Learnings from the latest Tech IPO — NerdWallet
NerdWallet is a tech company that just went public. Below are some of the highlights and learnings from their prospectus.
What they do. “At NerdWallet, we empower consumers — both individual consumers and small and mid-sized businesses (SMBs) — to make smarter financial decisions with confidence. We deliver guidance to consumers through educational content, tools and calculators, product marketplaces and our app.”
They did M&A to instantly go international. “We expanded our guidance to the UK with our recent acquisition of Know Your Money (KYM), we also expanded organically into Canada during the third quarter of 2021, and have further plans to expand internationally. ”
16mm monthly users. “Through our platform, our financial services partners can reach a substantial audience, comprised of 16 million Monthly Unique Users (MUUs) on average in 2020 and 20 million on average in the first nine months of 2021. After doing research on our platform, consumers are better informed about the financial decision they’re about to make, which makes them primed and ready to transact.”
Transactional revenue model. “We generate revenue by successfully matching those consumers with our financial services partners, from whom we generate fees. These fees from which we recognize revenue include revenue per action, revenue per click, revenue per lead, and revenue per funded loan. We focus on attracting users to NerdWallet who are interested in multiple financial products that we review and then use machine learning to help them find financial products for their needs. For example, if an individual comes to our platform to learn more about credit cards, we hope to bring that individual back to NerdWallet at a later time to explore other financial products, often via automated contextual “nudges.””
Partners are critical to such a model. “We worked with over 400 financial services partners as of September 30, 2021. All of our revenue is generated from our financial services partners, and as such, relationships with new and existing financial services partners are critical to the success of our business.”
Covid hurt. “we experienced lower growth in 2020 as compared to our growth rate in 2019, particularly in the second half of the year. In 2020, our revenue increased 7% versus an increase of 32% in 2019. Credit card approvals slowed during the height of the economic uncertainty and credit card revenue declined 30% compared to 2019.”
Content marketing is critical. “In order to maintain our position as a trusted destination for personal and SMB financial guidance, we produce high-quality financial guidance, which is developed by our independent team of writers and editors. Our editorial and product teams continuously improve our content, tools and resources to ensure that our platform reflects the latest consumer finance trends and related products from our financial services partners.”
Interest rates matter to this business. “when interest rates decline, we see accelerated consumer demand for loans which in turn leads to increased traffic to our platform. Conversely, when interest rates increase, we see slowed consumer demand for loans and accelerated demand for banking products.”
Brand marketing is a must. “In 2020, approximately 39% of our total marketing expense was attributable to brand marketing, 34% to performance marketing, and the remainder to organic marketing and other marketing expenses. Performance marketing spend can be adjusted more quickly than brand marketing, which typically involves pre-committing to spend in future periods.”
But SEO and editorial content is even more important. “In the trailing twelve months as of September 30, 2021, over 70% of all traffic to NerdWallet came organically through direct or unpaid channels, reflecting the strength of our brand and organic marketing efforts. Our in-house, award-winning and experienced editorial team leverages search-engine optimization best practices and technology, and designs interfaces to help consumers easily find the information they are seeking. Our editorial team also optimizes page structure to increase visibility, not only for organic search results, but also for Google’s premium features such as FAQs, featured snippets, and video results. Personnel-related expenses within organic marketing were up 9% in 2020 compared with the same period in 2019, which is a reflection of our continued investment in building a comprehensive set of skills and expertise across our editorial team.”
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