We recently learned that social media platform Nextdoor is planning to go public via a special purpose acquisition company merger with Khosla Ventures Acquisition II (NASDAQ:KVSB). In this Fool Live video clip, recorded on Aug. 9, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss why this could be an interesting opportunity as the platform evolves.
Matt Frankel: Any thoughts on KVSB? That’s Khosla Ventures SPAC, fourth quarter. In the fourth quarter it becomes Nextdoor. We talked about Nextdoor last week, didn’t we?
Jason Moser: Maybe. I can’t remember.
Frankel: That was one of the SPACs on the radar.
Moser: Yes, that’s right.
Frankel: The social network Sarah Friar is the CEO of.
Moser: That’s right.
Frankel: Sub-$5 billion market cap, I can see how they can monetize from the app, and the SPAC seems like an easy way to get into early for a company with similar ARPU, that’s average revenue per user to Pinterest with huge potential. As we discussed the last week on the show, I have two different thoughts on Nextdoor. One, it could be the next Pinterest, which would be huge, as you mentioned. Sub-$5 billion market cap, that could be a 10-bagger easily if it is the next Pinterest. On the other hand, I have trouble deciding how engaged their users are and what the potential is. Jason, this is probably what you remember about Nextdoor last week. We got a ton of comments on, “all Nextdoor is, is a bunch of neighbors complaining about each other.”
Frankel: You remember all that feedback we were getting, and how people used it to complain about their neighbors and post lost pets?
Frankel: It’s a toss up, I say, which side wins, because I don’t know how you monetize people who are just on there to complain about their neighbors. If people are actually on there to have neighborhood discussions, they plant events, and things like that, great, you’ll be able to monetize that all day long. On the plus side, I love Sarah Friar. I would invest in anything she’s involved in for the most part. I think she is more of a reason that Square went from a niche credit card processor to where it is today than Jack Dorsey is. I think she was an absolute rockstar CFO at Square.
Moser: I agree.
Frankel: I have a tough time dismissing it. The same time I would have to see, how are they planning to monetize the users better? I want to see that how.
Moser: You’re right. Particularly when it comes to these social networks, like it’s just advertising. I don’t know, it’s not doing it for me anymore, and it does feel like you need to have some type of reliable subscription or service-type revenue. If you’re charging like an HOA X number of dollars a year to be able to use your platform, than your HOA, you get a free network that lets your neighborhood communicate and you use tools within that network, I don’t know, I think you’re right. I want to see more of how they plan on actually growing meaningful and sustainable revenue.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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