." And we want to increase advertiser outcomes, which is what we're doing on the other side, with using ML more in the background for that better targeting. So you can kinda see we are unique, and that we're probably one of the few platforms that can really use GenAI ourselves to better the product that we're giving out to consumers.
Mm.
rather than being in the kind of picks and shovels business of creating the tools for others to go do that.
Yeah. Right.
Yeah, and just looking at all of that through the P&L lens, I really want to underline Sarah's last point there, which is, if you think about the impacts you get from things like the Quick Create capabilities in our Nextdoor Ads Manager, that's helping us unlock new customers. It's delivering that value to customers, and ultimately, that is the path to durable revenue growth.
W ith a business model like ours, that is key. So, like, really, I'll double down on that point. It's just the core thing we're thinking about and why we're so focused there. In terms of efficiencies and thinking about from the cost perspective, it's really... It's something we've been constantly iterating and thinking about, testing, how can we be more efficient in terms of how we support our neighbors with our neighbor operations team?
How can we think about our overall R&D investment? How, how effectively do they work as teams? Those are all things that we're constantly exploring and iterating, and they even tie into, as we thought about things like our cost reduction plan-
Right
... our path to cash flow break even. It's the capabilities and the muscle around that type of work that really give us conviction that we could reduce our cost base and move forward and focus on all the areas that we talked about-
Mm-hmm.
while still continuing to get more efficient. One of the core pieces of that is AI. We're early there on the cost side, but we do think it's an opportunity over a multi-year window.
Are the potential efficiencies from whether it be the engineers or the sales force changes, who knows? Are they more than enough to sort of offset the other higher costs that come with AI and having to use more of the GPUs and sort of more of the expensive instances and running the platform that way? How do we think about sort of the puts and takes of that?
Yeah, I mean, we're certainly still early on our journey.
Mm-hmm.
We have been, and we've talked about this a little bit, certainly over the last 12 months, and, and for the months to come, really thinking about ways we can optimize our spend generally. We, we've really started to, you know... When we think about our third-party hosting costs, as an example-
Mm-hmm
... we are constantly our framework internally is, how do we take optimizations we can make as an increasingly sophisticated and mature business, and then put that back into increased experimentation? So we actually enable our teams to expand their budgets, have key thresholds for thinking about how they can keep pushing the envelope.
Mm-hmm.
T hat framework, in many ways, is analogous to the framework we think about our own investment at a business level. So we, we think there's still runway to optimize things like our hosting costs, as an example, to create space for our teams to keep investing there.
Got it. Okay. And what about, actually, this is jump ball as well.
Mm.
On user acquisition, I mean, I thought the postcards and the digital postcards were good examples, but maybe if you sort of, like, walk us through your oldest neighborhoods-
Mm
versus, you know, younger neighborhoods. How do you-- What are the KPIs you watch and monitor, and how do we think about investment in new user growth from here?
Mm
Across those types of markets?
Yeah. So certainly here in the U.S., we have tipped almost fully away from paid marketing. The Holy Grail is to create the viral loop of bringing new users to the platform. So even actually, frankly, it's, you know, never waste a good crisis. Last year, going through kind of a much tougher ad market made us get very tight on cost, which meant that variable costs, like paid marketing, really got taken down.
T oday, 98% of all of our verified neighbors, 95+, are coming through organic mechanisms. So think about it as almost a funnel in and of itself. There's the digital invites that I've talked about. They're very unique to Nextdoor. I kind of like them as an acquisition channel because they're owned and operated, and they only get bigger as the site gets bigger.
As we invite you and you come, you go through onboarding, and in that onboarding, we ask you to do things like sync your contacts. We actually see a fairly healthy number of people be willing to sync contacts, and from that, actually be willing to invite other neighbors to the platform. It's about, how do we continue to go from the big to surgical on that? I'll go back to the building group as an example. The reason why we like making the neighborhood around you feel small in some ways is, you're very naturally incented to go invite other people to get the value out of the platform.
Mm-hmm.
If you live in a building of 40 people, and you... We can tell you, we can actually set up the community and say, "Hey, Brian, you know, you live in building 1A, and 24 people are on Nextdoor. We've put you all into a group where you could message. So if you wanna talk about, you know, what was that noise? What are you all doing about putting up holiday lights?
Mm-hmm.
You name it. We can then help push you to say, "Okay, if all 40 of you are in this group, this is when it gets to really high value." And so we do a lot in those loops as you onboard to get you to reach out and bring your people to the platform. We have also invested in ways to effectively content share content out of Nextdoor and then bring content into Nextdoor.
We launched our developer API platform last November, so that site is now up and running. And some of the biggest partnerships we have are with folks like Microsoft, where we actually take our data, hyperlocal, put it on, it's actually Edge for them. They more and more want to make that, that homepage truly home-
Mm-hmm.
-meaning the place I'm living in right now. And one of the things we see is that Nextdoor content is actually very high-performing in a place like that Microsoft homepage. So that's an example where our content is going out, sitting on someone else's site. Why that's good for us, which obviously is driving engagement for them, but it's good for us because if you click on the post at that moment, we have a moment to pull you back in to Nextdoor, maybe to log in because you're already a user or maybe to sign up. So we like being able to put our data out there in the world. We have also done partnerships to pull data into Nextdoor.
W e know that things like weather, lost pets, these are all examples of content that actually is very engaging. So that's where we'll go work with folks like The Weather Channel or The Weather Company. We'll go work with folks like GoFundMe, and pull content onto the platform. Now, this gives you more liquidity, more posts, and so of course, when that's happening, now you've got more ability to do notifications and hence the flywheel gets quite strong.
On your question about older neighborhoods versus younger, one thing we have seen from day one is that it is not a linear build on engagement. So as a neighborhood goes from, say, 5% penetration to 85% penetration, so from, you know, a cold start all the way up to hyper-engaged, it isn't...
What we actually see is a bend in the curve. So there is somewhat of an exponential growth. That's why it behooves us to keep pushing top-of-funnel growth-
Mm-hmm.
Because actually, it should have a multiplier effect on the WAU front. Now, finally, I would say, as we go internationally, so we believe Nextdoor is a global platform. There are neighbors everywhere looking to connect to their communities. When we go to new countries, we often have a cold start problem, and there we do use paid marketing to kind of get the flywheel going.
Mm-hmm.
Of course, we have a whole playbook of how you get a new city going, involving public agencies, involving the businesses, involving kind of the true community activists, but we tend to fan those flames through some paid spends, and that we dial up and down. It's very... We know it has a very high return. The U.K. is already a market that we are monetizing quite effectively.
Mm-hmm.
However, we are measured because we are always coming back to our P&L to make sure that we're both giving investors top-line growth, but also margin expansion, with the eye to being cash flow break even, as we've said, at the end of 2025.
Yep. Excellent. Let me ask one about new advertiser growth and sort of getting new advertisers across all three buckets: the enterprise, the mid-market, and the SMBs, to experiment and sort of get into hopefully always-on mode. It's a little bit of a weird time in the online advertising market, where you know-
Mm-hmm.
one of the, one of the two big players, Meta, is just throwing out a lot of impressions-
Mm-hmm.
-across the ecosystem. You have all the AI discussion with the big platforms. And then there are, I would say, five or six smaller platforms, including y'all-
Mm-hmm
... that are really pushing to say, "Advertisers, get with our API. Test us, test us, test us.
Yep.
So I guess, like, in that environment, number one, what are sort of the key competitive differentiation points?
Yep
... that you point out? And two, is the impression growth a risk to pricing? Like, how do we think about sort of pricing dynamics in the market, given all the impression growth dynamics?
Okay, why don't I start, then you can take the pricing point?
No, sounds good.
That's okay. So when we are going to an advertiser of any size, we are selling them on, number one, we are hyperlocal. So we know real people. It's real people. You don't need to worry about fake IDs, fake bots, and so on, 'cause we take that time to create a verified neighbor, and we know where you live.
Mm-hmm.
Often I find, in a conversation with an advertiser, they want to dive in almost immediately to targeting, and they want to understand what data we've got.
Right.
They've already gone to kind of where a lot of those competitors that you've mentioned start. I have to pull them back and say, "Hey, we know where people live." Like, in a world where things like cookies are disappearing and so on, we have kind of almost the ultimate way of knowing who you are going after. We find we work particularly well when an advertiser is doing an online-to-offline connection. So say, a supermarket that's opening a new store-
Mm-hmm
... or a quick-service restaurant that's got a new special coming up for whatever, I don't know, Halloween. That awful latte thing with,
The pumpkin spice.
whatever, pumpkin spice in it.
Mm-hmm.
Sorry, I realize that tends to polarize people.
I can... Oh, I-
I've probably now offended some of our biggest advertisers. Anyways, so hyperlocal first. Second is a really high-intent audience. So people are not just doom scrolling and kind of, you know, wasting their day away. They actually tend to come to Nextdoor because they're trying to get something done. So in an ideal world, when we can put a contextual ad next to that post, that gets very exciting for us. The relationship that we built with Microsoft, actually, and Bing, they are showing contextual ads in for sale and free. So if I'm doing a search for a bike-
Mm-hmm
... we're now seeing a contextual ad pop up, and it's super performative. It's not rocket science-
Mm
... but not something we've been able to do a lot of to date. And then the third piece is this idea of neighborhoods everywhere. So we do work for a national campaign, but we're able to localize it. And what we find is even just things like copy, having a more local element to them, tends to make them also perform better.
Mm-hmm.
That's pretty differentiated from most other platforms. We're not just selling the social—like, we go to the social buyer, but the story is different. Now, because it's different, it takes time.
Mm-hmm.
We're definitely having to build up that brand awareness. That's why you see Nextdoor showing up in more places like Cannes or Possible or Ad Week New York-
Okay
... and so on. I mean, we have historically had the bandwidth to go do that, but we're getting big enough that now we're able to do that. Finally, I would say we are doing a big investment in agencies. Agencies are the way to force multiply. In the U.K., that's actually been something the team has been really strong at, and I think that's why you see our EMEA business growing, you know, kind of at a heady rate relative to the rest of the platform right now. In the U.S., we're now up to a team of 4, 5 people focused on agency, and what we've seen is a lot of our recent revenue has come through an agency.
Often it starts because we do a direct sell, but then the advertiser will want to bring in the agency in order to make it part of their overall spending and how they buy and so on. But that investment is super important, and that's a place where the agency's often looking for, you know, what's never been done before, what's new and creative. And that's where we'll often do custom things, like with maps and so on. Again, to show Nextdoor in a different way, but ultimately, we want you back buying in the bread-and-butter way that you would buy social, but understanding those three different areas of the three differentiation points that we have.
Yeah, and just adding on in terms of your question on pricing and how that ultimately flows through our model. I think there's a point I really want to emphasize, which is that 36% year-over-year growth in session depth, so the amount of content that each neighbor views in each session, that's on top of neighbor growth. That's really important because it is the foundation for robust and continuous supply growth.
Mm-hmm.
In a world where we know advertisers are looking for reach, they're looking for performance, that's really critical, 'cause even within that supply, there's a big opportunity for us to, one, increase the depth, but two, improve the distribution of neighbors who are going deeper in the feed, who are seeing that next piece of content. And we still, whether it was when we came out public 2 years ago, whether it's today, we still see big, big opportunity in terms of driving supply, which downstream gives us even more latitude to focus on things like performance.
Now, in terms of performance, I think one of the things that's really interesting and compelling is we look at those, those advertisers who are coming on to the Nextdoor Ad platform, in the summer, SMBs, and more recently, our mid-market advertisers on our Nextdoor Ad Manager.
We look at what are ways we can measure outcomes? What does retention look like? How are click-through rates improving? On that last point, it's early, but really excited around the types of outcomes we can drive, deliver on our performance, and make better use of our inventory so that effective pricing still stays strong and stable.
We have tons of first-party data. Sarah talks about all the things we bring to bear in terms of how we can deliver value to advertisers with that first-party data. And so continuing to get more and more advertisers on the platform, seeing things like improved click-through rates, when combined with that supply growth, is something that really makes us feel confident about 2024.
Yeah.
That's helpful. Over the last couple of years, Google's been talking about cookie deprecation with the third-party cookies. It seems like now we might finally be getting to that point where it might happen. It's more likely than not, the back half of the year.
Mm-hmm.
I guess, as you know, I know you've built a lot with the tech stack-
Mm-hmm
... built a lot with the new infrastructure. How should we sort of think about, you know, your preparedness for cookie potential changes on either targeting, measurement, attribution, any of those factors?
It should actually, I think, really benefit Nextdoor-
Mm-hmm
... because we are a fully logged-in platform.
Yep.
We don't have to drop cookies in order to follow you around to infer who you are. So I actually think from a relative perspective, we didn't see an impact when Apple rolled out their change. And I think on a relative basis, it's a good time for us to now finally have that proprietary stack going strong.
Got it. Okay. Let's talk about capital allocation and sort of the repurchase program. You have a, you have a buyback program now in place. I know there's some, you know, some announcements on changes in management, et cetera. But maybe first, Matt, for you, sort of how should we sort of think about capital allocation, focus on free cash flow per share, dilution, all the, all the CFO dynamics?
Yeah. Yeah. There's really four buckets we wanna make sure everybody's thinking about, and some are more in focus than others today. I mean, the first is the investments in our operating business.
Mm-hmm.
When we think about the dynamics we discussed around efficiency and clarifying the path to cash flow break even, we're focused on driving leverage in the areas we're investing today. From a capital allocation perspective, that really is kind of the top of the conversation. Next is the buyback, and that's where, at the end of the day, when we look at where we are, where we're trading, the opportunity we see ahead, we are buyers of our stock.
We think it's an interesting opportunity to, to take that really strong cash balance of over $530 million, and so it's an opportunity that, that we were happy to highlight in our most recent earnings, and it'll be a part of our core capital allocation strategy.
There's a third point which is a little bit more subtle, but we think it's also meaningful, especially as we think about maintaining and driving down dilution over the long run, which is things like, for our RSU as they vest, net selling those shares. We think we can meaningfully reduce the number of shares coming out into the market when that happens. We're talking about potentially a couple points of dilution over the course of any year.
Right.
When we couple that with the buyback, I think it really puts us in a strong position to ensure that we are minimizing dilution, not just in 2024, but, but over a multi-year window. So that's. Those two are really paired together, but they're, they're both important and meaningful. And then finally, M&A. This is a lesser focus for us today, but at the end of the day, we're thinking about all the ways that we can really enhance our capabilities. Right now, it's focusing on those core organic investments in the, in the path to cash flow break even and the buyback. But over a longer term time horizon, that, that is something that can come back into the mix.
All right. Sarah, you've announced you're stepping down, so it is bittersweet. So thank you, thanks for coming. Thanks for everything you've done.
Thank you.
2-part question here. Number 1, sort of, you know, as you leave the platform, in your current role, what are you sort of most excited to sort of pay attention to externally, or the biggest opportunities, you think? And then maybe talk about the new Ads Manager team.
Well, why don't I just give a shout-out first to say our founder, co-founder, Nirav, is in the audience. And I'm excited to be handing Nextdoor back at this moment in time, right? I feel that we've put a lot of investment in the last couple of years. We've done some extraordinary things, tripled the platform, raised nicely on our balance sheet to give ourselves flexibility, invested in areas like AI and data, and invested in our ad tech stack. And so it feels like Nextdoor is at a very healthy upswing moment, and that is one of the reasons why we're doing the buyback, too, because we see all that opportunity. So welcome back, Nirav. He's never really been gone.
Yeah.
He's been on our board throughout, and we've worked really closely. And actually, Dana Evan, I'm also gonna give a shout-out to our board member, is in the audience. I just saw her come in. So, we have wonderful folks around us guiding Nextdoor. I have not been this excited about tech in quite a long time. I mean, we talked just coming in the door-
... I was gonna ask you.
Yeah, if you layer on what's going on in AI, I have the privilege of sitting on a private company board called Consensys, in the Web3 space. I mean, if we think the ad business has gone through the winter, the crypto winter was kind of painful. But we're somewhat appear to be back out into spring, summer for now, and it will stay volatile.
But when you start overlaying what's going on in spaces like Web3, in terms of community, in terms of personalized identity, thinking about how things... I actually did a super fascinating call yesterday, with Publicis, Consensys, and we were talking about actually the Sephora activation that just got announced at NFT Paris. It's really fascinating to think how advertisers are trying to lean into the community, the, how people are thinking about the products that they buy.
They want the exclusivity. They wanna feel like they're part of that family. And then, of course, in a world of AI, thinking about just how do we make sure the content is digitally watermarked, that it has the irrefutability of a blockchain, for example. Like, there's just the layers on tech right now are fascinating.
Yep.
I'm in the must say no to everything for a while-
Right
... but very excited about what's going on in the industry. But most importantly, landing Nextdoor strong for Q1, making sure we have a seamless handover, and that I'm here for the company. I, I love this place, I believe in Green, and I think Nextdoor is just gonna go from strength to strength.
Great. Well, thank you so much. Thank you, Matt, as well.
Thank you.
Thanks, Frank.
We'll talk to you soon.
Thanks, team.
Thank you, everyone.
Oh, of course.