Can Nextdoor Make Hyper-local News Happen?

The San Francisco startup thinks it's found a better formula for disseminating local information, with a business model that borrows more from social networks than from news outlets.

by Greta Kaul, San Francisco Chronicle / March 5, 2015

(Tribune News Service) -- Patch, AOL’s failed attempt to create a syndicate of local journalists across the nation, was seen by many as a death knell for hyper-local news.

Hiring hundreds of journalists, outfitting them with laptops, cameras and police scanners, and sending them out to gather community news for local sites proved too costly considering its limited audience. Patch lost between $200 million and $300 million, according to media reports, before AOL managed to offload it in 2014.

Now Nextdoor, a San Francisco startup, thinks it has found a better formula for disseminating local information, with a business model that borrows more from social networks than from news outlets. Instead of hiring reporters to tell community members what’s happening down the block, Nextdoor wants the neighbors to do it themselves.

It’s a model that has attracted a substantial amount of interest from investors: The company said it had raised $110 million Wednesday, in a round led by Insight Venture Partners and Redpoint Ventures. All told, Nextdoor has now raised $210 million in four rounds and says it’s worth $1.1 billion.

On Nextdoor, neighbors who create free profiles and verify where they live can engage as part of the online community. It’s a place people convene to kvetch about anything happening down the street: community events, used furniture up for grabs, reports of crime and complaints about barking dogs.

“To me the best source of local content is people that are in the community,” said Deven Parekh, managing director at Insight Venture Partners. “This has the potential to be kind of the LinkedIn for communities.”

Patch’s problem was both structural and strategic, said Jeff Bercovici, a reporter who covered Patch at Forbes and is now the San Francisco bureau chief of Inc.

“The structural reason has to do with the online news business,” he said. Hyper-local news “is the kind of thing that’s probably better done through user-generated content, or social aggregation.”

Strategically, Patch burnt cash as it expanded quickly, he said.

“They tried to grow too fast. They thought that they needed to grow faster than they needed to grow because they perceived that there would be a very narrow window before all this competition came up,” Bercovici said. “They were spending a ton of money.”

Robert Hernandez, an associate professor at the USC Annenberg School of Journalism, said quality control is an issue for many digital communities.

“There’s a difference when you go into a chat room that is empty, or a chat room where there’s two people, and then an active one — it’s really hard to foster those communities,” he said. “The lightning in the bottle is when a legitimate community uses a service to engage.”

He likened Nextdoor to the bulletin boards he’s seen in every community he’s lived in — whether they were on Facebook or listservs.

“Just because you have a community, doesn’t mean there’s going to be quality. Every community will be different unless they have someone really curate and put quality content on there — that’s what Patch tried to do in the area of community journalism,” Hernandez said.

For now, Nextdoor is taking it slow, Parekh said. The company will bring more neighborhoods online before attempting to monetize its social network — perhaps by selling ads to local merchants and service providers.

“Networks take a really long time to build, but fundamentally people tend to trust their neighbors and their friends in their local community more than anybody else,” Parekh said.

Nextdoor, which launched in 2011, says it is now in 53,000 neighborhoods — more than a third of all the neighborhoods in the U.S.

The startup has also met success in partnering with city agencies to get information out to community members.

“People truly do want to bring back a sense of community to the neighborhood and we’re humbled to be a part of it,” Nextdoor’s chief executive officer, Nirav Tolia, wrote in a blog post about the funding round Wednesday.

©2015 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC