Nextdoor, a ZIP code-based social network, is diving into real estate.
The company debuted a new feature called “Your Home” on Tuesday morning, unlocking another step on its path to profitability. The offering, which was reviewed by Yahoo Finance, seems like a natural next step for the business, and is initially being rolled out to the platform’s U.S. homeowners.
Real estate is one of the most talked about topics on Nextdoor, accounting for one in four conversations. The discussions range from disbelief that a home got significantly over the asking price to how changed zoning laws will affect property values, according to Nextdoor Chief Revenue Officer Lauren Nemeth.
The intention is twofold — to meet user demand and to create a new revenue stream.
Nextdoor’s users get a personalized view of the value of their home, local real estate trends and outside factors that would affect their home value. Homeowners can connect with local agents by choosing “talk to an expert.” Unlike Zillow (Z) and Trulia, Nextdoor opted not to build its own estimate tool, and instead is using third-party partnerships like real estate data portal ComeHome.
Perhaps more importantly, real estate agents get increased brand exposure and an opportunity to spark relationships with an engaged community by showcasing their local expertise.
After testing the feature in five pilot markets over the past six weeks, Nemeth said she’s confident this is a program that is meeting the sell-side consumer’s top requests.
“It’s not quite like Zillow because most neighbors aren’t necessarily ready to sell right now. We’re talking about conversations on the consideration level, not the conversion level. And we’re helping real estate agents lay the foundation for those longer term relationships,” said Nemeth.
‘Where there’s money, there’s focus’
Though Nextdoor has been around for a decade, new hires like Nemeth and CEO Sarah Friar, who joined 16 and seven months ago, respectively, have attracted newfound attention and support. The company closed its latest round of funding last month, raising $123 million at a valuation of $2.1 billion.
Nextdoor does not share user numbers, but disclosed that over 237,000 neighborhoods across 10 countries — the U.S., UK, Germany, France, Spain, Italy, the Netherlands, Australia, Sweden and Denmark — are on the site.
The company is completely self-aware, and perhaps a bit self-conscious, about its growing community but continued lack of profitability.
“The first seven years was about growing the customer base. But three years ago, we started serious conversations about making some money,” said Nemeth.
Advertising, which is set to double in revenue from a year ago, makes up the bulk of Nextdoor’s business, followed by real estate agents and local businesses that pay to have their pages displayed on the site.
“Where there’s money, there’s focus. We’re rolling out this real estate product but our ad business is also getting a ton of investment from every department,” she said.
Real estate agents can currently create business pages for free on Nextdoor. They can pay a monthly fee to unlock special features, like being a top-surfacing sponsored suggestion, the ability to post directly into the feed and showcase open houses directly to the ZIP codes they’re choosing to target. The price of the sponsorship depends on two factors — the community’s density and the average home value. Monthly fees range between $30 and $150 per agent.
Justin Patterson, an internet analyst at Raymond James, said the new offering “has the potential to be pretty valuable.”
“We’ve been broadly tracking Nextdoor since its inception. There’s a lot of potential within the real estate category as a whole. We are looking for the right product to really drive that connection between consumers and real estate agents,” he said.
Patterson, who has a neutral rating on Zillow, said the lead generation market for real estate has become fairly concentrated, especially after Zillow’s acquisition of Trulia in 2015.
“Nextdoor is an intriguing platform that’s community driven with high user engagement. The local context creates more potential for relevant results and higher conversion. Real estate agents would be intrigued to have a new digital platform for high context and high engagement and less competition,” he added.
From online to offline
On a broader level, the real estate industry has faced its fair share of disruption but is still fundamentally rooted in relationship-building.
Tom McCoy, a product manager for Nextdoor’s new feature, said he consistently hears real estate agents talk about moving their budgets dedicated to digital marketing and lead generation to beers and coffee with prospective clients.
“Nextdoor can be the perfect relationship starter for prospective sellers, where users can find contextual answers to their questions,” he said.
Just as old-school billboards are making a comeback (even among tech giants who use the classic form of advertising as a way to troll competitors), real estate agents often stick with tried-and-true methods of analog advertising, particularly referrals.
“Word of mouth is still an incredibly powerful driver particularly in big ticket items, especially real estate. This is certainly a product that realtors will be interested in. Even when you look at the offline nature of real estate, when a realtor sells a home, the sign shows x, y, z’s face and name sitting in front of that home for a couple of weeks. That helps raise awareness and helps people determine who is a competent realtor in that particular area at certain price points,” said Patterson.
In order to join Nextdoor, users have to register their real name and verify their home address via phone or a credit/debit card. If neither of those options work, they have to wait for a postcard to arrive in the mailbox. In an interview with Yahoo Finance last year, Friar said these barriers are a core feature of the business.
“[The process] is friction-full because we want to make sure that you do actually live in that house and live in that neighborhood. And that's the bond of trust we create with our members. We have a lead that actually founds the neighborhood, so there's a bond of trust about who's driving it. There’s no injection into the feed the way you might find, say, on a Facebook platform. So it’s a very different starting point,” she said.
In fact, Nemeth emphasized that Nextdoor’s ultimate goal is for these online conversations between agents and homeowners to manifest in real life.
“Whether it’s a Starbucks or Home Depot, companies want to have those offline connections and touch points. We saw the same thing as we built our real estate product. Neighbors can get in touch with a potential agent online, but they want to make sure that he comes to their house, they want to go to one of his open houses. We’re positioning the house in a specific community,”
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm. She hosts Breakouts, a monthly interview series for Yahoo Finance featuring up-close and intimate conversations with today’s most innovative business leaders.