Similarweb has over 5,000 customers with 60% of ARR coming from $100k and plus deals

DaaS companies are often saddled with COGS 2x their SaaS counterparts, razor thin margins and an uphill climb first to scalability and only then profitability. The ascent of Similarweb.

In 2013, Similarweb (NYSE:SMWB) began giving its first dataset away for free, with no paywall or login required.

The reasoning was simple: The data was not yet very good, according to Benjamin Seror, Similarweb co-founder and Chief Product Officer.

Instead, the startup decided to launch for free and create an audience. The combination of low expectations, little friction, and zero cost inspired a surprising emotional response.  ‘

Today, Similarweb is one of the world's largest publicly traded Data-as-a-Service (DaaS) companies. The Tel Aviv-based firm specializes in website and app traffic and behavioral data and analytics for digital marketing, research, sales, investing, and e-commerce. Its customers include some of the world's largest digital brands, including Google, Walmart and Adobe. 

In 2023, Similarweb generated $218 million in revenue, a 13% increase from the year before. In its most recent Q2 earnings report, Similarweb beat expectations and logged its third consecutive quarter of accelerating growth, citing new customer acquisitions and improved retention. After the company raised its full-year 2024 guidance, shares rose by double digits. “We’re just getting started” quipped CFO Jason Schwartz.  

82% Gross Margins, NRR above 100% - in DaaS, scale is key

Similarweb went public in 2021 at a $1.6 billion valuation, which makes it unusual in the DaaS space. As World of DaaS has previously reported, there are only about 60 publicly traded DaaS companies, with most being privately held. To further drive the “DaaS is mostly private” point home, some notable public DaaS companies like Nielsen have shifted back to private ownership. 

Seror says this makes sense for DaaS companies like Nielsen or Dun & Bradstreet, which are both more than 100 years old. Historic data-collection processes were inefficient and costly.

"It's smarter for these older companies to go back private and fix what they have to fix in order to rebound with more modern technologies and better financial efficiency," he says. 

The barrier to entry today for data companies is also quite steep, requiring significant upfront investment.

"This is why there are so few data businesses, because it takes time to get the leverage and the scale to become efficient and profitable," Seror says. "Not only does it take time, but it takes the right tools. This is what some historical companies don't have, and so now they're trying to pivot internally on the technology stack." 

Back in 2017, Similarweb was raising funding when CFO Jason Schwartz told investors that the gross margin would increase to 80% once it reached $100 million in annual revenue - a claim investors found hard to believe. “Whatever you're smoking, we’d like to have some of that” is the reply Schwartz got. When Similarweb hit its revenue milestone, Schwartz had to call the investors and apologize because its gross margin only reached 79%.

Many early-stage SaaS companies have 70%-75% gross margins, Schwartz says. They have a few upfront costs, some hosting costs and you call it a day. DaaS companies on the other hand, have a much higher upfront COGS - the raw numbers are crazy. R&D margins alone typically run in the 20%-25% range for a growing SaaS company, and 10%-15% for a tech company at scale. Those figures can easily double for a DaaS company, since the R&D may be going toward creating, acquiring, and manufacturing data while also building and also potentially maintaining a platform - your R&D can effectively double. 

"Those numbers get scary," Schwartz says. "You've got a gross margin that's at 50, 54%. You have an R&D margin that's at 35-40%, and that's before you have your first salesperson, the first marketing dollars spent. How the heck are you ever going to make money?"

AI to make self-serve dream a reality

Similarweb recently launched the fifth version of its dataset, which is powered by more than 10 billion daily signals and covers more than 100 million websites, 190 countries, and 210 categories. 

The emergence of AI presents several opportunities for Similarweb. Since AI is data-intensive, for example, the company could also leverage its data as an input.

AI could also enhance its product offerings. Last year, Similarweb launched SimilarAsk, an AI-powered digital assistant to help users navigate the Similarweb platform. In May, the company released SAM, an AI assistant to help salespeople identify prospects and close more deals. 

AI could improve the quality of its dataset and enable the company to build datasets more efficiently, Seror says. All DaaS companies dream of offering their data to customers on a self-serve basis, but few can. AI, however, could potentially move Similarweb closer to that reality.

The technology could help customers with setup and activation to ensure that users are leveraging the right data that reflects their business needs. Finally, AI could assist with insights generation, although this currently carries risk and faces limitations due to the nascency of the technology.  

"It can sound smart and generic, and then not very useful," Seror says. "But we can try to go very deep and then have a lot of potential mistakes, and so this is where you have the biggest challenge to make AI work for us." 

The 450x upsell - the first double-digit million customer

Today, Similarweb has more than 5,000 annual subscribers growing by 16 to 17% each year and about 60% of its revenues are from customers with ARR of  more than $100,000 a year, Schwartz says.  

“Once they have [the data], get the experience, and see the value, we know that over time, they're going to grow, and Similarweb will be more integrated into how they do business and drive their growth,” Schwartz says. “I think that's the power of DaaS."

Similarweb recently announced its first eight-digit customer who has been a client for nine years and has seen their ACV grow by 450x. "That's unbelievable, but it's not the biggest multiple that we've had," Schwartz  says. "We've had people that started as no-touch customers, paying by credit card $99 or $199 a month that today are multi-million-dollar accounts." 

This illustrates the long-term potential of DaaS and customer lifetime value, Schwartz says. 

"When you create something that's so valuable and people recognize how this impacts their understanding, how that differentiates their business, how it helps them be better at what they want to be and do, that suddenly is a long-term relationship," he says. "The DaaS model is one of a lifetime."