MongoDB stock sinks 13% after Amazon encroaches on its turf - but an analyst says that MongoDB has two secret weapons
- MongoDB stock closed 13% down after Amazon Web Services announced its own rival DocumentDB.
- Analysts say this needs to be taken seriously because of Amazon's scale and reach - but it's too early to tell if it will affect MongoDB in the long term.
- MongoDB has two key advantages more capabilities and a loyal developer following - so loyal that when Microsoft offered a competing database called CosmosDB, it had little impact on MongoDB.
MongoDB's stock was down 13% at the close of the first day of trading after Amazon Web Services launched DocumentDB, a direct competitor to its own database business. The company, which went public in 2017, is now valued at just over $4 billion.
On Wednesday, Eliot Horowitz, CTO and co-founder of MongoDB, told Business Insider that he's not worried about Amazon DocumentDB - rather, he said, it was a sign of "how desperate Amazon was" to do what MongoDB does. Wall Street, however, does not seem to agree, evidenced by the dropping share price.
"Amazon released a product that is not only competitive and directly targeted at MongoDB," Edward Parker, director and data and cloud infrastructure analyst at analyst firm BTIG, told Business Insider. "Given Amazon's cloud size and technical confidence, we have to take this very seriously. It has competitive implications for MongoDB."
Notably, DocumentDB is compatible with certain older versions of MongoDB, potentially making it easier for customers to move from one to the other. For its part, DocumentDB is tightly integrated with the rest of the Amazon Web Services empire, and customers pay only for what they use.
Not all hope is lost for MongoDB, though, says Parker. What makes MongoDB stand out is its enthusiastic developer following. That enthusiasm might mean that AWS has trouble swiping these customers away from MongoDB, no matter how easy Amazon makes it. Besides, MongoDB has been around longer, and is more fully-featured.
"MongoDB has a very capable document database with a very passionate and large developer base," Parker said. "Amazon has advantages over MongoDB in terms of scale and overall resource preponderance. The question is the extent to which Amazon can attract MongoDB developers."
In an interview with TechCrunch, MongoDB CEO and president Dev Ittycheria was more confident, saying that "imitation was the sincerest form of flattery" and that "developers are technically savvy enough to distinguish between the real thing and a poor imitation."
"MongoDB will continue to outperform any impersonations in the market," Ittycheria told TechCrunch.
MongoDB has a secret weapon
In a note to clients, BTIG analysts pointed out that MongoDB has weathered similar storms before - a competing database from Microsoft Azure, called CosmosDB, failed to make a significant dent on MongoDB's momentum.
"CosmosDB is a document database from Microsoft which is the de facto number 2 hyperscale cloud provider," Parker said. "In theory, you would have expected that to be viable competition, but it hasn't really been able to slow down MongoDB. Microsoft has likely not been able to capture the same kind of developer mindshare that MongoDB has."
Instead, MongoDB says, it's common for customers to install MongoDB itself on their Microsoft Azure cloud infrastructure. MongoDB's Horowitz expects that there will be a similar dynamic at play with Amazon DocumentDB.
"We have had zero problems with MongoDB adoption on Azure," Horowitz told Business Insider. "I don't think [Amazon DocumentDB] going to have a terribly large effect on our business. It will bring MongoDB to the forefront to people's minds. It shows people who haven't used MongoDB before just how powerful the MongoDB API is."
Ultimately, BTIG believes that while the introduction of Amazon DocumentDB may not hurt MongoDB in the short run, it remains to be seen if it'll have long-term effects on the business. At the same time, MongoDB's killer advantage is really that developer enthusiasm, giving Amazon a high bar to clear, say the analysts.
"Time will tell the extent to which [Amazon] is able to successfully emulate [MongoDB]'s virtues while overcoming some of its shortcomings, but it's hard to conclude that this development doesn't have negative competitive implications," BTIG analysts wrote.
Also of note is that MongoDB was one of the companies that went on the defensive against cloud providers, like Amazon or Baidu, that take open source software like its own and package it up as a service for profit. To do so, MongoDB changed its software licensing agreements - a a controversial move with ripple effects still playing out.