Tech Drivers
Tech Drivers

Billion-dollar neighborhood social network Nextdoor moves against Zillow, Redfin

Key Points
  • Nextdoor, the social network for neighbors, is taking on Redfin and Zillow with a new real estate section.
  • The move follows Facebook's release of real estate-specific ads this week.
  • The real estate industry spent $26.8 billion on advertising in the U.S. last year.

After raising more than $200 million in venture funding and surpassing a $1 billion valuation, the social network Nextdoor is finally figuring out how to make money: real estate ads.

The start-up, which was founded in 2010 as a way for neighbors to communicate online, launched a section on Tuesday that aims to connect real estate professionals with residents in a particular neighborhood.

Agents and brokers can create official business pages on Nextdoor to build their reputation as a local expert. They can also pay to sponsor a neighborhood section and buy branded listings so their Nextdoor profile shows up alongside their listings when someone searches for homes in the area.

"It's an opportunity for real estate agents to sponsor a dedicated section where they can connect and build relationships with neighbors," Nextdoor CEO Nirav Tolia said in an interview.

According to research from Borrell Associates, the real estate industry spent $26.8 billion on advertising last year in the U.S., making it one of the largest local advertising categories. Nextdoor sends postcards to people when they move into a new place, inviting them to set up a profile, and then links them in a semiprivate group of their neighbors.

The company has been called the "anti-Facebook" because it verifies users by address and connects people in their immediate vicinity. But the site has gained notoriety for allowing neighbors to stir up paranoia about crime on their streets. Last year, Nextdoor released tools to curb racial profiling within its groups.

Nextdoor: Connect with neighbors online
Nextdoor: Connect with neighbors online

The company has built a massive user base in the U.S. and has begun to expand to the U.K., the Netherlands and Germany. According to Tolia, Nextdoor is now used by homeowners in 80 percent of the U.S., and in hot real estate markets like the Bay Area, at least half of homeowners use the social network.

Revenue has remained elusive despite Nextdoor reaching a $1 billion valuation more than two years ago. The company said in a blog post in June that until this year the business has been funded by its investors including Benchmark, Greylock Partners, and Kleiner Perkins Caufield & Byers, but it recently started surfacing sponsored content from select businesses.

"We have always believed that there is a tremendous opportunity to connect neighbors with businesses that serve the local community," the post said.

Even though it's not a listings engine or a marketplace, Nextdoor's new real estate section puts it in competition with sites like Zillow, Trulia (owned by Zillow) and Redfin. Its launch also follows Facebook's rollout of ad units for the real estate industry, which allow listings to appear in users' feeds on Facebook or Instagram.

"Our product is not an in-feed ad, and is not focused on listings," Tolia said.

Nextdoor didn't originally set out with the idea of serving the real estate industry, according to Tolia. Instead, the company observed which industries were creating profiles most on the site. Real estate offices claimed the most, followed by pet sitters.

Correction: A previous version of this story incorrectly described how the company recognized interest from real estate professionals.