Semrush IPO: S-1 Data, Product Overview & Competitive Landscape

by Bruce Hogan - May 21, 2021

On March 1, 2021, Semrush filed its registration statement for a proposed initial public offering (IPO). Below, we break down the S-1, Semrush's product, and the competitive landscape in the online marketing software industry.

Table of Contents

Semrush IPO: Key S-1 Data & Analysis

In the S-1 filed for the Semrush IPO, Semrush refers to itself as an online visibility management SaaS platform. This reflects the company's continued expansion away from its online search marketing core. While the platform does offer solutions for business listing management, content development, and social media marketing, its customers still purchase a subscription primarily for its search marketing capabilities.

Key data points included in the S-1 are:

  • Semrush currently has over $144 million of annual recurring revenue
  • Semrush had over a 50% compound annual growth rate between December 31, 2006 and December 31, 2020
  • In 2020, Semrush had a 114% dollar-based net revenue retention rate
  • Semrush had a 76% gross margin in 2020
  • Semrush had over 67,000 paying customers as of December 31, 2020, 24% year-over-year growth
  • Semrush has an ARR per paying customer as of December 31, 2019 and 2020 of $1,892 and $2,123, respectively
  • Semrush had over 404,000 users as of December 31, 2020, 21% year-over-year growth
  • The Semrush platform includes over 50 tools
  • Semrush has raised $37 million in capital

Semrush revenue grew from $92.1 million in 2019 to $124.9 million in 2020. The company's gross margin grew from 75.5% in 2019 to 76.0% in 2020. The company had a net loss of $7 million in 2020.

Semrush S-1 financial data

The company's results of operations shows that it spent 44% of revenue on sales and marketing in 2020, slightly down from 45% of revenue in 2019. Semrush spent 23% of 2020 revenue on G&A and 14% on R&D.

Semrush S-1 results of operations

The S-1 also shares information about Semrush's pricing, which is also available on its website. "Our subscription model enables our paying customers to choose among tiered plans for a majority of our products to meet their specific needs. Our multi-price point pricing for our core product ranges between $100 and $400 per month or $1,000 to $4,000 per year for customers who purchased our core product prior to January 4, 2021 and do not let their subscriptions lapse, and between $119.95 and $449.95 per month or $1,199 to $4,499 per year for new customers as of January 4, 2021, with each price point providing an incremental level of access to our products and usage limits."

SEMrush Pricing

Finally, Semrush provided a timeline of its significant milestones in its S-1:

  • 2010: Surpassed 1,000 customers
  • 2012: Started expansion into SEO software, launched Position Tracking, and opened our 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 our 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 our first add-on offering, Local Listings;
  • 2019: Surpassed 50,000 customers and $100 million in ARR, and launched our second add-on offering, Competitive Intelligence
  • 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 our headcount grew to more than 900 employees globally

Understanding the Semrush Product

Semrush is an all-in-one online marketing platform with over 50 tools that is used by marketers at businesses of all sizes. Its cloud-based tools support SEO, content marketing, market research, paid advertising, social media marketing, and other marketing activities.

Semrush's most popular tools are used for keyword research, competitive research, and keyword rank tracking. While almost all of Semrush's tools are strong, these are the specific areas where it is best-in-class. Its primary competitive advantage is its massive database of over 20 billion keywords.

The majority of its tools fall into one of nine categories:

  • Keyword Research
  • Competitive Research
  • Keyword Rank Tracking
  • Backlink Analysis
  • SEO Site Audits
  • Content Research
  • Traffic Analytics
  • Listing Management
  • Social Media Management

Below are images of the Semrush product for two common use cases. The first image is Semrush's Keyword Magic tool. This is one of several keyword research solutions included in the platform. Search marketers use this tool to identify promising keywords to target with organic and paid search campaigns.

Semrush Keyword Research

Semrush is also used for competitive research. The data available on its platform make it possible for a business to quickly identify online competitors. Marketers use this knowledge, and associated information, to manage their marketing strategies and capture more Internet traffic.

Semrush Competitive Analysis

The Semrush platform provides granular data about competitors. For example, a business can use the platform to see the search ads that its competitors are using in paid search campaigns.

Semrush Advertising Research

The Semrush Competitive Landscape

Semrush is one of the world's most popular software tools used by online marketers. From a channel-by-channel perspective, it is most dominant in organic and paid search. Semrush does provide solutions for other major marketing channels including business listing management, digital PR, and social media. Notably, it does not include solutions for CRM and email marketing.

Semrush competes with numerous online marketing solutions. The software and data tools that compete most directly with Semrush are:

  • Ahrefs
  • Alexa
  • Moz
  • SimilarWeb
  • SpyFu

Another way to understand Semrush's competitors is to organize them by feature category. Here's a full list of Semrush competitors by feature category:

Semrush Feature CategoryTop Semrush Competitors
All FeaturesAhrefs, Serpstat, SE Ranking, Moz
Keyword ResearchKWFinder, Long Tail Pro
Competitive ResearchSpyFu, Alexa
Keyword Rank TrackingAccuRanker
Backlink AnalysisMajestic
SEO Site AuditsDeepCrawl, Screaming Frog
Content ResearchBuzzSumo
Traffic AnalyticsSimilarWeb
Listing ManagementYext
Social Media ManagementSprout Social

Of these competitors, Sprout Social is the largest, and the only publicly traded business (SPT). While there is some product overlap between the two platforms, it's more likely that a business will purchase both products than make a tough decision to buy only one. Companies that invest more in search marketing will choose Semrush, and those that invest more in social media marketing will likely choose Sprout Social. Larger companies are likely to have a search marketer that relies on Semrush, and a social media manager that primarily uses Sprout Social or one of its competitors.

A more common decision for search marketers is choosing between Ahrefs and Semrush. These are the two leading products that beginner and intermediate search marketers use. Marketers who are specifically focused on content marketing and building backlinks tend to prefer Ahrefs. For most other types of search marketers, Semrush is the superior option due to its aforementioned strengths in keyword research, competitive research, and keyword rank tracking.

Rand Fishkin, the founder of Moz, provided his estimates for Ahrefs' and Moz' current revenue in the Tweet below. He confirmed that Ahrefs is Semrush's biggest competitor, and shared that Moz is not far behind.

Rand Fishkin tweet about Semrush, Moz and Ahrefs revenue

Semrush IPO Analysis

On Wednesday, March 24th, Semrush announced that it is pricing its IPO at $14 per share. This price gives the company an expected market capitalization of $1.96 to $1.99 billion at IPO, depending on if the underwriters’ option to purchase additional shares of Class A common stock from Semrush is exercised in full.

Comparing Semrush to Sprout Social

Sprout Social, which has been public since December 2019, is an ideal comparable for Semrush. Both are leading SaaS tools in their respective marketing channels. Sprout Social is the leader in social media, and Semrush is the leader in online search.

Financial Performance: Semrush Outperforms

Sprout Social currently has a market capitalization of $2.88 billion. This is 21.7x Sprout Social's 2020 revenue. Semrush, in contrast has priced its IPO at 16.0x 2020 revenue. Does Semrush deserve to be priced at a discount to Sprout Social?

MetricSemrushSprout Social
Market Cap / 2020 Revenue Multiple16.0x21.7x
2020 Revenue$124.9 million$132.9 million
2020 Revenue Growth35.6%29.4%
2020 Gross Margin76.0%74.3%
2020 Operating Income-$6.1 million-$32.0 million
Customers67,00026,718

Semrush outperformed Sprout Social on major financial metrics in 2020, with the exception of absolute revenue generated. The company outperformed Sprout Social on revenue growth, gross margin, and operating income. In addition, it has more than double the customer count.

Product & Moat: Semrush's Massive Database

In addition, the Semrush product has something that Sprout Social does not – a clear moat. At the core of Semrush's powerful product is its database. Semrush stores over 20 billion keywords and 30 trillion backlinks. This data, which has been aggregated since its founding in 2008, is nearly impossible for competitors to copy. In addition to sheer size, there is no feasible way for a competitor to capture historical keyword and backlink data from the past.

Sprout Social is a fantastic product – the clear leader in social media management. However, it does not have a concrete moat similar to Semrush. Hootsuite, Sprinklr, Agorapulse and other social media management software businesses have competitive products, which we believe will lead to price competition over time.

Value of Marketing Channel: Search vs. Social

A final consideration is the nature of the marketing channels themselves. According to a December 2019 study from BrightEdge, organic and paid search account for 68% of all trackable website traffic. Social media channels, in contrast, accounts for 5% to 10% of website traffic.

Conclusion

Semrush and Sprout Social are the two leading SaaS products in their markets. Semrush has stronger financial performance, a product with a concrete moat, and operates in a more critical channel for online marketers. As a result, we believe it should not be priced at a significant discount to Sprout Social.

Sources:

  • https://d18rn0p25nwr6d.cloudfront.net/CIK-0001517375/8aa55639-d0ce-4fa4-b5e7-97ecc7c2abbf.pdf
  • https://www.sec.gov/Archives/edgar/data/1831840/000162828021003658/semrushforms-1.htm
  • https://sec.report/Document/0001628280-21-004792/#icb9c0ce4f063445c853444a692df5629_372