Semrush - SEMR - SaaS Online Visibility Platform

Semrush is a highly differentiated platform that offers a lot of value for small and medium-sized businesses, enabling them to succeed at online marketing, managing their online brand, and actively innovate by spotting new trends and keeping ahead of the competition.

We look at Semrush, a proprietary differentiated Online Visibility/digital intelligence/marketing platform with hyper-growth and a long runway for growth


Disclaimer: The information provided is not financial, investment, tax or other advice. Nothing contained constitutes a solicitation, recommendation, endorsement or offer to buy or sell any securities or any other financial instruments. For more information read the disclaimer.

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Semrush - Online Visibility Management Platform

In this deep dive I will cover:

  1. What is Semrush’s Mission?
  2. What is happening in the Online Marketing industry?
  3. What are the limitations of current Online Visibility Management/Online Marketing solutions?
  4. What does Semrush do?
  5. What are Semrush’s Products?
  6. How does Semrush make money?
  7. What is Semrush’s customer value proposition?
  8. Who are Semrush’s Customers?
  9. What are some successful Customer Case Studies?
  10. How did Semrush evolve its platform and products in its current state?
  11. What is Semrush’s Market Opportunity?
  12. What is Semrush’s Growth Strategy to capture this market opportunity?
  13. What is Semrush’s Competitive Advantage and why is it a durable long-term investment?
  14. What are Semrush’s People and Culture like?
  15. What does Semrush’s Management and Board look like now?
  16. How are the executives being paid currently?
  17. What is Semrush’s current Insider Ownership for Executives and the Board?
  18. What do Semrush’s current Financials look like?
  19. What are my final thoughts on Semrush AKA TL;DR;?

What is Semrush’s Mission?

Semrush's mission is to make online marketing better.

I got this from glassdoor. I like the simple and powerful mission they have to help people succeed in online marketing. This mission will provide lots of room to develop a lot of products and services. The mission lacks inspiration.

What is happening in the Online Marketing industry?

Companies are continuing to rapidly increase their online presence. The COVID-19 pandemic has further accelerated this trend as traditional brick-and-mortar companies are forced to operate online to survive in the wake of government-mandated shut-downs and social distancing practices. For example, based on a survey by McKinsey & Company, globally, the percentage of consumer interactions that are digital increased to 58% in July 2020, up from 36% in December 2019. Meanwhile, companies that have historically relied on face-to-face interactions to promote and sell their products and services, such as business-to-business companies that host a range of events, presentations, and trade shows, have been required to transition online to continue driving demand. However, the significant increase in the availability of digital content, including social media, blogs, and videos, accelerated by social media and organic search, has further driven increased competition for consumers’ attention.

The awareness stage is the most critical part of the digital marketing process, as it introduces a company’s brand to consumers and educates them on its differentiation and value proposition. An initial positive company-consumer interaction improves the efficacy of the digital marketing process. Efficient consumer acquisition enables companies to scale and drive long-term return on investment (“ROI”) on their sales and marketing spending.

Companies utilize a number of digital strategies to drive online awareness, including the paid advertisement, social media, digital PR, owned media, and SEO. Investing in only a single strategy is not sufficient to maximize online visibility and may not yield meaningful ROI on digital investments. While paid advertisements are effective at driving immediate traffic to their website(s) they are costly and require routine updates with new content. Social media and digital PR are effective at driving sustained traffic and awareness over the long term but require a significant upfront time and costs to invest in relationships with social media influencers and journalists. Lastly, once a company’s site and keywords are ranked on search engines, such ranking is sustained for an extended period of time, driving long-term traffic; however, it takes significant time to create content and attain an advantageous rank in search engines across key categories. As a result, companies benefit from utilizing a comprehensive strategy that combines paid advertisements, social media, digital PR, owned media, and SEO to drive long-term ROI on their digital spending and maximize traffic to their website(s).

What are the limitations of current online visibility management solutions?

Companies lack the technology to aggregate and process broad and deep data sets

Companies collect data from online content through a broad range of individual channels and networks but struggle to aggregate and process the data, which makes it difficult to form a complete view of how efficiently their content drives traffic to their websites. Even if companies had the ability to generate their own internal data, they lack the competitive intelligence and perspectives on other websites to synthesize the data to derive analytics and insights.

Lack of comprehensive analytics and insights

Network-specific and point solutions are not able to provide comprehensive insights about a company’s online visibility, limiting a company’s ability to make a fulsome set of changes to drive more and higher quality traffic to their websites.

Large technology platforms do not provide unbiased, comprehensive insights

Some large technology platforms, including Google and Facebook, only provide insights into their own networks and are financially incentivized to prioritize their own paid channels. This significantly limits their ability to provide comprehensive insights and functionality for potential customers and underscores the need for an independent, unbiased online visibility solutions provider.

Limited third-party integrations

Third-party integrations are critical to providing incremental data and seamless end-to-end workflows, addressing top-of-funnel needs for marketing professionals. However, most existing solutions have limited integrations, significantly impacting their functionality and usefulness, requiring companies to spend time and money integrating several solutions themselves.

Not designed for a comprehensive view of online visibility

Many companies need to combine perspectives from multiple third-party vendors to form a holistic view of their online presence. This dynamic complicates the customer experience and may undermine a company’s ability to derive actionable insights as products from different vendors may not communicate with each other. It is critical for teams across an organization to work together to effectively manage a company’s online visibility, but managing multiple products makes collaboration more challenging.

Inefficiency

Subscribing to a patchwork of multiple point solutions for analytics and insights can be expensive and diminish returns on technology investments. This inefficiency results in increased costs due to the need to integrate multiple information technology (“IT”) systems and the manpower required to train and utilize multiple software platforms.

What does Semrush do?

Semrush enables companies globally to identify and reach the right audience for their content, in the right context, and through the right channels. Online visibility represents how effectively companies connect with consumers across a variety of digital channels, including search, social and digital media, digital public relations, and review websites. The evolving online landscape and information overload from online content have made it increasingly difficult for companies to understand and manage their online visibility. Semrush's proprietary software-as-a-service (“SaaS”) platform enables them to aggregate and enrich trillions of data points collected from over 200 million unique domains. Semrush enables their customers to understand trends and act upon unique insights to improve their online visibility, drive high-quality traffic to their websites and social media pages, as well as online listings, distribute highly targeted content to their customers and measure the effectiveness of their digital marketing campaigns.

Semrush generates substantially all of Semrush's revenue from monthly and annual subscriptions to Semrush's online visibility management platform under a SaaS model. Subscription revenue is recognized ratably over the contract term beginning on the date the product is made available to customers.

Since its inception, Semrush has managed its rapid growth with discipline and efficiency, having raised only $37 million of capital. Semrush has been led by Semrush's co-founders, Oleg Shchegolev and Dmitry Melnikov, since Semrush's inception 12 years ago.

As interactions between companies and their customers continue to shift online, managing a company’s online visibility has become critical. With over 4.9 billion internet users in the third quarter of 2020, according to Internet World Stats, and consumers worldwide spending an average of over six and a half hours per day online, according to GlobalWebIndex, digital channels are essential for customer engagement. While these digital channels have made it easier for companies to have an online presence, with so many different sources of media competing for customers’ attention, it has become increasingly difficult for companies to be discovered by, and engage with, their customers. Most companies do not have the technology or resources to effectively ingest, aggregate, process, and analyze the vast amount of fragmented data from these diverse sources at scale to derive actionable insights. Companies often attempt to address individual aspects of online visibility, such as search engine optimization (“SEO”), search engine marketing (“SEM”), content marketing, social media management (“SMM”), digital public relations (“PR”), and competitive intelligence, among others. Fully integrated solutions are more likely to drive long-term traffic improvement than siloed approaches, offering more comprehensive functionality and insights, and combining strategies across owned, earned, and paid media.

Semrush's fully integrated SaaS platform leverages Semrush's proprietary technology, differentiated data, and actionable insights to improve online visibility. Semrush utilizes machine learning capabilities to synthesize broad and deep data sets to derive actionable insights and analytics. Semrush's ability to aggregate, crawl, and process massive data sets, including search engine, website traffic, backlink, online advertising, panel, and social media data, combined with Semrush's ability to obtain data from Semrush's customers through APIs, enables Semrush's software to generate a comprehensive view of a company’s online visibility profile and identify the specific keywords, advertisements, third-party websites, and content that are driving traffic. Semrush also integrates with third-party solutions to create comprehensive end-to-end workflows across the entire marketing funnel. These workflows include analyzing trends, identifying potential opportunities to optimize visibility, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their marketing campaigns. As a result, they empower companies to improve their online visibility across key channels through a holistic strategy.

In a highly fragmented market with a myriad of network and channel-specific solutions, Semrush's differentiated and integrated platform provides comprehensive insights into a company’s online visibility. Some large technology platforms including Google and Facebook offer their own solutions but are incentivized to prioritize their own paid channels, lack independence, and do not operate across rival networks. Meanwhile, individual solutions targeted at addressing one or a subset of business problems, or point solutions, rely on limited, channel-specific data, providing only partial, incomplete perspectives. Semrush's technology collects, aggregates, and enriches a broad set of fragmented data across networks and channels, which we leverage to derive valuable and actionable insights that we provide Semrush's customers. As Semrush's data assets grow, Semrush's ability to provide insights improves, attracting more customers to Semrush and enabling us to invest in new and existing products, thereby further strengthening Semrush's competitive position. According to G2.com, Inc. (“G2”), Semrush is listed as a leader in the “all segments” category, comprised of reviewers from each of the small business, mid-market, and enterprise segments (as G2 defines such categories), across 15 product categories, including SEO, competitive intelligence, local marketing, content analytics, and social media analytics, which reinforces the strategic advantages of providing a comprehensive solution.

What are Semrush’s Products?

Semrush utilizes proprietary technology and machine learning capabilities to aggregate, cleanse, and analyze broad and deep datasets to derive differentiated insights and analytics for Semrush's customers to manage their online visibility. Semrush's unique set of data assets have been developed over the last 12 years as Semrush's network of customers has grown and includes over 200 million domains, 20 billion keywords, clickstream panel data from billions of events per week, over 33 trillion backlinks, over 17 billion URLs crawled per day on average, 310 million Google Display Network banner advertisements, 1 billion events analyzed per day, and a range of data aggregated from social media networks.

Semrush obtains data through a mix of proprietary and third-party data sources. Semrush's data sources include:

  • Data they collect from websites algorithmically through their proprietary data collection techniques, including web crawling of third-party websites;
  • Data purchased from independent third-party data providers, which includes clickstream data, search engine data, online advertising data, and data from social media sources; and
  • Reference data that customers grant them access to, which includes Semrush's customers’ website and social media data. Semrush obtains social media data through APIs that connect to social media platform operators, including Facebook, Twitter, Instagram, Pinterest, and LinkedIn.

Semrush integrates with a wide range of third-party solutions to seamlessly create comprehensive end-to-end workflows across the key components of a company’s online strategy. These workflows include analyzing trends, identifying potential opportunities, creating high-quality content efficiently, helping customers assess different marketing approaches, executing campaigns regularly, and measuring the effectiveness of their digital marketing campaigns. Semrush's intuitive, easy-to-use platform prioritizes customer experience and collaboration to empower companies to develop a holistic strategy for their online visibility across key channels.

Components of Semrush

Semrush's core set of features includes SEO, content, advertising research, social media, competitive research, local marketing, and reporting, in addition to Semrush's Prowly and Sellerly offerings.

SEO

Semrush's SEO tools are designed to enable Semrush's customers to optimize their online presence by analyzing what drives traffic to their page. Semrush's search engine positioning (“SEP”) capabilities enable Semrush's customers to analyze competitors in search positions, improve and expand backlinks, conduct technical audits to improve website performance, and track daily rankings, which together collectively offer a highly functional workflow. Following are the SEO tools available in Semrush:

  • Backlink analytics - Provides a set of metrics to help monitor the backlinks of a website allowing companies to stay up-to-date with inbound links. Improves online visibility because links from relevant, authoritative third-party websites that link to a company’s website can drive better organic search rankings.
  • Backlink audit tool - Universal tool that enables companies to check whether malicious websites have links to their sites, and remove or disavow these links. Provides a list of potentially harmful backlinks that can be removed directly in the tool.
  • Backlink gap - Allows comparison of competitor domains, subdomains, and URLs to easily identify and analyze the strongest backlink profile.
  • Bulk analysis - Provides information on how many referring domains and backlinks each URL has and prospect link-building opportunities.
  • Domain overview - A set of comprehensive reports that provide an overview of any domain’s visibility and performance through key metrics, such as organic and paid traffic, backlinks, and display ads.
  • Keyword gap - Finds and compares the keyword profiles of up to five domains, enabling companies to identify competitors’ strong and weak points.
  • Keyword magic tool - Provides ideas to help customers build a keyword master list utilizing one of the largest keyword databases with over 18 billion keywords.
  • Keyword overview - Provides a snapshot of a particular keyword’s value through key metrics, such as volume, keyword difficulty, and competition in paid search, allowing companies to evaluate the prospects of a keyword and how it impacts to traffic.
  • Link building tool - Provides a tool that enables companies to discover new opportunities for acquiring links, managing links, obtaining contact information on target websites, and monitoring progress.
  • Logfile analyzer - Analyzes log files and identifies the time and the number of hits made by search engines’ web crawler software to help understand how bots crawl a website.
  • On-page SEO checker - Suggests ideas to improve a website’s ranking, including ideas on how to improve content and customer experience by leveraging data from different sSemrush'sces and comparing websites with their top real-time organic competitors for each target keyword.
  • Organic traffic insights - Identifies which keywords drive traffic and conversions to help enhance SEO strategies and optimize future marketing campaigns.
  • Position tracking - A universal keyword rank monitoring tool to check ranking fluctuations over a period of time, compare to the competition and discover new opportunities to appear in search engines’ top results.
  • Ranks - A proprietary score that finds the domains that are getting the most traffic from organic search in order to compare the online performance of different websites, their keywords, and traffic costs for the purpose of competitive analysis, prospecting, or research.
  • Sensor - Detects search engine ranking updates caused by a variety of factors, such as technical issues on the website, website restructuring, content revision, or updates to the ranking algorithms themselves.
  • Site audit - Performs a comprehensive technical audit to find, prioritize, and address on-site issues, including website performance to improve search rankings.

Content

Semrush's content tools help companies find ideas for new content, build a content strategy plan, ensure content is SEO friendly, analyze mentions, and audit content in order to drive marketing impact. Following are the Content tools available in Semrush:

  • Brand monitoring - Tracks brand mentions online, checks the estimated reach, analyzes mention sentiment, tracks referral traffic, and evaluates PR effectiveness in order to assess overall brand reputation, identify weak spots, and find new partnership opportunities.
  • Content audit - Analyzes content assets of a website under custom criteria and personalizes content audits based on real-time metrics from Semrush, Google Analytics, and Google Search Console in order to discover which articles require updates.
  • Marketing calendar - Calendar tool that allows customers to manage marketing campaigns with the ability to track campaign performance.
  • Marketplace - Writing service offering professionally written content for a company’s blog or website.
  • Post tracking - Measures the performance of articles published on external resSemrush'sces by tracking social engagement metrics, backlink count, referral traffic, and daily keyword rankings.
  • SEO content template - Generates a template focused on target keywords with custom SEO recommendations to increase search engine rankings and improve organic traffic.
  • SEO writing assistant - Content optimization tool that takes into account various parameters to meet the needs of specific audiences, provide actionable SEO recommendations, and check for plagiarism, readability, and writing tone. Integrates directly with WordPress and Google Docs.
  • Topic research - Simplifies the ideation process and helps to create a competitive content plan by finding engaging content ideas based on an audience’s needs.

Advertising Research

Semrush's advertising tools plan advertising campaigns, provide insights for search, display, and shopping campaigns, collect keywords, and reveal competitors' search ads and strategies. Following are the Advertising tools available in Semrush:

  • Search advertising research - Helps uncover information regarding competitors’ search ads, evaluate competitor Pay Per Click (“PPC”) spend and strategy, in addition to helping companies plan their own PPC campaigns.
  • Display advertising - Enhances Google Display Networks campaigns by monitoring competitors’ display ads. Allows analysis of competitors’ advertisement texts and banners, locating where they are advertising and what audiences they are targeting.
  • Shopping ads research - This allows for the exploration of the competitive landscape for product listing ads and analyzing competitors’ product feeds.
  • PPC keyword tool - Helps gather keywords by importing keywords from different file types, finding related keywords, removing keyword duplicates, and merging keywords to build new combinations.

Social Media

Semrush's social media tools enable customers to plan, prepare, and schedule posts, find content to share with their audience, discover fans and influencers, and monitor competitors in order to build an effective social media strategy. Following are the Social Media tools available in Semrush:

  • Tracker - Identifies how often competitors are publishing content, changes to their follower count, and which posts and hashtags are driving the most engagement.
  • Poster - Allows for scheduling and posting to multiple accounts, including those on Facebook, Twitter, Instagram, Pinterest, LinkedIn, and Google My Business.
  • Manage Facebook ads - Allows for creation, launch, and management of ads on placements across Facebook brands, including Facebook, Instagram, Facebook Messenger, and the Facebook Audience Network.

Competitive Research

Semrush's competitive research tools provide market insights and an overview of competitors’ strategies. Following are the Competitive Research tools available in Semrush:

  • Market explorer - Reveals key competitors in an industry, analyzes a new market or niche, and obtains in-market audience insights by entering a website domain.
  • Competitive Intelligence - Allows for the discovery of competitors’, prospects’, and potential partners’ website traffic to analyze website performance, set benchmarks, and obtain marketing insights.
  • Organic research - Conducts deep analysis to find the most relevant keywords for a market. Provides the ability to analyze website rankings, explore competitors, and check keywords that drive traffic.

Local Marketing

Design geography-specific marketing strategies with the ability to track keywords, website rankings, and PPC on a localized basis. Following are the Local Marketing tools available in Semrush:

  • Google Maps Tracking - Tracks up to 5 keywords on a local level, with website rankings displayed visually in a map output around a specific target area.
  • Listing management - Provides accurate information about how a customer’s website performs on a local level with local map tracking, review monitoring, and features that enable customers to reply to reviews.

Reporting

Semrush's reporting tools create elegant SEO and customizable marketing reports with appealing visuals to help Semrush's customers monitor metrics and visualize data. Following are the Reporting tools available in Semrush:

  • Google data studio connectors - Adds Semrush's data into Google Data Studio to create dashboards and reports with visualized data.
  • My reports - Ready-to-use templates or custom templates that report on over 50 marketing metrics.

Prowly

Semrush's recent acquisition of Prowly provides purpose-built tools designed to help PR professionals find and manage media contacts, create and publish press releases. Following are the SEO tools available in Prowly:

  • Media Influencers - Database of approximately 1 million media contacts with the ability to create targeted communication.
  • Customer Relationship Management (“CRM”) System - Allows tracking, management, and easy access to communications history utilizing CRM software built for PR.
  • Email Outreach - Send personalized emails at scale to media recipients with reliable delivery and customized design.
  • Newsroom - Online newsroom software used to create custom layouts of a company’s newsroom website. For PR agencies, the ability to manage multiple clients’ newsrooms.

Sellerly

Toolbox for maintaining and growing Amazon seller businesses. Monitors listings, analytics on webpage traffic, and audit tools designed to help increase sales. Following are the SEO tools available in Sellerly:

  • Listing Protection - Alert system for sellers that helps companies quickly respond to unwanted listing changes and traffic loss. Tracks keyword positions, buy boxes, listing suppression, and prices.
  • Amazon Traffic Insights - An analytics tool that compares and evaluates Amazon listings’ traffic channels to help determine promotional strategies.
  • Listing Quality Check - Audit tool that checks listings for incompleteness, Amazon guidelines fit, and content errors, and provides recommendations for listing optimization.
  • Amazon Split Testing - Split-testing tool for Amazon listings that manages product pages and delivers insights with real-time statistics on views and conversions

How does Semrush make money?

Semrush offers its paid products and tools to customers via monthly or annual subscription plans, as well as one-time and ongoing add-ons. Semrush's subscription-based model enables customers to select a plan based on their needs and license Semrush on a per month basis. Semrush currently has three paid subscription tiers for Semrush's core product, Pro, Guru, and Business, as well as several add-ons for an incremental cost. Semrush offers time-limited free trials, which allow prospective customers to test the functionality of Semrush's Pro or Guru plans for a limited period of time. At the end of the trial period, prospective customers either become paying customers or are switched to free customers.

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Free - Semrush's free offering grants access to Semrush and limits the number of results, keywords to track, and projects. Free accounts help generate demand for Semrush's paid offerings as active free customers experience the capabilities and functionality of Semrush and are prompted to upgrade to a paid membership when they reach free customer usage limits.

Pro - Pro provides access to Semrush and ongoing software updates. With Pro, customers have the ability to run their SEO, PPC, and SMM projects with over 50 advanced tools and features.

Guru - Guru provides the same features as Pro, with the addition of Content Marketing Platform, historical data, extended limits, and Google Data Studio Integration.

Business - Business provides all of the same features as Guru, plus white label reports, API access, extended limits and sharing options, and share of voice metric.

Semrush has a demonstrated track record of upgrading customers to higher price point plans. Customers upgrade to higher price point plans to increase usage limits and add features, including content marketing tools and historical data tracking. Within Semrush's subscription tiers, customers have the ability to purchase increased usage limits by adding the ability to create additional projects, keywords to track, and user licenses without moving to a higher price point plan. Semrush's dynamic pricing model enables Semrush's customers to tailor a plan that is suitable for their strategic needs and affords us the ability to expand within Semrush's customer base as customers seek additional functionality from Semrush. Paying customers who discontinue their subscriptions have the option to return as paying customers at a future time, continue to use Semrush's products and tools that are available to free customers or discontinue using Semrush's products and tools entirely.

Key Factors Affecting Semrush's Performance

Acquiring New Paying Customers

Semrush expects to convert a lot of their free users to paid users and keep adding new users to their platform. We can track progress here by looking at the number of paying customers and the ARR.

As of December 31, 2019, and 2020, Semrush had more than 54,000 paying customers and 67,000 paying customers, respectively, accounting for $102.6 million and $144.2 million in ARR, respectively.

Retaining and Expanding Sales to Semrush's Existing Customers

Semrush expects to have high customer retention and expand the usage of their platform with their current customers by cross-selling and up-selling more products to their customers. For this, we can keep track of their Dollar based net retention ratio and average ARR per customer.

Semrush believes there is a significant opportunity to expand within Semrush's existing customer base as customers often initially purchase Semrush's entry-level subscription, which offers lower usage limits and limited user licenses, as well as fewer features. Semrush has demonstrated the ability to expand contract values with Semrush's existing customers as they use Semrush's products and recognize the critical nature of Semrush and often seek premium offerings through incremental usage, features, add-ons, and additional user licenses.

Semrush's dollar-based net revenue retention rate for the years ended December 31, 2019, and 2020 was approximately 120% and 114%, respectively.

Semrush's ARR per paying customer as of December 31, 2019, and 2020 was $1,892 and $2,123, respectively.

What is Semrush’s customer value proposition?

The key benefits of Semrush’s solution include:

  • Robust, proprietary technology platform - Semrush developed Semrush's technology platform over the last 12 years, leveraging machine learning to aggregate, cleanse, and analyze an immense amount of proprietary and third-party unstructured data. Semrush's data assets include over 200 million domains, 20 billion keywords, click stream panel data from billions of events per week, over 33 trillion backlinks, over 17 billion URLs crawled per day on average, 310 million Google Display Network banner advertisements, over 1 billion events analyzed per day, and a range of data aggregated from social media networks, all of which scale continuously as customers use Semrush.
  • All-in-one SaaS solution to provide comprehensive online visibility - Semrush's software products cover key aspects of online visibility, including SEO, SEM, content, advertising, competitive research, SMM, and digital PR. Semrush's comprehensive solution is built with differentiated insights into traffic sources for specific sites, analysis of drivers of traffic to a company’s and its competitors’ websites, the keywords that are driving this traffic, and the effectiveness of a company’s content marketing strategy.
  • End-to-end workflows with third-party integrations - Semrush maintains a range of seamless third-party integrations for data, workflow, and reporting capabilities, enabling Semrush's customers to manage every critical step in optimizing their online visibility. Notable integrations include Google Analytics, YouTube, Facebook, Twitter, Domo, Yext, and Microsoft Outlook.
  • Intuitive, easy-to-use platform - Semrush's SaaS platform prioritizes the customer experience and promotes collaboration across functional teams. Semrush has developed easy-to-use dashboards, report builders, project sharing, and task management capabilities that streamline the analytics process for Semrush's customers through an intuitive and modern customer experience while enabling intra-company teams to work together seamlessly to manage a company’s online visibility.
  • Strong value proposition - Semrush's comprehensive product suite delivers differentiated insights through a singular platform that enables companies to efficiently manage online visibility, reduce traffic acquisition costs, promote consumer engagement, minimize the cost associated with managing multiple third-party vendors, and acquire new customers.

Who are Semrush’s Customers?

Semrush serves a range of customers from SMBs to enterprises and marketing agencies, across a wide variety of verticals, including consumer internet, digital media, education, financial services, healthcare, retail, software, and telecommunications, among others. As of December 31, 2020, they had over 67,000 paying customers and over 404,312 active free customers on their platform across over 142 countries.

Customer Concentration

No single customer accounted for more than 1% of their revenue in 2020(so no customer concentration).

What are some successful Customer Case Studies?

TransferWise

TransferWise is a peer-to-peer money transfer service founded in 2011 that allows customers to easily manage multi-currency accounts and send money across international borders in over 50 different currencies. TransferWise needed to minimize customer acquisition costs and ensure that each marketing campaign produced a positive ROI. Prior to using Semrush, TransferWise did not have a SEO team or SEO strategy to help acquire and foster non-brand organic traffic.

Semrush solution

TransferWise turned to Semrush to better understand how to drive increased organic traffic, what their competitors were doing, make better content, and understand what products could be built for their customers. TransferWise’s marketing team leveraged the Keyword magic tool and the SEO content template tool to define the best topics and article structures to create content briefs for the copywriting team to turn into effective content for increasing organic website traffic.

Key benefits

After implementing Semrush, TransferWise quadrupled the amount of content produced in less than one year, creating over 200 articles of impactful, relevant content in over five languages per quarter. TransferWise increased organic search traffic from nearly zero to over 1,000,000 search results in less than 24 months, and increased to over 19 million search results, according to the latest traffic estimates. Furthermore, TransferWise boosted organic traffic by 1,000% in less than 12 months while maintaining customer acquisition cost targets.

Monash University

Monash University is Australia’s largest university, with vast study options and extensive research output. The University’s web presence is an equally large ecosystem, with more than 65,000 pages across hundreds of sites, subsites, and subdomains, governed by a distributed website model.

Before Semrush, Monash outsSemrush'sced their SEO to a third-party, which caused the University to have limited visibility into search results and no control in driving organic traffic to the subsites of individual faculties.

After exploring product solutions available in the market, Monash chose Semrush to help build out its digital marketing capabilities. Starting with Semrush's Competitive Research tools, Monash uncovered that the top-level domain of the University was not ranking highly on search engine results pages when compared to other competing universities.

Monash ran a technical audit with the Site audit tool. They identified the need to implement HTTPS webpages in addition to fixing redirect chains and loops, multiple URLs, missing canonicals, alt tags, and broken links. Addressing these problems resulted in a positive user experience, better crawlability of the University’s pages, improved search rankings, and reduced bounce rate.

Additionally, Monash utilized keyword research to identify content gaps and create effective website content.

Key benefits

Using Semrush, Monash was able to double organic traffic growth on their main domain from 460,000 unique visits to over 1,000,000 — an increase of 117% in less than 12 months.

Based on the initial success of integrating Semrush, Monash then deployed Semrush to the rest of the University, resulting in more than 100 employees engaged across 30 new projects to drive complementary and effective content marketing across the University.

Adactive

Adactive is a leading digital marketing agency providing data-driven tools for digital promotion and advanced reporting for customers globally across a broad range of industries. Before Semrush, Adactive relied on several point solutions to track keywords and meet their customers' digital marketing needs, including content production, traffic generation, and brand awareness.

Adactive chose Semrush to replace various digital marketing point solutions and provide a comprehensive digital marketing toolkit to customers. Adactive leveraged Semrush's Competitive Research, Backlink analytics, and Content tools to uncover and suggest new subjects for its client's content and change their keyword strategy. Semrush's Competitive Research tools allowed Adactive to introduce salary comparison tables in the same way competitors were, which helped boost traffic and rankings positions relative to their peers.

Key benefits

With Semrush, Adactive was better able to serve the digital marketing needs of their diverse customer base. Semrush has enabled Adactive to grow the online registrations of a leading supermarket chain's loyalty club at a rate of more than 1,000 new members per month compared to several dozen before using Semrush. For a government organization, Adactive was able to grow organic traffic by 73%, page results by 50%, and ranking positions by 100% in less than a year. Using Semrush's tools, Adactive has the ability to enhance the speed and quality of their marketing services to customers.

Smileworks

Smileworks is a dental practice in Liverpool, England that provides dental and medical aesthetics to patients. Before Semrush, Smileworks relied on outbound marketing tools that required considerable investment and did not drive returning clients. Smileworks’ website was not optimized to rank highly in search engine results relative to competitors and did not offer the content necessary to convert website visitors into customers.

Smileworks turned to Semrush’s site audit and competitive research tools. Smileworks identified keywords they wished to rank, worked with the insights tool to increase listings, conducted a site audit to work with the domain authority, and used Semrush's content marketing tools, such as topic research, to fill the gaps in its content strategy and make its website more efficient.

Key benefits

Within ten months after starting to use Semrush, Smileworks saw a 4,773% increase in organic traffic to its website. Smileworks was able to obtain the number one position for over 380 keywords locally. In less than five quarters, Smileworks has grown its practice from a margin of (5%) to 38%, with an increase in top line revenue of 100%, enabling it to pay down its debt, minimize reliance on agencies, and cut advertising spend by 90%.

Oneupweb

Oneupweb is a Michigan-based full-service digital marketing agency. The company began as one of the pioneers of SEO and has been in the industry for 20 years. Before Semrush, Oneupweb struggled with finding a reliable keyword research tool. Using existing free solutions involved a cumbersome process and yielded inaccurate results. Oneupweb also lacked a seamless workflow as everyday tasks were divided between a number of free and paid tools for research, tracking, technical SEO audits, and reporting.

After implementing Semrush, Oneupweb replaced several legacy tools for keyword research and site auditing. Semrush's Keyword gap tool helped them streamline the keyword research process and quickly map out a plan for filling content gaps. Using the Keyword gap tool together with the Keyword magic tool improved the success of Oneupweb’s proprietary content calendar platform. In addition, Oneupweb uses Semrush products in its sales process, as demonstrated to a prospective client how they compare to their competition in the Keyword gap tool acts as a strong motivator to prospective clients to start working with Oneupweb.

Key benefits

With Semrush, Oneupweb was able to increase the number of clients with SEO/Content marketing retainers by 108%, developed three new revenue-generating SEO products, and achieved a 185% increase in revenue from its content calendar platform.

Arkadium

Arkadium is a creator of premium gaming content. Arkadium’s games deliver hundreds of millions of gameplays annually from its own site as well as the websites of the world’s biggest publishers and brands, including USA Today, the Los Angeles Times, the Washington Post, and MSN. In a crowded online landscape, Arkadium’s key challenge was competing for online visibility against hundreds of online games.

In 2018, Arkadium chose Semrush as a comprehensive solution to support its online visibility strategy. Arkadium leveraged the site audit tool to understand the technical updates required for reducing 404 errors and implementing redirects. Arkadium used keyword research to uncover the size of the search market, which was then used as a proxy to understand potential customer demand for games types and categories. Based on the success of site audit and keyword research, Arkadium expanded their usage of Semrush products, including domain analytics, to better understand competitors, and position tracking, to better understand search engine results.

Key benefits

Using Semrush’s suite of online visibility products, Arkadium was able to scale traffic efficiently and quickly, driving an 850% increase in organic traffic since 2018 and a 361% increase in Mobile and Tablet traffic since 2018. Semrush also helped redefine Arkadium’s game development process, by providing data on monthly search volumes for potential game types, developers can understand potential customer demand and build games accordingly

How did Semrush evolve its platform and products in its current state?

Semrush was founded in 2008 by Oleg Shchegolev and Dmitry Melnikov, and after that, they have achieved a number of significant milestones, including:

  • 2010: Surpassed 1,000 customers;
  • 2012: Started expansion into SEO software, launched Position Tracking, and opened Semrush's first U.S. office near Philadelphia, Pennsylvania;
  • 2014: Continued expansion of SEO capabilities with Site Audit tool;
  • 2015: Surpassed 10,000 customers and launched Social Media tools;
  • 2016: Launched Content Marketing and Digital PR tools;
  • 2017: Completed Semrush's first round of financing led by entities affiliated with Siguler Guff & Company and introduced collaboration features, including the ability to add users and share projects and received U.S. and UK search awards for the “Best SEO Software Suite”;
  • 2018: Completed another financing led by Greycroft and e.ventures, relocated headquarters to Boston, Massachusetts, and opened an office in Dallas, Texas, surpassed $50 million in ARR, and launched Semrush's first add-on offering, Local Listings;
  • 2019: Surpassed 50,000 customers and $100 million in ARR, and launched Semrush's second add-on offering, Competitive Intelligence; and
  • 2020: Launched Sellerly, a new product for Amazon Marketing, acquired Prowly, and received multiple awards, including “Best SEO Software Suite” and “Best Search Software Tool” according to the European Search Awards, and Semrush's headcount grew to more than 900 employees globally.

What is Semrush’s Market Opportunity?

Based on Semrush’s current average customer spending levels, the annual global potential market opportunity for online visibility management SaaS platform is currently $13 billion. This was calculated based on the number of small and medium-sized companies (those with less than 500 employees) and large companies (those with 500 or more employees) in the United States, based on information published by the U.S. Census Bureau. Approximately 94.9% of Semrush’s customers are in the small and medium-sized category and in such category customers had an ARR per paying customer of $2,000 as of December 31, 2020, and large enterprise customers had an ARR per paying customer of $4,200 as of December 31, 2020.

They then multiplied the total number of companies in each segment by the average revenue per customer for each segment. They calculate the average revenue per customer for each segment using internal data based on actual customer spending.

They assume 50% online penetration in the small company segment (those with less than 20 employees) and 100% penetration in the medium-sized (those with between 20 and 499 employees) and large company segments.

What is Semrush’s Growth Strategy to capture this market opportunity?

  • Acquire new paying customers - Semrush will continue to target new customers who have not yet adopted online visibility management solutions and those who are currently using their free offering. Their sales model for new customers is highly efficient due to low-friction, self-service onboarding capabilities that allow them to acquire new customers with relatively low sales investment. Additionally, they focus on the conversion of free customers to paying customers.
  • Expand the use of Semrush by Semrush's existing paying customer base - Their substantial base of over 67,000 paying customers as of December 31, 2020, presents a significant opportunity to increase monetization. They expect to continue to grow their revenue from existing customers as they seek to add premium features and additional user licenses, as reflected by their dollar-based net revenue retention rate of 120% and 114% during the years ended December 31, 2019, and 2020, respectively.
  • Continue to innovate and develop new products and features - Semrush will continue to invest in research and development to enhance their platform and release new products and features while bolstering one of the largest independent data sets for online visibility. The release of new products, tools, add-ons, and features has enabled them to drive higher monetization over time as they have increased ARR per paying customer from $1,892 as of December 31, 2019, to $2,123 as of December 31, 2020.
  • Pursue opportunistic M&A - Semrush expects to continue to allocate resources to identify, evaluate, and execute strategic acquisitions. For example, they acquired Prowly.com sp. z o. o. (“Prowly”) in August 2020 to expand their technological capabilities and solutions offerings. Prowly significantly accelerated product expansion into the digital PR software space and added fSemrush's new product categories, as defined by G2, to their product portfolio.

What is Semrush’s Competitive Advantage and why is it a durable long-term investment?

Semrush has built a differentiated easy to use platform that provides awesome insights to their customers. They provide a high ROI and save a lot of time for content creation and marketing. They are starting to build their marketplace(developer platform) and have a full suite of integrations. Their main competitive advantage currently is their proprietary technology and their deeply entrenched founders who have figured out hard problems by working on them for decades. In the future, they will be able to develop high switching costs and economies of scale as they increase their revenue per customer by cross-selling and adding more customers to their platform.

What are Semrush’s People and Culture like?

From glassdoor I can see that Oleg is running Semrush in a way that his employees love working there and are highly supportive, referring people to Semrush as a workplace.

What does Semrush Management and Board look like now?

Oleg Shchegolev has served as Semrush's Chief Executive Officer, President, and a member of Semrush's board of directors since October 2012. Mr. Shchegolev received his Masters of Science in Computer Science from St. Petersburg State Polytechnic University. He is the co-founder of Semrush.

Dmitry Melnikov has served as Semrush's Chief Operating Officer and a member of Semrush's board of directors since October 2012. Mr. Melnikov received his Masters of Science in Radio Engineering from St. Petersburg Electrotechnical University. He is the co-founder of Semrush.

Vitalii Obishchenko has served as Semrush's Chief Product Officer since May 2015. Prior to that, he served as one of Semrush's Product Owners from July 2013 to May 2015 and as a Developer from September 2008 to June 2013.

Delbert Humenik has served as Semrush's Chief Revenue Officer since August 2017. Mr. Humenik previously served as the Chief Revenue Officer at Dex Media, Inc. (NASDAQ: DXM) from November 2010 to December 2015 and has also served as an Executive Vice President, Chief Operating Officer, and General Manager of Sales of Dex Media, Inc. Prior to that Mr. Humenik was the Senior Vice President, Sales and Marketing of Paychex (NASDAQ: PAYX), and the Vice President of Sales at VIS, a division of Verizon (NYSE: VZ).

Eugene Levin has served as Semrush's Chief Strategy and Corporate Development Officer since March 2016. Mr. Levin served as an Investment Director of Target Global from March 2016 to March 2017 and prior to that as a Partner from November 2014 to March 2016. Prior to that, he served as the Co-Founder and Head of Marketing at AggroStudios from September 2013 to November 2014. Mr. Levin also served as a Partner of Foresight Ventures and as a Senior Systems Analyst at Cloudmach Inc. Mr. Levin received his Master’s Degree in Information Technology from Saint Petersburg State Polytechnical University.

Evgeny Fetisov has served as Semrush's Chief Financial Officer since July 2019. Mr. Fetisov previously served as the Chief Financial Officer of Luxoft (NYSE: LXFT) from May 2017 to May 2019, and prior to that, he served as the Chief Financial Officer of the Moscow Exchange (MOEX: MOEX) from February 2013 to March 2017. Prior to that, Mr. Fetisov was a member of the board of directors of B2B-Center and RTS Stock Exchange, and a Managing Director and Partner at Da Vinci Capital.

Jeffrey Belanger has served as Semrush's Chief Human ResSemrush'sces Officer since July 2020. Mr. Belanger previously served as a human resSemrush'sces executive at Buildium (acquired by RealPage Inc. in December 2019, NASDAQ: RP) from September 2018 to May 2020, and prior to that served as a human resSemrush'sces executive at Pandora Media (acquired by Sirius XM Holdings Inc. in 2018, NASDAQ: SIRI) from October 2015 to September 2018. Prior to that, Mr. Belanger served in various human resSemrush'sces related roles at IPG Mediabrands, Organic, and Kenexa (acquired by IBM in August 2012, NYSE: IBM).

Mark Vranesh has served as a member of Semrush's board of directors since December 2019 and as an advisor from November 2017 to December 2019. Mr. Vranesh previously served as the Interim Chief Financial Officer for TuneIn, Inc. from January 2020 to July 2020, as the Chief Financial Officer of App Annie Inc. from August 2015 to April 2017, and prior to that served as Chief Financial Officer of Zynga, Inc. (NASDAQ: ZNGA) from May 2008 to August 2010.

Dylan Pearce has served as a member of Semrush's board of directors since 2018. Mr. Pearce currently serves as a Partner at Greycroft Partners, which he joined in 2014.

Roman Simonov has served as a member of Semrush's board of directors since 2017. Mr. Simonov currently serves as a Managing Director at Siguler Guff & Company, LP (“SigulerGuff”), where he is responsible for investments, particularly cross-border transactions, in the Technology, Media, and Telecommunications (TMT) sector across all stages. Prior to joining SigulerGuff in 2010, Mr. Simonov was a Managing Director at Delta Private Equity Partners from 2007 to 2009.

Trynka Shineman Blake has served as a member of Semrush's board of directors since November 2020. Ms. Blake currently serves as a member of the board of directors of TripAdvisor, Inc. (NASDAQ: TRIP), a position she has held since March 2019. In addition, Ms. Blake has served on the board of directors of Ally Financial (NYSE: ALLY) since August 2018. Ms. Blake has also been a member of the board of trustees of the Mass Technology Leadership Council since June 2018. Previously, Ms. Blake was the CEO of Vistaprint, a global e-commerce company, from February 2017 to February 2019, and served as the President of Vistaprint from July 2014 to January 2017.

How are the executives being paid currently?

The compensation and the equity awards currently granted to the executive team seem reasonable. I don't really like the cheap options, but since they were given before they went public I will give them a pass on this one.

What is Semrush’s current Insider Ownership for Executives and the Board?

Semrush has insider ownership of 70% of which the founder Oleg owns 40%. Talking about skin in the game, I feel like Oleg will be extremely aligned with the shareholders. 57 million shares at a price of 24$ per share put him at $1.3B.

What do Semrush’s current Financials look like?

Following is the income statement for June 2021.

Following is the balance sheet for June 2021.

Following is the cash flow statement for June 2021.

  • Revenue - $345M Q2 2021
  • Revenue Growth - 60% Q2 2021
  • ARR - $188M Q2 2021 at 57% growth
  • Gross Margin - 77% Q2 2021
  • Earnings Margin - nearly 0% Q2 2021, breaking even, nice to see.
  • Total Debt/Equity - 0.41 Q2 2021, really awesome balance sheet
  • Net Cash - $180M Q2 2021
  • EV - $2.97B (Assuming $3.09B market cap, $0.062B total debt and $0.18B cash)
  • EV/ARR - 15.8x for Q2 2021
  • Dollar Based Net Retention Ratio - 114% for 2020

The above image is very important, only a few businesses share this and I love it when they share it. This gives us an insight into how the management wants to structure their business for the long term. Their long-term target for 80% gross margins makes sense for SaaS businesses, pretty common IMHO. What I like is that they are targeting 20% operating income, which means that 20% of the revenues will be plowed back into the business for long-term sustainability and growth.

What are my final thoughts on Semrush AKA TL;DR;?

Semrush is a highly differentiated platform that offers a lot of value for small and medium-sized businesses, enabling them to succeed at online marketing, managing their online brand, and actively innovate by spotting new trends and keeping ahead of the competition. Their technology stack built over a decade with a lot of integrations provides real-time intelligence and quite honestly is difficult to build. They have been successful at converting their free users to paying users, have very high retention, and are successful at expanding the products they offer to their customers. All this coupled with a massive market opportunity, hyper-growth and a founder-led team with extremely high insider ownership tell me that they are bound to find success.


We are at the end of the deep dive. By now you should have a good understanding of Semrush’s Mission, Industry, Current Trends, Semrush’s History, Products, and services, How they make money, Market Opportunity, and everything that Semrush is doing to achieve durable long-term growth.

If you love this article and my work, I urge you to subscribe and share.

Modern Growth Investing
SaaS, Tech Hyper & High Growth Investing in High-Quality Compounding Businesses with a Sustainable Moat.

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