Since going public in October 2017, database platform developer MongoDB (MDB 78.28, -8.34, -9.63%) has become a top-flight growth name, consistently exceeding analysts' quarterly expectations, as its "freemium" land and expand business model has worked wonders. Its consistent high double-digit topline growth rates have helped the stock nearly triple in value since its IPO.
That kind of
performance is going to shine a spotlight on a company, with investors and
business partners alike taking notice. As it turns out, one of MDB's most
prominent business partners, Amazon (AMZN), is now turning into a competitor with
MDB's managed cloud database offering.
MDB is a leading non-relational (or noSQL) database platform that is heralded by developers. Customers use its platform as a document database to store, retrieve, and manage semi-structured data. In terms of their products, it offers Community Server as an open source offering, analogous to a "freemium" offering. Community Server is a free-to-download version of MDB’s database that does not include all of the features of its commercial platform.
MDB also recently launched an enterprise class database product called "Atlas" which includes comprehensive infrastructure and management of MDB’s Community Server offering. It is mainly known as a database product for IT developers. So, in essence, MDB looks to initially lure in new customers with its more basic, open source Community Server product, and then move them over to the feature-rich Atlas version.
The strategy has worked incredibly well for the company, evidenced by fifteen consecutive quarters of 120%+ annual recurring revenue (ARR) expansion. It is the company's Atlas product that has been fueling its rapid topline growth. In fact, revenue for the product has been surging by 300-400% over the past couple of quarters. From a broader point of view, the ongoing secular trends revolving around public cloud adoption, as well as database modernization, have been providing a tailwind for MDB.
These trends have not been lost on AMZN, either, as it has funneled plenty of capital into its burgeoning Amazon Web Services (AWS) business. As we noted above, AMZN also foresaw the success of MDB by partnering with the company to offer an AWS-based version of the open source product. But, as MDB's popularity and growth continued to climb, AMZN decided that it wanted a bigger piece of the pie.
So, the internet and cloud software giant is creating and launching "DocumentDB", a database platform designed to work with older versions of MongoDB -- specifically, MDB's version 3.6, introduced in November 2017. This looks like a work-around in order to be in compliance with MDB's new licensing rules, called SSPL, which stipulates that anyone offering MongoDB as a service must first release the code to allow that service to be an open-source project of its own.
According to AWS, it considered other ways of supporting customers using MongoDB, but, in the end, it believed that the most effective (and profitable) avenue would be to launch its own database product, based on MDB's code. But, how AWS goes about updating this product, while keeping MDB's new licensing rules in mind, remains a question mark.
For its part, MDB is putting on a brave face -- at least in public. The company stated this morning that the cloud database market can handle many competitors and that MongoDB's differentiated functionality in its newer software gives it a competitive advantage. However, when the largest company in the country makes you a direct competitor, MDB isn't simply going to brush it off as an inconvenience. That said, for the time being at least, MDB seems fairly well insulated as it has a very loyal customer base -- see the 120%+ ARR -- and as its Atlas offering continues to enjoy remarkable growth. Going forward, though, investors would be wise to keep a close eye on its ARR and user growth rates, looking for signs for a change in demand.