- 1CEO Tim Chen says rising distribution costs make brand reach more valuable.
- 2NerdWallet is making more aggressive long-term bets on brand and distribution.
- 3Q1 SMB revenue was $25M, down 15%, on organic search declines.
On NerdWallet's Q1 earnings call, CEO Tim Chen laid out why he thinks distribution now matters more than product, even as the company's small business revenue fell 15% year over year.
The distribution thesis
Asked about NerdWallet's vertical integration strategy, Chen said the cost of launching financial products is falling quickly as software, call centers and capital markets get more efficient. Meanwhile, he said, the cost of distribution is climbing.
Because of that, NerdWallet has decided to be more aggressive with its long-term bets, Chen said. He argued that the company's brand and distribution advantages grow as weaker brands struggle to reach consumers efficiently and AI lowers the cost of offering financial products. He added that the environment is getting harder for newer entrants and single-product companies, while NerdWallet's trusted brand positions it to use its consumer reach and distribution network.
SMB segment slips
NerdWallet sells both consumer and small business products. CFO John Lee said SMB revenue was $25 million, down 15% year over year. He attributed the drop mainly to organic search revenue declines in SMB products, partly offset by growth in loan originations.
The decline tied to the shifting organic search environment has been a recurring theme in recent quarters.
Source reporting: deBanked.
