Hi Saul,
Thank you for this amazing summary of DDOG’s earnings report! I had tentatively dipped my toe in the water with a few shares a couple weeks ago when they really dropped a bit for no reason. But this report gives me a significant boost in confidence for their potential!
Two things stand out in this report for me:
• In October, we announced we are currently “In Process” on the FedRAMP Marketplace, initiating the certification process. Achieving FedRAMP authorization will expand our addressable market, by allowing U.S. federal government departments and agencies to adopt and use our cloud platform.
Having worked at a start-up which had spent a considerable amount of time, effort, and money chasing FedRAMP certification, it’s important to note just how difficult this rating can be! My former employer spent more than 7 YEARS chasing FedRAMP certification. It is a long, tedious, and arduous process. And even now, after 9 years, they still don’t have FedRAMP certification!
So, why have they continued to pour so much time and money into it? Because they believe the amount of future revenue they’ll gain as a result of that one certification will make it all worth it! You can not sell into many of the government agencies without this certification! And once you have it, you are often THE ONLY ONE in your category with that certification. This means you have a complete monopoly on all sales into the Federal government for your product category!
It doesn’t matter how good, or even how many competitors you have in the overall market. If you’re the only one with FedRAMP certification, the vast majority of government agencies CAN NOT buy from your competition even if they want to!
Which leads to the second quote which stands out:
We believe we are at the very early stages of an existential market opportunity,
If they are close to getting the FedRAMP certification, then this is a very true statement. But, more importantly, this statement is indicative of the ideas others have stated. We have not even begun to see the expansion of a SaaS-based world yet. In my previous company my eyes were opened to what SaaS and cloud based applications will look like. The future of software development is completely inverted in the cloud. Everything is possible, and everything is completely decentralized. Gone are the days of a fixed environment in fixed data center. Gone are the days of having an IT staff “own” the data centers and networks and monitoring, etc. In the future, all this will be owned by the developers themselves.
Monitoring is an essential component of running a software platform. And everything that can be monitored and measured should be, otherwise, how do you know where problems lie, or improvements can be made? However, no one likes monitoring. It’s tedious, it’s cumbersome, and it’s HARD. And where do you draw the lines? DDOG has solved all of that and provided a flexible, customizable, and robust platform to monitor everything and anything you could ever want for cloud-based SaaS platforms. They’ve gone viral (as someone earlier stated) because they’re that good. You could choose lots of alternatives, but none of them are as comprehensive, or as flexible, or even as cheap once you consider the amount of effort required to cobble all the pieces together and the difficulty of integrating all those pieces into your solution.
And since DDOG is essentially a first-mover in this space, AND we haven’t even begun to see cloud-based SaaS take off yet, I believe they are right; we are sitting at the threshold of an existential market opportunity!
The big question now is: Can they execute and maintain their lead position in order to exploit that opportunity! Only time will tell!
Anyway, thanks a lot for this summary, I really appreciate it!
Paul