The Exchanges

Q But what cohort do you guys cater to now? Is it more enterprise? You're selling big seat deals. I mean, tell me more about that.

A So, um, I'd say majority of our subscriptions are still, um, In, um, you know, a little bit below 200 per month. So it's, it's still very affordable. Um, and obviously you need like bigger subscription when you start using more software, but yet again, everything is super fair. You pay more only if you use more. Um, but you know, on the other side, we have huge accounts, uh, that, that I approach in half a million per year. So It's, it's, you know, one of the stories where we have presence in, in, uh, SMB segments with mom and pop shops, with bloggers, and then we have, uh, seven out of top 10 world biggest advertisers. We have 25% of Fortune, 500. So it's, it's really, I like, I like the Dropbox analogy because, um, I think this is the same kind of solution company of any size can benefit from it.

AI assessment note: “we have presence in, in, uh, SMB segments... and then we have... 25% of Fortune, 500”

Q Okay. So it's fair. I won't push you harder here, but fair to say today somewhere between 30,060 thousand paying customers and five million registered users. Yep. Okay. Um, how do you convert a registered? Like what's the critical moment that, you know, a registered user has to hit to drastically increase the likelihood they convert to paid?

A Um, it really depends. We have multiple different funnels. It depends on what problem users are coming with. Um, so for things like keyword research, uh, we'll give, uh, certain functionality for free, certain amount of data for free, and then as people hit the limit, uh, they will, you know, either upgrade or, you know, sometimes wait another day. We, we limit number of searches that you can make on a, on a free plan per day, or we also limit number of results that we show. For example, for free, we'll show you 10 results. If you want to More than 10, you have to upgrade. So, so that would be sort of fun for keyword research. But for site audit, it will be different. For site audit, for example, we will allow you to crawl 20 pages for free. So if your website is less than 20 pages, you can use it for free, um, Pretty much forever. Uh, but if your website is bigger, then you'll hit the limit and, you know, either upgrade or, you know, don't crawl your whole website and just limit your site audit to some sections.

AI assessment note: “as people hit the limit, uh, they will, you know, either upgrade”

Q Yeah. And, and where are you spending that mostly? Is it, is it traditional channels or have you identified some unique growth opportunities?

A We, we identified tons of unique growth opportunities and, um, Uh, as I said at the beginning, company was growing viral with almost no market. And we, we said, okay, we are a search engine marketing software. At least we have to do search engine marketing. And we, we started spending a lot of money on, um, on, uh, AdWords, uh, to the point where we realized we already spending more than any other company in this, uh, niche. So, Then we said, okay, what's the next step? And we started doing much, much more content marketing. Then we scaled content marketing across a number of other geographies. So at the beginning, we focused mostly on English speaking markets. And then we started doing a local content, uh, in European markets and many other markets. Uh, and, and then if you produce high quality content, then you need to invest money in outreach. You need to work with local opinion leaders. You need to build presence in, um, in local, uh, you know, social media communities. And, and that was the second wave of expansion. And then we started doing a little bit more sales because, um, you know, some customers can work with the low touch internet sales model, but some of them need to have a demo. Yep. So, so we, we started doing inside sales.

AI assessment note: “We, we identified tons of unique growth opportunities and... started spending a lot of money on AdWords”

Q ARPU. I mean, that there is 5.4 million a month or 64 annually, and that's on the low side. So, you know, in summary, the company is doing really, really well. I want to go back to your story now. You're sitting pretty, right? Russian VC firm doing really, really well. You know these guys. I mean, what do they do? Did you pursue them, or do they pursue you?

A Yeah, actually, it was me, like, uh, I use the product a lot. Um, you know, uh, it's actually, we have quite good traction, DC community as a product, because, uh, it allows you to identify competitors. And every time you talk to a new company, they will tell you they have quite a unique product, no competition whatsoever. And then you go into SM rush and type in their domain name and you see that there is not just a competition, but this competition is probably bigger and they spend tons of money on advertising. So extremely helpful product. Um, And then I, you know, when I was even younger, I, I did a lot of stuff in marketing and search engine optimization. So I knew product really well. And then I thought, okay, I know the product improves significantly over time. Uh, I know this is a good product. Let's see if it's also a good business. So I've met, uh, founders and, and they give me some numbers and it took me some time to really put it into, you know, VC style format. And then I realized this is probably either the best or one of, let's say, top three companies that I've ever seen, and I've seen tons of companies, so it was pretty much a no-brainer.

AI assessment note: “Yeah, actually, it was me, like, uh, I use the product a lot.”

Q I see. Okay. Very good. So talk to me about some of these experiments you guys ran that panned out like super quickly and returned a lot of cash. What were some of the first experiments you ran in 2018 when you closed?

A Uh, we, we started Experimenting with, um, new marketing channels. We started doing more YouTube. Uh, we dramatically expanded our global, uh, footprint. So we started hiring people to run marketing for, um, you know, European markets, such as Germany, Italy, Spain, France, and so on. So, um, it's, um, you know, those, those were the, the first things that we tried. Um, but then we started investing more in product. Uh, product takes more time to kind of show result. And some of the things that we started doing in 16, they actually started paying off only 18 or 19. Um, you know, things like, uh, our traffic analytics product. We, we've been building it for two, three years. It's extremely complicated technology. Um, so it took us quite a while to get everything running. Uh, but now it's actually one of the fastest growing product lines, uh, that we ever had. So Yeah, I mean, that's, that's kind of, in a nutshell, what, what we started doing once we had more flexibility and could take more risks.

AI assessment note: “we started Experimenting with, um, new marketing channels. We started doing more YouTube.”

Q Yeah. Interesting. Um, what do you know that you have to get a user to do in the first week that they install SEMrush to make them exponentially more sticky?

A It's not really about what we do, but more about what they learn. Uh, and all we can do is to help them to, to find better ways to be more successful. So, so that's why what we will do is We will give them a lot of educational content. We have a great community, uh, portal where you can read tons of content on how to be more successful marketing person. And then on top of this, we have SEMrush Academy that has online courses, and then you can take an exam and get certification. But yet again, it's, it's really, uh, up to end user. We are not doing Anything artificial, because if they, if they are successful, if they know how to be successful and use the product, they will, they will continue using it. If, if, if they cannot do this, uh, yeah, they churn.

AI assessment note: “We have SEMrush Academy that has online courses, and then you can take an exam”