MDB Acquisition

Investment Analysis Clubs Saul’s Investing Discussions
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Going to buy Realm.

NEW YORK, April 24, 2019 /PRNewswire/ – Today MongoDB, Inc. (Nasdaq: MDB), the leading modern, general purpose database platform, announced it has entered into a definitive agreement to acquire Realm, the company behind the Realm mobile database and Synchronization Platform, for $39 million in cash, subject to certain adjustments. The acquisition is expected to close in the second quarter of MongoDB’s fiscal year ending Jan. 31, 2020, subject to the satisfaction of customary closing conditions.

Full article:
https://investors.mongodb.com/news-releases/news-release-det…

Mongo is doing this to widen their developer base.

This should be a good move.

Gene
All holdings and some statistics on my profile page
http://my.fool.com/profile/gdett2/info.aspx

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Here’s what they say:

Mongo strengthens mobile offerings with acquisition of Realm

Mongo, the leading modern, general purpose database platform, announced it has entered into a definitive agreement to acquire Realm, the company behind the Realm mobile database and Synchronization Platform, for $39 million in cash. The acquisition is expected to close in the second quarter of Mongo’s fiscal year ending Jan, 2020.

“Realm is incredibly popular with mobile developers because it makes it easy for them to work with data to accelerate innovation, which is very consistent with our own philosophy. This acquisition is a natural fit for our global cloud database, MongoDB Atlas, as well as a complement to Stitch, our serverless platform. We look forward to working closely with Realm’s strong engineering talent and the vibrant developer community to capture additional share in the database market by giving developers a far more flexible, intuitive and comprehensive way to work with mobile data.”

The acquisition of Realm will deepen MongoDB’s relationship with developer communities focused on mobile and serverless development. There are more than 100,000 active developers using Realm, and the solution has been downloaded more than 2 billion times.

Can anyone explain to me, a non-techie, how mobile offerings fit in with what a database platform does?
Thanks,
Saul

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Saul,

My key take away is this:

“We look forward to working closely with Realm’s strong engineering talent and the vibrant developer community to capture additional share in the database market by giving developers a far more flexible, intuitive and comprehensive way to work with mobile data.”

  1. Realm’s talented engineers
  2. Realm’s developer mindshare (more MDB customers)
  3. Realm’s expertise in mobile data. So MDB can now strengthen Cloud for mobile data.

Seems like they acquired for the right reasons.

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Replace Cloud with Atlas, sorry.

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Realm allows a mobile device to store and query data right on the device itself. Increasing data access speeds. Kinda like the hybrid cloud/local phenomena happening with bigger systems.

More on this can be found by Googling “what is Realm”?
It brought me here which has a much more left brained explanation than my dominant sometimes a bane, sometimes a blessing right brain.

https://realm.io/blog/introducing-realm/

John

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One of the key features of Mongo is that is works everywhere all the time in a seamless fashion. From cloud titan to corporate server, laptop, mobile phone, wireless medical device, highway sensor, home automation devices, oil rig sensors, city video cams, whatever.

Mongo attempts to make sure you have a seamless experience running your Mongo database through all these form factors, no matter where it is being consumed in the world.

As far as I can tell this product does for mobile deployments and in the mobile form factor what Stitch does everywhere else. Or perhaps it will add to the functionality of Stitch to make it a better fit in the mobile database world.

What Stitch is, is very similar to what Pivotal does, it creates an abstract layer and makes development on the platform easier. It is the CTO’s favorite feature of Mongo. As a tech nerd he says he cannot get over playing with it as he can do so many neat things with it.

Anyways, mobile, the edge, is the next great frontier and Mongo intends for its database to dominate in mobile deployments as it is in its present contexts. And to do so in a seamless fashion no matter the form factor. This purchase seems to acquire thousands of developers, hundreds of customers, many large, millions of users, and solutions that will improve Stitch functionality for the mobile environment.

Or it is a good thing. Mongo already has by far the best running general purpose database in the NoSQL offerings, and this just adds to that distinction, moving to the mobile world. Leaving no reason for someone to have to use another database from core of the corporate market to oil rig sensors in the Gulf of Mexico, along with buying many more Mongo developers and commercial enterprise customers.

Tinker

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Over 30 new server-side databases technologies have been launched
since the introduction of the iPhone in 2007, but none for mobile.

If you’re a mobile developer, your only viable option today is the same as it was in 2000: SQLite. It’s used for persistence by virtually every mobile app today — either directly or through one of the many libraries that provides a convenience wrapper around it such as Couchbase Lite, Core Data, ORMLite, etc.

SQLite was revolutionary when it launched in 2000 but developing mobile apps in 2014 is obviously a very different beast than it was 14 years ago, and our notion of what a “phone” or “app” is has also changed drastically. We saw a clear opportunity to provide a fresh start for data on mobile with an easier API and an architecture that benefits from the last decade of innovation in databases. In short, we’re the first mobile-first database.

Mobile as we know it is barely 7 years old after all — still in its infancy — and many fundamental needs, long served server-side, still need an answer on mobile. We build Realm in the hope that it answers one of these needs for you, and we will work hard to make sure it becomes & remains your go-to solution whenever you need to handle data in iOS, Android, wearables, and beyond.

“Finally an elegant, low-footprint and multi-platform database for apps…
And so beautifully designed too.”
David Helgason, CEO, Unity3D

Simple
Realm’s designed to give you amazing ease-of-use: data is directly exposed as objects and queryable by code, removing the need for ORM’s riddled with performance & maintenance issues. Plus, we’ve worked hard to keep our API down to just 3 common classes (Object, Arrays and Realms) and 1 utility class (Migrations): most of our users pick it up intuitively, getting simple apps up & running in minutes.

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The Realm CEO gives what I think is the clearest vision for what Realm is bringing to the Mongo table. From the PR linked blog post.

https://realm.io/blog/mongodb-to-acquire-realm-the-future-is…

We’ve been extremely happy and proud of the growth to date. Realm’s database is used by over 100,000 developers, at companies ranging from small-to-medium to the Fortune 1000. Over 350 customers of varying sizes perform data synchronization between mobile devices and the Cloud via Realm Platform across all regions of the globe. We see a huge future opportunity for helping developers and enterprises with their mobile apps and digital transformation, and want to continue that growth.

I believe the highlighted part is what Mongo really wants. The database stuff on device is low dollar but the cloud stuff is where the goods are. And this sets up Mongo, as Tinker points out, for end to end.

He goes on to explain more:

The combination of MongoDB and Realm will establish the modern standard for mobile application development and data synchronization for a new generation of connected applications and services.

Darth

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Kinda like the hybrid cloud/local phenomena happening with bigger systems.

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Saul,
I’ve not really looked at Realm’s technology, but I’ll take a stab at a non-techie description of how mobile offerings fit in with what a database platform does. So, you’re getting my generic understanding, not necessarily a description of Realm functionality.

The most basic function of a database is to function pretty much like a library. It provides a repository for information that can be retrieved with relative ease. And like a library, it should be agnostic to format. Books,CDs,DVDs, magazines, newspapers, microforms, PDFs, MP3s, whatever, like a library a database needs to provide an organizational scheme in order to keep track of all of this stuff, and it needs to know if some information has been “checked out” and a lot of other management functions. We needn’t get into the weeds, at its most basic function a database supports “gets” and “puts” of data while insuring integrity and security.

A mobile device is basically an edge device. Virtually 100% of the activity on a mobile device takes place at that digital to analog conversion boundary of human perceptible output and machine manipulable input.

Putting database and mobile together is not a simple proposition. We humans who operate those mobile devices have developed an expectation of immediacy and reliability. We’re not dealing with dial-up modems anymore. Press the button and we expect the answer, not just any answer, but the correct, authoritative answer. At least that’s what we expect when we’re connected to some functional business system, or government agency or similar.

I think there’s a clue in the company’s full product name: Realm mobile database and Synchronization Platform. Knowing nothing more about Realm than what’s been posted here and a brief article I read on the Fidelity website, I would venture that the Synchronization part of their platform resides at the heart of what makes their s/w a defacto mobile standard.

It also appears to be another public domain package, or at least it seems apparent that use a freemium model. It will be interesting to see how they get integrated to Mongo with respect to S&M and licensing.

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Here is a little more to help build on what was already said.

  1. At their core, databases are a more intelligent way to store data than, say, dumping it into a file. The library analogy of the previous poster is a good one. A database is to data what a library is to a pile of books. Sure, both are a way to store books, but one offers a way to easily find, track, group and sort books, and the other does not.

  2. Because databases provide these extra capabilities, they traditionally require extra resources in terms of hardware (memory, cpu, etc.) in order to perform the indexing and internal data organization required. This is not a problem in the modern data center where we have many powerful servers. A database like Mongo can scale infinitely through a combination of using the powerful resource of each individual server to its fullest (this is called vertical scalability) and using many servers together (this is called horizontal scalability).

  3. On a mobile device, the resource situation is very different. All you have is the comparatively puny power of what’s in your physical device - a mobile CPU, limited memory, and of course, zero horizontal scalability - you just have the one device, that’s it. If you tried to put a database built for the data center onto your phone, it would choke from the scarcity of resources. Therefore, if you wish to have the benefits of a database on a mobile device, you really need a database that was very carefully engineered to work in a resource-constrained environment of a phone to begin with. That’s Realm.

  4. Of course, you don’t HAVE to have a database right on your phone. In fact, most of our apps don’t - when they need to read or save data, they simply connect to the big database sitting in the data center over the network, and ask it do whatever needs to be done. However, this requires an always-on network connection, and you better hope it be pretty fast, otherwise you have lag, and the user experience suffers. And of course if you want your app to work in the subway or on the plane, you are screwed.

  5. Realm lets you have the database right on your phone, so all the interactions between the app and the database are very quick, and don’t need to travel over the network. That makes for a great, fast user experience, and applications that work even in offline mode. At the same time, the Realm database has a synchronization process through which it can connect to the “big” database back in the data center to make sure that all the data is (ultimately) in sync with that central location. This ensures that if you later connect from a different device like your home computer, the data you modified from your phone is all there. But Realm is also smart enough to figure out how to do this synchronization in a way that doesn’t disturb the user experience (i.e. in the background, while you aren’t actively using the app, or simply later, when a good network connection is re-established).

  6. So the upshot of using Realm from a user’s perspective is that you have the power of a real database to support your apps (which makes for more powerful apps) without having to worry about active network connections or explicit data synchronization (which makes for great performance and a smooth user experience overall).

  7. One downside is that this requires more storage on your phone itself, but a good app can manage this intelligently.

  8. Overall, this is a very good acquisition for Mongo, because it effectively extends their presence right out to each individual phone device, while empowering mobile developers to create more powerful and more performant apps. From a product strategy perspective, I expect that the Realm databases running on the phones will be paired with MongoDBs running in the data center. And because there are not a lot of other mobile databases out there, there will be a significant degree of lock-in for developers that use Reach (but it will be worth it for them because they can produce better apps than the competition). With the Mongo name behind the product, developer confidence in the product will grow as well, creating even more market share.

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I asked a question and I am overwhelmed by the helpfulness of all the people who have responded and really made me understand why MDB bought Realm. It now sounds like a potentially brilliant tack on acquisition.

Thanks so much to you all,

Saul

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shikotus… wow that was excellent insight… thanks for sharing.

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Thanks for these beginner and simple overviews.
I learned a bit about Stich (through owning Talend- btw, anyone still interested in Talend?).

And can anyone give something similar about Elastic and what they are doing?

tj

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I’m coming late to the party, but let me throw in my perspective.

BACKGROUND

There are databases everywhere. On your computer, in the data warehouse, in the cloud, and on your phone.

Mobile databases are very valuable for applications that want to perform very snappily on your phone. Going out to the cloud to get data can be slow and can also fail in a poor connection zone, which makes the whole app seem unresponsive.

Mobile databases usually cache data from the primary cloud database, so the application doesn’t have to go out to get the data, and they typically go out and get the data they need asynchronously, (meaning you are doing something else and don’t even notice).

Cloud and mobile databases don’t have to come from the same vendor, and they usually don’t, but it makes some people more comfortable if they do.

MONGO’S SITUATION

Mongo has its own mobile database, but unfortunately it hasn’t grown the way cloud and local Mongo has grown. To be perfectly honest, I don’t know any developers who have used it.

Realm is one of the top mobile databases in use. Mongo bought them for 39M, which looks like a deal to me - from the point of defending their weak points.

To be clear, I wouldn’t look at this as Mongo buying developer mind share. I’d look at this as Mongo acting proactively to make sure they don’t have weaknesses that competitors can exploit. As an example, now people won’t be going to their competitor, Couchbase, because Couchbase also has a good mobile offering. Mongo has one of the top two mobile databases in use - no more argument for choosing Couchbase.

This is one of the reasons why, in my opinion, once a general database like Mongo starts winning, it becomes almost impossible for others to catch up. Where Mongo’s technology has a weak point, or where a new technology comes up, Mongo has the money and resources to buy or build, and stay on top.

As long as the management team is smart and paranoid, no one can catch them. And they continue to demonstrate that they are smart and paranoid.

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Couchbase is probably the closest analog to Mongo. Couchbase has had a mobile offering of this type for a few years now. They were ahead of Mongo in regard. But it did not matter much as Couchbase lost out nearly everywhere else to Mongo.

One gets information in funny places. I remember one evening pulling out of my parking spot after shopping at Kroger and I had NPR on the radio. And lo and behold they are interviewing the CEO of Couchbase for some reason! I knew within a minute or two that Couchbase was the loser here. The CEO stated that their strategy was not to go after big enterprises like Mongo was doing but to go after start-ups and the like. They also talked about having had their mobile product for a few years.

One does not target poor start-ups if one can target rich enterprises. The choice to go after start-ups was clearly made because that is the only place they could get any traction. So not too worried about Couchbase. In addition, when the AWS threat came about, we did an analysis of if there is any true substitute for Mongo. The answer is no. There is no other product that can do what Mongo can do as a general purpose database. Postgres can substitute for many use cases, Couchbase can substitute for many use cases, you can find open source patches for this and that and the other thing. But to make something to equal or at least substitute for what Mongo can do you have to use Postgres (which may be less than ideal for big data) or Couchbase, and then patch onto it multiple third party software that you have to pay for anyways for the most part.

Where with Mongo you just get it all in one package. Btw AWS could not substitute for Mongo either except for simpler use cases and even then there are shortcomings like having to develop online while the meter is running on the AWS server.

In regard to the Elastic question, after studying it some more Elastic’s business strategy is coming into focus. Elastic does offer the X-Pack that has enterprise features that have been said to be very difficult for almost anyone to replicate. So good there. But what Elastic is really doing is creating proprietary features that are not offered open source but are strictly X-Pack Premium. Machine learning is the big one for now. Elastic intends to build on this, improve, expand it out. Thus the plan seems to be suck them in with the freebies, get big enterprise use cases to use the X-Pack basic, and then create features that are value add that one can only get in the premium package to not only encourage more sales of X-Pack but to upsell them to the premium package.

It is still a nascent strategy so TBD. But it is well thought out analytically. We won’t know how well it works until we actually see it working. There are always hypothetical in marketing and product planning. Elastic has a very good record however in creating product that their customers really want and having it virally spread.

In this regard I think Mongo’s business plan is more mature and less risky as it is already working and is not a future hypothetical. It does create upside however to Elastic in the future it is successful.

Tinker

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But to make something to equal or at least substitute for what Mongo can do you have to use Postgres (which may be less than ideal for big data) or Couchbase…

Tinker,

I’m not sure how a lawyer by trade and investor by night is so up on MongoDB’s landscape, but you nailed my approach to MongoDB database. I have been abusing Postgres’s JSON capabilities and using it like a NoSQL store, but need better indexing and flexibility and, most importantly, SCALE that Postgres cannot offer. Hence I have backed myself into a corner and need to start using MongoDB in my architectural stack.

And you are correct, Couchbase is a long ways off from MongoDB in terms of adoption. It’s night and day adoption numbers according to DB-Engine ranks and Google trends.
https://db-engines.com/en/system/Couchbase%3BMongoDB
https://trends.google.com/trends/explore?q=mongodb,couchbase…

As I posited in my latest MDB post, you are also correct that MDB is catching up to Couchbase in the few areas it seemed to excel at (mobile) - furthering the divide from here. MDB has already won against the alternative OSS projects. The only true competition going forward is against the cloud provider offerings. Mobile and serverless are the new fronts against that competition.

In this regard I think Mongo’s business plan is more mature and less risky as it is already working and is not a future hypothetical. It does create upside however to Elastic in the future it is successful.

I completely agree. My allocation is 12% to 4% between MDB and ESTC. I do plan on increasing my ESTC allocation now that the shine of their IPO has faded, but MDB is the safer bet of the two. I do feel that if one admires and owns MDB, they need to strongly consider ESTC as well, as it’s a very similar business model, but with diverging approaches, developer use cases and TAM opportunities. I will deep dive into ESTC soon enough, as there seems to be consternation from Saul about their OSS strategy vs MDB, and a lot of confusion as to what they actually provide as a toolset.

-muji
long MDB and ESTC

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Muji
Thanks for your great write up on MDB. Wish I could say that I understood most of it. I can not. I will need to read it again. One part that caught my eye had to do with the notion of “serverless” and not needing back end APIs for the mobile data base app to communicate w the main database an vice versa (I may even be stating this incorrectly). Anywhere buried in all of this, is there a warning for TWLO’s APIs? In other words, can a serverless model someone be used to make TWLO’s apis obsolete?

Thanks
David

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Or are the APIs the gateway to the TWLO platform and therefore this doesn’t apply. Something tells me the two cases are not similar as I think about.
Thanks

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Hey muji,
In the spirit of looking for new companies coming down the road, I heard Snowflake mentioned on CNBC today by early investors from Sequoia and Altimeter.
Sounds like they are feeling out the IPO path:
https://www.geekwire.com/2018/snowflake-computing-hints-ipo-…

Basically they are a data warehouse “built for the cloud” which is a trend we are seeing stock success with via Zscaler or Zoom or Mongo with Atlas, etc…
Competitors listed were: AWS Redshift, Google BigQuery, Teradata, IBM dashDB, HPE Vertica, Microsoft Azure SQL, SAP HANA and Oracle Exadata. None of those are names tied to stocks I would want to invest in as they are all just parts of much bigger companies vs a pure play.

From last ER, AYX CEO mentioned they see good engagement with Snowflake, despite no formal relationship between the two companies:
https://www.fool.com/earnings/call-transcripts/2019/02/27/al…

Talend appears to partner with them, too.

So I am curious if you have any experience with Snowflake and thoughts on them as something to watch in the IPO pipe?

thanks,
Dreamer

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