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Good morning! It's Tuesday, October 23rd. Today, we are looking at MongoDB, a database management platform that’s expected to generate $1.54B next year!

THE FEATURE

MongoDB: The $24B Database Management Platform

In 2007, Dwight Merriman, Eliot Horowitz, and Kevin Ryan sold their company DoubleClick to Google for $3.1B.

DoubleClick’s claim to fame was the invention of display banner ads that track user engagement online, an invention that now serves as the foundation for Google Ads.

$3.1B is undoubtedly a large payout, but DoubleClick’s founders are now up to something bigger and better– a SaaS company worth $24B!

What’s MongoDB?

Before selling DoubleClick, its founders recognized that the company's most significant shortcoming was that it delivered more ads than existing databases could handle (up to 400,000 per second). This shortcoming led to long load times and a lack of functionality for banner ads.

The problem was that databases a decade ago were incapable of processing large workloads. So, after selling their company to Google, Merriman, Horowitz, and Ryan set out to create their own database.

As the name would suggest, MongoDB is designed to handle massive (“mongo”) workloads. MongoDB can do this by defusing stored data across multiple third-party data centers while using a Binary JSON format to access and aggregate the information quickly.

Essentially, MongoDB revolutionized data storage by coupling large workload capacity with the ability for users to quickly query their data without having to be skilled software engineers.

In addition to its $24B enterprise value, it's clear that MongoDB is a market leader from its client list of billion-dollar companies like Verizon, Adobe, and Toyota.

These companies love MongoDB because it's one of the only database management programs that can keep up with their operations and make them even better. For example, eBay uses MongoDB to process its search suggestion feature, guaranteeing that relevant products will be shown to users in the blink of an eye.

With the company’s ~40k clients, MongoDB is expected to generate $1.54B in revenue in 2024, which would amount to 19.5% Y-o-Y growth. The bulk of this revenue comes from subscription fees, but they also generate money from consulting services for platform integration and employee training.

How They Win: Invest In Long-Term Clients

Last year, MongoDB showed a net loss of $64.4M. This is unusual for SaaS companies, which have high-profit margins since it costs nothing to deliver software once it is developed. But unlike other Saas companies, MongoDB has been investing heavily in sales and marketing to acquire high-quality clients.

MongoDB’s lack of profit isn’t actually a problem, considering that the company has also seen exponential revenue growth– this is the same situation companies like Facebook and Google were in before they began generating massive profits.

Spending hundreds of millions of dollars to acquire high-quality clients has been a winning play for MongoDB. That’s because clients stay with MongoDB for the long run, as it’s simply the best data storage manager out there (MongoDB’s 100 largest contracts have been customers for 5+ years).

The magic behind MongoDB’s business model is that the company grows with its customers. As subscribers learn to use the platform and grow their business, they inevitably input larger and larger workloads and purchase additional software tools. The average MongoDB customer voluntarily increases their subscription fees by 2.1x after two years.

Key Observations

In recent years, SaaS companies have been struggling as their customer base has tightened their budgets and reduced their number of vendors ahead of economic uncertainty.

However, MongoDB has seen explosive growth during this same period.

This is because their product isn’t a luxury for large-scale businesses; it’s a necessity. Businesses have been dropping various software vendors and subscribing to MongoDB so their employees can access and handle data distribution on their own.

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