Nextdoor (NYSE:KIND) is a social network focused on hyperlocal connections. Shares of KIND stock debuted late last year following a merger with a special purpose acquisition company (SPAC).
Generally, KIND stock has not received a hospitable welcome from investors. Yes, shares did pop to $14 in November immediately following the merger. However, the stock broke down right after that. By December, shares of Nextdoor had slumped below the opening $10 mark. Now, they’ve slipped even further, recently hitting about $6 apiece.
This recent SPAC name is off to an unspectacular start in 2022. However, there’s actually a fair bit to like about Nextdoor.
KIND Stock: What Makes Nextdoor Unique?
In addition to being hyperlocal, Nextdoor offers advertisers a very different demographic. Most hot new social network companies of late — such as TikTok and Snap (NYSE:SNAP) — tend to gravitate toward younger audiences. That’s appealing in its own way, sure, but youths also have less money to spend. The older Nextdoor-using age group has a lot more disposable income, however. These users also tend to be more sticky and loyal to a service once they engage consistently with it.
It’s true that Nextdoor is never going to be the most glamorous social networking experience out there. But there is a solid niche offering available with KIND stock. What’s more, advertisers are generally willing to pay solid ad rates to target wealthy and loyal users.
Right now, monetization is still something of a work in progress for this company. In the third quarter, Nextdoor averaged $1.61 in revenues from each weekly active user (WAU). That’s a pretty low number by social network standards. Overall, the company also had 33 million WAUs. But, given its low revenues per user, it generated just $53 million of sales on the quarter. That’s a fairly light number for a company with a market capitalization of greater than $2 billion.
A Different Kind of Social Network
Most social networks are focused around one main purpose. Be it catching up with old friends, watching videos, or consuming short-form content, social media is usually centered around one theme. Nextdoor, however, plays to a different lane.
In a way, Nextdoor is kind of Swiss-Army-knife application. It is good for catching up on neighborhood gossip, getting local recommendations and connecting businesses with their communities, among other things. This platform dials into the thing that made social media popular in the first place — it gives users a way to follow and keep up with friends, family and the neighbors that live in their area.
Nextdoor has also enjoyed a strong word-of-mouth effect. As more of a neighborhood, town, or city joins the app, people talk to their friends about it. It’s more impactful when your neighbors tell you to get on an app than just reading about it or seeing an ad. Social media can feel very corporate and distant in today’s environment, but Nextdoor offers users a much different experience. That’s great for KIND stock.
International Expansion Is an Underappreciated Possibility
Social networks have a hit-or-miss reputation with international markets. Some of the bigger ones have spread virtually all over the globe while the more niche names have generally struggled to catch on in foreign markets. And, even when they do make it overseas, it’s often a challenge to monetize effectively. Oftentimes, average revenues per user (APRU) are multiples higher for U.S. accounts as opposed to international ones.
Nextdoor, however, is on surprisingly good footing here. The website has already achieved tremendous popularity in the United Kingdom and several other European markets. Nextdoor CEO Sarah Friar grew up in Northern Ireland and has worked at or served on the boards of multinationals like Walmart (NYSE:WMT) and Block (NYSE:SQ).
To succeed as an investment, Nextdoor will need to either grow its user base dramatically or improve monetization. Both would be ideal, but either approach could work in isolation, too. Further, there’s potentially strong demand for localized social networks all over the globe. Nextdoor has a broad opportunity to fulfill that need.
The Verdict on KIND Stock
It’s not hard to imagine a scenario where Nextdoor works out as a business. There’s definitely some demand for this type of local product. Some of the offerings such as local marketplaces are available elsewhere, but Nextdoor has a nice opportunity to offer a broad range of services and social interactions on a neighborhood- and city-wide level.
Currently, though, KIND stock has a lot of obstacles to work through. The SPAC association is just terrible right now. And Nextdoor being linked to backers like Cathie Wood’s Ark Invest isn’t helping matters, either.
An unprofitable social network SPAC is an ice-cold product offering in the stock market of early 2022. Once the tides start to turn, however, KIND stock could find a warmer reception among investors.
On the date of publication, Ian Bezek did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.