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Nextdoor is a an up-and-coming social media network, that's going public via SPAC merger with Khosla Ventures Acquisition II Co (KVSB). This is an interesting one, that Cathie Wood seems to be buying up. In fact, by my count, she's bought over 2M shares this past week. This is in addition to her PIPE investments in the company. So what is Cathie seeing here?
Founded in 2011, Nextdoor is a niche social network for neighbors to discuss local events, rate local businesses and exchange goods and services. Apparently 1 in 3 U.S. households currently have the app downloaded. So, there are a lot of people of all demographics on this app. Consequently, there has been a lot of toxic behavior that Nextdoor had to formally address. But, looking at the bigger picture, this is clearly a successful app that took 10 years to build.
From their SPAC investor presentation, Nextdoor believes their unique proposition is real people, hyperlocal proximity, trusted information, local perspective, and instant distribution. I can see how this is very different from other platforms like Instagram or Facebook (for now).
Nexdoor believes there is a high barrier to entry in this niche market; which is why it took them 10 years to build it out. According to Vinod Khosla, the SPAC sponsor, it is difficult to achieve critical mass due to the inherent challenges of bringing together online and offline networks. Basically, they don't believe Facebook will have much success with Neighborhoods.
Nexdoor is expecting 2021 to have an ARPU of $5.93; whereas Facebook has a ARPU of $7.31 for it's trailing-twelve-months. Nextdoor should, in theory, have a higher ARPU than Facebook; given how hyperfocused the audience and potential advertising can be. But, of course, we know that the platform is nowhere near as mature. So, it isn't fair to compare with Facebook. But, to be fair, Facebook is still growing its ARPU and has many other areas of monetization left on the table (imo).
At a $3.5bn EV, Nextdoor is trading at 14.2x Revenue. Even with the benchmarks they highlight, it honestly doesn't seem cheap to me. Again, just for perspective, Facebook is currently trading at a 9x multiple (much cheaper).
I do, however, like that existing shareholders are retaining majority of shares and the CEO, Sarah Friar (ex-CFO at Square) is also putting money into the PIPE. That's amazing to see, because it really shows the confidence they have in the platform's future.
Nextdoor has experienced incredible growth, and they offer a unique proposition to both its users and advertisers. It's making money, unlike other SPACs. I like the leadership team and the confidence they have in the platform.
And, for the same reasons this app has been successful, Facebook has decided to "copy" it. Can Facebook crush Nextdoor? I wouldn't bet against it, to be honest. Of course we have the anti-trust legislations working for Nextdoor in this case.
But, the stock isn't cheap.
In summary, I can't justify buying Nextdoor over just loading up more Facebook stock. For me, that's the smarter move.
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