MNDY's competitive landscape

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This article came across my browser homepage’s news section today: https://www.haaretz.com/amp/israel-news/tech-news/.premium-t…

Although the above linked article is probably “biased”, as the authors disclose that they are customers of one of MNDY’s competitors, Clickup, I found it quite illustrative of the market space that MNDY operates within.
This only bolsters the decision I made in the afterhours of MNDY’s last earnings report day to sell out completely, as the quarter was disappointing to my expectations.
For a company that burns so much cash and throwing money around like crazy in sales/marketing (like $8 million on a Super Bowl advertising experiment in Q1 2022), I expect more ‘bang for the buck’ in revenue growth.
When MNDY delivered 15% QoQ growth at $95.5M revenue for Q4 2021, that just doesn’t cut it.

The sequential addition in revenue in Q4 2021 was a flat-line:

                    Q2-21  Q3-21  Q4-21
Sequential rev add  11.6   12.4   12.4

The S/M expense continues to climb and S/M expense as percent of revenue didn’t decrease much from Q3-2021.

                   Q2-21   Q3-21   Q4-21
S/M expense        61.1    67.4    76.5
S/M as % of rev    86.5%   **81%     80%  [flat!]**
Non-gaap S/M exp   55.5    61      69.4
Non-gaap S/M %rev  79%     **74%     73%**

I’d much rather have seen closer to 20% QoQ growth at $100M revenue for Q4 2021, which would be a sequential addition of $17M instead of $12.4M, and would have brought the S/M percent of rev down to 76.5%.

Now let’s compare to SentinelOne for example.
Although SentinelOne is at a smaller run rate, its revenue growth at >120% YoY for the past 3 quarters has been crushing it with S/M expense barely increasing at all.

                   Q2-22   Q3-22   Q4-22
S/M expense        41      41      42
S/M as % of rev    90%     **74%     64%  [drop!]**
Non-gaap S/M exp   37.1    36      36.3
Non-gaap S/M %rev  81%     **64%     55%**

SentinelOne’s kind of trend is what I’d prefer to see! It hints to me that their product is ‘selling itself’ despite competition from CRWD and MSFT and loads of other endpoint providers out there, while MNDY is having to work hard to generate that next dollar in sales.

Finally, from the above linked article, here are the highlights:

In a podcast in November, Evans told how the company had reached annual recurring revenues (ARR) of $85 million, and he expected another jump in the ARR rate of 200 percent in 2022 to $250 million.

MNDY guides this year for $470M, at a growth rate of 53% YoY. Yes, it’s likely very conservative, but still, ClickUp is catching up real fast at 200% growth rate, and growing way faster than MNDY historically did, albeit we don’t know ClickUp’s cash burn to achieve this.

What makes ClickUp a company with the highest growth rate in the category of task management tools is the combination of timing, strategy and aggressive pricing. Monday.com and Asana were founded a decade ago, during a period in which the sector was still in its infancy – and the two firms were forced to work hard and invest a lot of resources in getting development teams to adopt their tools. When ClickUp was launched in 2018, its product met a market much more ready for it, and the company could concentrate on product development and finding customers through organic traffic – without having to burn the cash needed to buy its initial customers.

Another aspect that enabled the rapid growth of ClickUp was the price. The company offered a limited free subscription at the beginning, or a $5 a month subscription that included more features – without any limit on the number of users. Monday.com’s basic package costs $10 a month per user, with a minimum of three users. Monday.com launched its first free version just last year. Asana has a free version and a basic version that costs $13.50 a month – without a minimum number of users. All of these prices are for a package that renews every month automatically – but they all have a discount if you buy an annual subscription. ClickUp is also generous in the discounts it gives for a commitment for an annual subscription: Between 35 percent to 45 percent – compared to about 20 percent for Asana and Monday.com

Now THAT is a major market narrative red flag to me, with the details about pricing discounts. This sounds like it could become a race to the bottom and heavy commoditization of the entire space.
If you throw in the looming giant of Microsoft entering to compete later in 2022, this would only be an accelerant to burn down pricing power. It’s rumored that Microsoft Loop will be “free” (https://news.thewindowsclub.com/microsoft-loop-launched-1064…). And given that many enterprises already use Microsoft, if Loop is bundled in without cost, why wouldn’t enterprise decision makers cut MNDY or ASAN or Clickup etc loose to save money?

Anyway, these are just my thoughts and opinions, I could be very wrong, and for those who hold MNDY, I sincerely hope that I am, so that MNDY outperforms and crushes it through 2022.

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Thanks for this post jonwayne

While I realize that Monday has lost a bit of its shine in this forum, I would offer up a couple counterpoints that could indicate confirmation bias in your post. This is not to be argumentative, but simply to offer a different perspective.

$8 million on a Super Bowl advertising experiment
While I do have concerns on the advertising spend, characterizing it as an experiment (unless one has insider knowledge around the plan) is diminishing. We don’t know. Or, alternatively, we could consider all advertising as an experiment.

Monday’s numbers & I would rather see 20% growth rather than 15% growth QoQ (paraphrased). Sure, this is valid. Valuation is tricky, and we all need to make our decisions around what we see as reasonable for the expected durability of growth.

I’m not sure the comparison with SentinelOne is a useful one. The two companies operate at different scales and in different segments. For what its worth, I am a S shareholder and have more confidence in it than Monday, but I expect S/M expense to be higher in the Monday segment.

As for the comparisons between ClickUp, I think it shows that this is a competitive landscape, but other than that it doesn’t tell me much. Taking expected another jump in the ARR rate of 200 percent in 2022 talked about in a podcast from a non-public company at a much smaller scale and using that as a direct comparison against what Monday has projected doesn’t feel reasonable. Additionally there is a point about ClickUp not having to burn cash to buy its initial customers, but that they are being generous in their discounts. The article overall very much feels biased, which you noted in the beginning of your post.

The race to the bottom and Microsoft? Yes, those to me are both very large concerns. We will see where Monday stands for the time being in a few weeks when they release earnings!

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Monday reports on the 16th. I will be watching closely. While I am long, it is the company I am most likely to sell, and I felt that way before I read your post. I was not as disappointed as you with their last earnings report. The revenue growth at 91%, I thought, was pretty good but as you pointed out, sequential growth was somewhat disappointing. And at first, I was not troubled by the Superbowl ad, knowing that just about every CEO in the country had seen it, in retrospect I felt it was a waste because the ad was not very good. If I didn’t know what Monday was all about before I saw that ad, I would not have had a much better idea after I viewed it.

In any case, in that I am retired and have no new investment money, I must sell something in order to buy something else. Lately, I have become increasingly interested in getting back into Mongo. Quite some time ago I felt that MDB was going to be the next Oracle. I spent 30 years in IT and watched as Oracle pretty much took over the relational database space while never investing dime in the company. I just wasn’t interested in investing in any serious way. And even though I felt Mongo would rule the no-SQL world, their performance was repeatedly disappointing. I reluctantly sold. Much has changed in the intervening months. Monday will likely be my source of funds for an investment in MDB.

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I wish there was a way to edit a post . . . .

Anyway, I forgot to mention my primary reason for holding Monday on a short leash. So far as I can see, Monday (and their competitors for that matter) do not have a business imperative product. Essentially, it’s a productivity tool.

Monday is not like a security product, every significant business with an internet presence needs cyber-security. Which one (or ones) can be debated, but the need is imperative. If you are a hosted business you have to be an incompetent imbecile to try and save money by not securing your network and connected devices. But you can comfortably conduct business without Monday.

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Just to chime in here. The ad was inarguably bad. I also didn’t care at first, but now, the aftertaste just kind of lingers. It feels like they missed a layup. They cold easily have made a spot about reclaiming the word “Monday” so that it no longer represents the most dreaded day of the week, but rather software that makes life easier (That said, I personally don’t understand why Monday - the day - gets a bad rap. I love coming in to work fresh and rested after the weekend. Don’t get me started on Thursday though - dragging myself all day long.)

The ClickUp article is surely a whole lot of FUD. We all know this is a crowded space. But it’s a space that saves businesses money. Cybersecurity is essential in the same way as brushing your teeth is essential. You need it, but that doesn’t mean everybody’s going to do what they should. Right now, with the inflationary environment and upward pressure on wages, what’s more likely, a CEO deciding to hold of on additional cybersecurity investment, or a CEO holding off on software that can actually save them money. I would be a little worried about cybersecurity right now, EXCEPT for the fact of geopolitics in eastern Europe, which is really a huge motivator to start taking cybersecurity seriously right now.

I take the article with a grain of salt. Sure, ClickUp is another fine competitor, but the article mentions they focus on the SMB, and SMBs choose ClickUp because it is simpler. It’s like choosing DigitalOcean over AWS. According to the article, ClickUp doesn’t have all the functionality large enterprises need. These firms will continue to go with Asana/Monday.

I do agree that Monday is on a short leash. Flat sequential additional revenue is not a great look.

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We implemented Asana in my business. It has become a core communication tool. It is easier to find project information than trying to “dig” thru emails. These productivity softwares pay for themselves with increased productivity (less labor). Decision makers that understand their business numbers realize these types of software are a no brainer. Smaller the business the less important, the larger they become imperative.

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“And given that many enterprises already use Microsoft, if Loop is bundled in without cost, why wouldn’t enterprise decision makers cut MNDY or ASAN or Clickup etc loose to save money?”

As a current user of ClickUp and Asana, I don’t think it would get to this point - as there is a significant difference in business advantage between platforms. No one would drop ClickUp for the Microsoft product, unless it was better…free or not. Also there is friction in moving between systems in terms of data migration, building workflows and processes and internal training.

Unfortunately I can’t speak to Monday, however if ClickUp was my competitor I wouldn’t be too happy. It’s a cracking platform, with significantly more power for business than Asana. I’ve just migrated my current org to ClickUp from Asana, after using it at my previous org.

While Monday is advertising heavily in Aus too, I have not come across anyone whose business is using it.

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