MongoDB Investment Thesis?

Investment Analysis Clubs Saul’s Investing Discussions
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Hi everyone,

I noticed that there have been a lot of off-topic posts on the board recently, so I thought I’d bring the focus back to individual growth companies that we are investing in. Specifically, I want to talk about a company that has posted a good quarter recently and that a few people hold on this board: MDB. I don’t currently have a position in MDB, but enough people have been talking about it that I decided to dig a bit deeper (a big shout out to Peter Offringa, who has an excellent website at Software Stack Investing, and who’s article initially got me interested in MDB).

One of the first things that MongoDB investors mention is that it’s a “category crusher” in its field. I’m not a tech/software guy, but it seems a lot of the people who invest in the company are more familiar with the tech field, so I thought I’d make this post to get some clarification about the investing thesis for MDB. I’ll be mostly making comparisons to other “category crusher” SaaS stocks (namely DDOG, SNOW, NET, CRWD, and ZS).

Firstly, the bull cases for MDB as I see them:

  1. Revenue growth in the most recent quarter is high at 56%, and is accelerating nicely (17.5% qoq revenue growth!)

  2. The company is finally showing some operating leverage, with both operating margin, and free cash flow margins improving (operating margin is now nearly breakeven on a non-GaaP basis).

  3. Net retention rate remains above 120%.

  4. In the most recent quarter, they had their highest qoq number of customers >$100,000 ARR adds ever at 106.

  5. The company seems to be a “category crusher” and clear leader in its field, and should benefit greatly from the exponential explosion of data that’s going on.

Next, I’ll go over some of the possible bear cases for MDB (especially compared to other SaaS companies we invest in):

  1. Their Atlas cloud offering now makes up 58% of their revenue and climbing, but that still means that you’re investing 42% in an on-premises software business (compare this to most of our other SaaS businesses where we are getting close to 100% cloud business). The advantages of the cloud are well-documented on this board, so I don’t need to go much further on this point.

  2. The original MongoDB software was open-source. There was a relatively recent discussion on this board a few months ago regarding the disadvantages of open-source software as an investment: https://discussion.fool.com/open-source-businesses-34996465.aspx…. My understanding is that MongoDB has put in certain protections in place to stop the hyperscalers from just copying their product, so if someone could elaborate on this for MDB specifically, that would be much appreciated.

  3. Revenue growth is fast, but still remains slower than other “category crusher” SaaS companies like CRWD, ZS, DDOG, and SNOW.

  4. Their FY2023 guidance calls for revenue growth of 35% on the high end, which is significantly lower than the other companies we discuss on this board. For example, Cloudflare, which is currently growing revenue at a similar rate to MongoDB, guided for 42% revenue growth on the high end for the next fiscal year.

  5. Their addition of customers with >$100,000 ARR may have been the highest they’ve ever posted at 106, but it still lags the other “category crusher” SaaS companies. For comparison’s sake, in their most recent quarter, for customers >$100,000 ARR, NET added 156, ZS added 135, and DDOG added 210.

  6. They don’t give much visibility into their net retention rate. While they confirm that it is over 120%, and this is a good number, it’s not quite as good as our other “category crusher” SaaS companies (CRWD with 124%, DDOG with >130%, NET with 125%, ZS with >125%, and SNOW with 178%).

  7. Their absolute total customer and Atlas customer additions have been pretty steady, but that means they’ve been steadily declining on a percentage basis. This past quarter, they added about 2,000 total customers, and in the year-ago Q4, they added about 2,200 total customers (so even a slight decline in absolute number of customer additions).

So given all of these potential bear cases, what is the thesis for including MDB in a concentrated growth portfolio? Is their growth durability expected to be better than some of those other “category crusher” SaaS companies we can invest in? Their current net retention rate, customer additions, and FY2023 revenue guide don’t seem to suggest that. Is their tech/product really much better and more sticky than other companies like SNOW/DDOG/CRWD/ZS/NET? Again, their current net retention rate and customer additions don’t really suggest that. Is their TAM expected to increase faster than the other companies discussed? Are they getting to a point where their customer additions and net retention rate are likely to meaningfully increase in the future to support continued revenue acceleration?

It’s possible that I’m missing something regarding MDB, so I thought I’d make this post to open the discussion and see if some of my bear cases can be refuted by MDB investors.

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Is their growth durability expected to be better than some of those other “category crusher” SaaS companies we can invest in?

My answer is unequivocal yes.

If there is one company on this board that I can be confident of growing their revenue to 10x of current level, it is MDB… and it is because their cloud database (Atlas) is picking up all kinds of applications… just listen to the call this quarter… this company does not have a visible competitor near them…

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Can someone explain this line from the recent (2022Q4) earnings call:
Atlas grew 85% in the quarter compared to the previous year and represents 58% of total revenue compared to 49% in the fourth quarter of fiscal 2021 and 58% last quarter.

Is he simply repeating the “58% of total revenue” statistic at the end of the sentence, or was there literally no relative growth in Atlas from the previous quarter?

I say “relative” because I’m assuming the two big businesses for MongoDb are: 1) Atlas and 2) Enterprise Advanced (called “EA” in the call at times). EA is their customer-does-the-hosting solution, or as they put it “run MongoDB yourself.” So, if the percentage of revenue from Atlas did in fact remain at the same 58% but did grow at 85%YoY, then EA also grew at 85%YoY. Which is pretty amazing considering they admitted that almost all EA business is renewals and expansions of existing workflows - almost no new customers are starting with EA (as makes sense).

So, I’m not really understanding the “58%” relationship, although I did note a couple times during the ER call that it was mentioned by both MongoDB and analysts that EA was a particular stand-out this past quarter:

Q4, historically, has been the strongest EA renewal base. We clearly demonstrated and observed very strong demand for more EA workloads. Most of the – just if you step back more generically, most sales of EA are to existing EA customers, right, who are expanding incremental workloads. And in addition, as we called out these sort of focused accounts that we’re putting more resources around. A number of them are primarily EA accounts. And we had a lot of success deepening our penetration with those customers. And given that Q4 is a large renewal base, that’s often a good time when that takes place. Certainly, EA will be volatile quarter to quarter given 606, but it continues to be very strong.

So, it could be simply that Q4 skews to EA renewals and that Atlas was able to grow in the quarter as fast as those mostly entire year on-premise renewals is pretty striking. Or, it could be that on-premise isn’t really going away or that customers are migrating. Typically with databases, once the workflows are setup and working you don’t want to spend time or money messing with them unless you have to.

There was also some discussion on the call about the new Serverless offering. Dev Ittycheria pitched it as an easy way for workflows to scale up/scale down on demand, but I think it could/should be more than that in terms of ease of setup and use. Nothing was provided on how Serverless might impact MongoDB’s business, however. It’ll be interesting to see if MongoDB is able to keep the same performance as Atlas “Classic” (my term) with the convenience of being “serverless.”

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Agree with Nilvest - for me this is a high conviction solid hyper growth company with an outstanding runway and a highly visible path to maintaining or raising its growth rate. I continue to hold although I completely understand how it would not feature in a super concentrated portfolio of say 6-8 holdings.

WRT your bear points:-

  1. I think they have handled their technology and business model transition just about as well as anyone. I maintain faith in the Atlas story.

  2. They have expanded their AWS partnership and since AWS lost their fight against Elastic I think it was, I see Amazon being a little less aggressive against open source partners and actually treating them as partners. There is increasing competition for AWS (e.g. Digital Ocean) so there is an incentive for them to behave a little more respectfully with their partners.

  3. Part of this would be to do with the rate of transition from non Atlas to Atlas as well as new new customers. The land and expand ratio might be different between the solutions in the future so lots to toggle off on that metric for me.

Smorgasbord - I would totally put the static nature of 58% down to differences in EA growth rates and renewal patterns in Q4.

Ant

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[MongoDb] have expanded their AWS partnership…

Yes, for those who may not know, AWS built its own version of MongoDB that they call DocumentDB with the objective of keeping the code open source forever. That version was based off version 3.6 of MongoDB, and attracted companies who wanted a fully open source NoSQL database with good integration with other AWS services.

The commercial version of MongoDB is no longer open source because proprietary features were added by MongoDB that were attractive to enterprise customers and security-conscious customers. Also, MongoDB kept improving the product at a furious pace beyond the old 3.6 base. They have a loyal base of customers who love the product, will pay extra for the proprietary features, and will not switch to DocumentDB.

This joint announcement made today shows that AWS has realized that it’s better for them to expand their partnership with MongoDB, because the growth of Atlas directly benefits AWS.

https://www.crn.com/news/applications-os/aws-mongodb-deal-fa…

"Amazon Web Services and next-generation database developer MongoDB have established a strategic alliance through which the two companies will collaborate across a broad range of go-to-market and customer support activities, including providing cloud migration services for customers and partners and launching joint development initiatives around AWS Graviton processors and AWS Outposts.

The extensive six-year collaboration agreement, unveiled Tuesday, elevates the status of the MongoDB Atlas cloud database on the AWS platform, despite the fact MongoDB competes with AWS’ own Amazon DocumentDB database.

The alliance marks a sharp turnaround from just several years ago when AWS competed more aggressively against MongoDB with DocumentDB."

-Ron
Long MDB since Q1 2018

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Can someone explain this line from the recent (2022Q4) earnings call:
Atlas grew 85% in the quarter compared to the previous year and represents 58% of total revenue compared to 49% in the fourth quarter of fiscal 2021 and 58% last quarter.

Is he simply repeating the “58% of total revenue” statistic at the end of the sentence, or was there literally no relative growth in Atlas from the previous quarter?

I would defer to Ant’s reply “differences in EA growth rates and renewal patterns in Q4.” for the reason but below is a table of Atlas as % of total revenue and Atlas rev growth over the last ~4 years.


**Atlas        Atlas	Day of	Day after     %**
**ER Date         % of Rev     Growth     Price   Price         change**
3/8/2022	58%	     85%	281.74	334.09	       18.6%
12/3/2021	58%	     84%	450.16	429.34	       -4.6%
9/2/2021	56%	     83%	401.65	507.41	       26.3%
6/3/2021	51%	     73%	271.15	315.27	       16.3%
3/8/2021	49%	     66%	287.05	311.92	        8.7%
12/7/2020	47%	     61%	280.46	282.98	        0.9%
9/1/2020	44%	     66%	250.72	239.53	       -4.5%
6/4/2020	42%	     76%	220.04	197.98	      -10.0%
3/17/2020	41%	     86%	114.52	105.73         -7.7%
12/9/2019	40%	     180%	131.01	129.18	       -1.4%
9/4/2019	37%	     247%*	158.66	150.44	       -5.2%
6/5/2019	35%	     340%*	148.87	147.74	       -0.8%
3/13/2019	32%	     400%*	104.26	130.94	       25.6%
12/4/2018	22%	     ** 	83.73	90.74	        8.4%
9/5/2018	18%	     400%*	72.04	78.65	        9.2%
6/6/2018	14%	     400%*	51.26	49.58	       -3.3%
3/13/2018	11%	     500%*	37.86	40.67	        7.4%

*small base
** not given

Long since Mar’18

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Tiger350,

Thank you for keeping the MDB conversation going. I also feel this company/stock deserves further investigation here.

Like you, I am indebted to Peter Offringa (Software Stack Investing) for some of my insights below.

Here is my point: In making your bull case, you omitted the central premise outlined by Peter Offringa in his latest post on MDB, dated February 9th, and have thus underrepresented the massive potential opportunities ahead of the company.

https://softwarestackinvesting.com/

This is the point that Peter makes:

"At their annual user conference in July, the leadership team highlighted their product rebranding as the first “Application Data Platform”. Their vision is to address all data storage workloads that developers typically need to build a modern, scalable software application. This scope goes far beyond a document-oriented database, to span caches, search indices, mobile app interfaces and even basic analytics for data visualizations. The premise is that developers prefer to focus on building features, versus worrying about data storage infrastructure. Additionally, engineering teams can reduce cognitive overhead with fewer database solutions to learn. MongoDB’s goal is to increase developer productivity by eliminating the “tax on innovation”…

“With this positioning, MongoDB is expanding the scope of their addressable market significantly. Previously, the argument for market share revolved around how much processing their document-oriented database could take from traditional relational databases. Now, the scope encompasses all front-facing application data stores.”

“This pivot is important to note and was strongly reinforced at MongoDB’s Live conference last summer. Since then, it has been carried forward in promotional positioning. The implication is that MongoDB can be the database solution for all types of applications within the enterprise, not just the smaller percent that are suitable for a document model. If MongoDB can pull off this product extension, then they transition from capturing a few percent of workloads in a large customer to the majority of workloads over time. That could be a 10x increase in spend with existing large customers over the next several years – an opportunity that didn’t exist before 2021. This will likely be the growth driver going forward, beyond simply adding new customers.”

In response to a question that I posed to him, Peter replied:

“I base the 10x estimate on the number of data storage use cases that are addressable now by MongoDB with the Application Data Platform, versus their prior focus on just document-oriented databases. If we look at the content shared at MongodB.live last year, they have added support for key-value, wide column, graph, time series, search, analytics, relational and a couple variants of mobile data caches. The 10x factor may be a little optimistic, but the point is that there are many more workloads that MongoDB can address than before. I think this does expand the serviceable portion of their addressable market significantly.”

Thus, Peter acknowledges that, of course, the total TAM/SAM expansion is unknowable at this time, but it is likely that these new use cases are already – to some extent – behind the growth in Atlas.

Thanks to Peter Offringa for his permission to share his insights. And I also want to acknowledge, per the usual custom, that this is my first post and to thank Saul and the board for sharing this extraordinary community.

Erik (of nola)

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The implication is that MongoDB can be the database solution for all types of applications within the enterprise, not just the smaller percent that are suitable for a document model.

Let’s break-down what’s really going on here because I’m reading some conflating of issues.

  1. MongoDB is based on a Document Model. Period.

  2. If your data has a fixed schema or otherwise does not need the flexibility of the Document Model, you don’t use MongoDB, you use a traditional SQL (Relational) database. Some of the reasons for this are:
    • SQL is a much simpler access method. It’s easier and faster. If you’re the big boss, you’ll pay less for SQL jockeys than for MongoDB jockeys.
    • SQL is a much more widely supported API. There are hundreds, maybe thousands, of BI (Business Intelligence) tools written that support SQL, versus maybe a handful that support MongoDB.
    • SQL databases easily support ACID (Atomicity, Consistency, Isolation, and Durability). (ACID is a big topic by itself, but for this thread ACID is needed for financial and other critical applications. One easy example is to think of transferring money from one account to another. If that’s done as two separate transactions: 1.Debit one account, 2.Deposit into another account, then the DB has to guarantee that both transactions go through or neither go through, and that’s what ACID provides.) While MongoDB does support ACID (https://www.mongodb.com/basics/acid-transactions ), there are performance implications when multiple documents are involved.

  3. One of the cornerstones of Analytic processing is matching data in various tables (documents for MongoDB). SQL supports JOIN statements, MongoDB is very limited in what it supports (Left Outer Joins, for instance), and even then performance is slower than SQL databases. These JOIN statements are heavily used in analytics as they enable matching of data in different tables. Another aspect is that Documents in NoSQL databases don’t typically have indexes, which is an efficient way of referencing data in different tables/documents. Now, there are ways around some of this, but these involve extra work and even programming, so they’re not ideal.

So when I read the exuberant quotes of Peter Offringa, I have to respectfully disagree, or at least clarify. Specifically:
• “Previously, the argument for market share revolved around how much processing their document-oriented database could take from traditional relational databases.”
If the market share argument was indeed MongoDB stealing business from SQL databases, that was a very flawed argument, as really the only superior property there is the easier scalability of NoSQL databases - most every thing else is harder if you’ve already got a schema (as you would if you have an SQL database you’re replacing).

• “Now, the scope encompasses all front-facing application data stores.”
First off “front-facing applications” aren’t really a thing. I think what was really meant is “web-facing” (perhaps “internet-facing”) applications. These are applications that operate over the internet (public or private). I struggle to understand what is new here for MongoDB. MongoDB has always been a great transactional database, and while there are some operational improvements in later versions, nothing has significantly changed in terms of support for ACID or analytics. Bank of America is not ever going to use MongoDB for its user accounts, even for access over the web or mobile app, and no-one is going to perform significant analytics directly on MongoDB databases. The “all front facing application” phrase just isn’t accurate in my view.

• “The implication is that MongoDB can be the database solution for all types of applications within the enterprise, not just the smaller percent that are suitable for a document model.”
As I’ve said repeatedly, there is no single database to rule them all. If you don’t need the flexibility of a document model, using a document model database simply isn’t ideal. See above.

• “If we look at the content shared at MongodB.live last year, they have added support for key-value, wide column, graph, time series, search, analytics, relational and a couple variants of mobile data caches. The 10x factor may be a little optimistic, but the point is that there are many more workloads that MongoDB can address than before. I think this does expand the serviceable portion of their addressable market significantly.”
Maybe I don’t understand all the changes to MongoDB, but I don’t see anything that drives an order of magnitude expansion of the TAM.

More important to me as an investor are:
• The upcoming changes to Atlas, specifically the “Serverless” effort. This basically simplifies MongoDB Atlas configuration and management.
• Discussion on the conference call about how MongoDB’s free-tier Community product leads to eventual purchases of Enterprise Advanced, and that they’re seeing the Atlas free-tier leading to eventual purchasing of Atlas licenses.
• Concern over whether Atlas is really growing fast enough. As discussed up-thread, the number of new customers isn’t growing much - if at all - and as a result the percentage of new customers acquired each quarter is actually decreasing. We are seeing top-line increases, which tells me that existing customers are using/spending more (NRR of 120%), but if Mongo can’t attract many more new customers soon it’s growth is going to slow down. We already saw this quarter that the traditional on-premise solution grew as much as Atlas, dollar-wise, and yes this quarter was the typical renewal quarter and so it’s higher than the other 3 quarters, but what’s that going to mean for the next 3 quarters in terms of overall revenue growth? I have concerns here.

Overall, MongoDB is a great product for what it does, but not only are there very real architectural limits in where is can expand, there are enough business metrics that aren’t top-notch (heck, is there a strong path to profitability?) that it’s remaining a small position for me now.

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Hi Smorgasbord1 - You make good points and I agree with much of what you are saying. I think the quotations from my blog might be taken out of context. The full blog post delves into more analysis and balances out the hyperbole. I agree with you that MongoDB is still based on a document model (I didn’t say it wasn’t). MongoDB’s recent product strategy is to position the platform as suitable for a broader set of application workloads. This may be more GTM messaging than recent tech changes. With micro-services and the emergence of many single purpose databases (key value, time series, graph, wide column), I can see the argument that some of those workloads could be addressed by a single data platform based on the document model, supplemented by the unified Query API that translates those query types into the backing document store. In addition, MongoDB is expanding addressable use cases within search (full text and faceted, built on Lucene) and the cache/sync layer in front of mobile apps (Realm). Yes, replacing traditional, entrenched relational and analytics workloads is likely a stretch. Having stood up many monolithic applications and microservices for a number of high-traffic consumer sites, I appreciate the nuance and performance considerations that you raise. I think the benefit of the document model as a means to reduce the overhead of object-relational mapping for application developers can be a driver of some adoption in that area, but not the lion’s share.

Regarding applicability for mission critical workloads, MongoDB is increasingly referencing customer usage of that pattern. This trend was discussed using Coinbase and “one of the largest North American banks” (200 applications spanning time series, caching, analytics, mobile and operational data store) as examples on the Q3-Q4 earnings calls. Besides these, they list a few other financial services companies as customers (Barclays, Royal Bank of Scotland). Customer stories include examples of transitions from a relational store to MongoDB. I agree with your implication that these are unlikely one-for-one rip-and-replace, rather part of a larger refactoring. By front-facing applications, I refer to those that are customer-facing with expectations for high concurrency and low latency. These applications are generally delivered over the Internet with the client being a web browser or mobile app. I have used this term in engineering shops in the past, but note that it is confusing. I don’t apply the term exclusively in the full blog post.

With total customer count at 33,000 and increasing about 2k a quarter consistently, I think their shift in focus to expanding spend with large customers makes sense in the near term (only 4% of total customers > $100k). In Q4, they reported a surge in Direct Sales customers (up 500 q/q versus 300 in prior quarters), which make up 86% of revenue. These are high potential customers that are assigned a sales rep (versus self-serve). This focus is now manifesting in the record number of $100k customers added in Q4 and 70% y/y growth in $1M customers to 164. I agree that the sequential percentage growth in total customers needs to pick up as the absolute number increases. On profitability, this has been a concern of mine too, but they are showing progress. Gross profit was up 2% y/y, op margin was up almost 900 bps and near break even, and they delivered 6% FCF margin.

Whether they can continue that momentum and expand broader utilization of the platform remains to be seen. I think the AWS partnership will help, but the jury is still out. I share your skepticism that a single data platform is achievable across all workloads. We could see consolidation to a smaller set of data storage segments, like document-adjacent (document, key value, columnar, maybe time series), graph and relational. Personally, I have a smaller position in MDB, with DDOG, NET and SNOW being my top 3 allocations. In any case, I appreciate your perspective and pressure testing of the thesis.

  • Peter Offringa, Software Stack Investing (@StackInvesting)
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Thank you, Smorgasbord1, for lending your expertise to this discussion.

Thank you, Peter O., for also weighing in.

Since I’m the person who shared the quotes from Peter’s blog, I want to acknowledge that his full post DID include greater context, and I was aware that I was cutting around some of it for the sake of simplicity and concision – but, obviously, lost an important thrust of his analysis in the process. I apologize for that.

That said, I’m glad to have received greater clarification and understanding from Smorgasbord’s and Peter’s exchange. Love to see a cordial, productive, and high-level exchange result from a layman’s clumsiness.

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Hey Peter - great post.

I looked up Barclays and RBS (Royal Bank of Scotland) and found some old (2015-2017) articles on them incorporating MongoDB into their operations. With those dates, they’re clearly not using Atlas. They have (had?) huge issues dealing with complicated internal systems that grew in place over the decades. One article in particular https://diginomica.com/rbs-focuses-fabric-simplification-spe… ) says RBS had 600 Oracle databases, 300 Sybase and 12,000 SQL Server databases using 40,000 compute cores, with multiple copies of data “abounding.” And remember, that’s all on-premise (world-wide, though)! My read is that these companies added MongoDB to service the customer-facing (I agree that’s probably the best phrase, at least if you consider that to include “internal customers” as well) inquiries, operating as a kind of cache to relieve the load on their legacy back-end database systems (but not replace them).

These use cases helped me understand why MongoDB Enterprise Advanced (its on-premise version) is still a significant proportion of revenue and solidifies for me that MongoDB will never be close to 100% Atlas. And that’s not a bad thing. I guess the truth is that there really aren’t good replacements for Oracle-type on-premise relational databases with high performance, reliability, etc., so the best thing for companies to do is to off-load everything else to other systems and let Oracle do only what it does best. What I still don’t understand, though, is how to calculate a TAM based on such “Oracle-adjacent” migrations are out there.

You also mentioned micro-services, and I agree that’s a trend that MongoDB could catch for some wins if its Serverless Atlas version is done right and becomes generally available quickly enough. With Serverless and the Query API, application programers could treat a MongoDB database as true DBaaS, which could gain some traction in adoption. But again, hard to assign a TAM on that kind of thing.

At any rate, Peter, even if we weren’t so aligned on our thinking (and resulting investment actions), this is the kind of respectful give and take thread that we all want here. Thanks for your considerable contributions.

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Great conversation here thank you. Here is an SA article that does not have much depth, but it is a NDB vote of confidence for those of interest:
https://seekingalpha.com/news/3814925-mongodb-upgraded-at-ub…

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Peter & Smorg, great information.

Wanted to point out that on the call, every one of the cases they pointed out were of the type of workload MDB is ideal for; the type that Smorg is referring to.

Mongo is very good at writing a lot of transactions.
Mongo is also very good at displaying groups (think all the data on a webpage in your account as you browse). Smorg’s point of the user facing apps.
Mongo is exceptional at being a database that is CLOSER to the edge; horizontally scaled across multiple datacenters. Its not quite edge like something NET might build, but it is a lot closer than the traditional SQL database. This means it is an IDEAL database for DISTRIBUTED applications, such as collecting data on the progress of trucks as they travel across the US or water & oil pipeline flows…

It will be interesting what new cases Mongo comes up with down the road. I’m 100% with Smorg though in that there is a larger set of database workloads that MDB won’t replace because its just not suitable for it. However, for an investment, that’s ok because data and databases are growing exponentially. One great thing is it is pretty much the undisputed leader for the sets it works great for. With a typical SQL based database, there is a lot of competition, Oracle, SQL Server, MySQL (Especially thru AWS AuroraDB), PostGres then other smaller players. Being a pure play database for a subset of the market has a lot of value for investors.

Also, remember that while TECHNOLOGY evolves rapidly, ADOPTION does not. Heck, I still see clients running on Windows Server 2003 (MAJOR SECURITY ISSUE). In 2020, I had a client in CHINA running their entire system off Windows Server 2003 and all their databases were SQL Server 2000 & 2005. I choose to think this outdated is an outlier… It is very common to see at least 10 year old tech still out there. One exciting thing though is the evolution of MDB. I remember when it was new and I was a new-ish database administrator back in those days. We tried it for a small product and the developers loved it. However, we ended up replacing that due to the fact that at the time, we couldn’t report on it (we moved the data to SQL Server then reported on it). That was 15 years ago or so and they’ve REALLY matured since then. Today, the fanatical devs have multiplied and the niche it serves is probably the fastest growing segment of transactional databases due to how dispersed workloads are becoming.

One other thing I want to note is the customer growth discussed earlier. For MDB, I don’t think total customer growth should be considered at all. It is all about larger client growth. I say this because ANYONE can be a customer for free or very little. If you notice though, ALL the customer growth is in Atlas. They added 2K new total customers and added 2K new Atlas customers. This is good, I think it means percent of paying customers likely going up.

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Thanks to Smorgasbord, Peter, and now FinallyFoolin on this thread. I’m conscious of the fact Saul recommends staying out of the weeds in technology and that GoToMarket is often much more important. I do like to understand the general positioning of what a company has to offer. I’m clear that I’m often completely wrong in this, despite my best efforts and I really appreciate each of you sharing here.

FinallyFoolin, when you wrote-
Mongo is exceptional at being a database that is CLOSER to the edge; horizontally scaled across multiple datacenters. Its not quite edge like something NET might build, but it is a lot closer than the traditional SQL database. This means it is an IDEAL database for DISTRIBUTED applications, such as collecting data on the progress of trucks as they travel across the US or water & oil pipeline flows…

It reminded me of last April when Cloudflare announced Durable objects Here:

https://blog.cloudflare.com/durable-objects-open-beta/

I wrote into my notes:

Note the pricing announcement. This should add nicely to recurring revenue very soon

My favorite paragraph in the above announcement-

Giving developers more for less

Not only are Durable Objects less expensive, they have a unique design that lets you do more than a traditional database layer.

Each Durable Object runs custom code that you write. After your Durable Object makes a request to a downstream API or to our storage API, the value can be cached in-memory for no-cost, low latency lookups.

Unlike major cloud-provider databases, Durable Objects are replicated to multiple distinct regions by default for high availability with no additional cost. With other cloud providers, this feature generally drives up costs - not to mention the increased complexity of self-managing multiple regions.

I added:
The above addresses directly my investment thesis. Cloudflare will become the EdgeCloud, doing all but the largest workloads now being done with the Hyperscalers.

I see now here ,thanks to this discussion, just how simplified a view this was.

I continue to believe in Cloudflare’s vision. I specifically appreciate FinallyFoolins admonition of the fact that ‘building tech is one thing and adoption rate is another.’ I realize this is a thread on MongoDB; however, does anyone else see Cloudflare as direct competition in this TAM we all see more clearly now, thanks to this discussion?

Best,

Jason

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does anyone else see Cloudflare as direct competition in this TAM we all see more clearly now, thanks to this discussion?

Why yes I do.

But not from Durable Objects that you mentioned (which are more programmable shared objects than a database)… but more from data services yet to exist, but that were hinted at when R2 object store was announced — an edge-spanning SQL database and a data streaming service.

But until then… the answer is no, they don’t compete currently. Back in Nov-21 MongoDB became a data partner in Workers.
https://blog.cloudflare.com/workers-adds-support-for-two-mod…

-muji

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I really like two things going for MDB:

  1. Atlas, the cloud side of their business. Featuring much higher growth rates than the non-Atlas portion of their business, and revenues are usage based. In this way, MongoDB monetizes the exponential growth of data. Needing to store more data and perform more operations on that data leads to more revenues.

  2. Growth in large customers, especially million dollar customers and direct sales customers.

And, the other side of the coin to Atlas, probably the best reason not to own MongoDB is that 42% of their business is not cloud based. This is one cut and dry reason why MongoDB should never be particularly richly valued on a price/sales multiple when compared to pure cloud companies like SNOW, since a large portion of their revenues are not cloud based.

Overall customer growth is decelerating, but I am taking the side that slowing customer growth probably doesn’t matter, because enterprise customer growth is steady and million dollar customer growth is solid. If that changed, I would have to reevaluate holding onto MDB.

If you want more details, I made a youtube video about the investment thesis for MongoDB available here: https://www.youtube.com/watch?v=sojiJl6HfW0&feature=yout…

It is now a 4% position for me.

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