Can Domo Effectively Compete With Tableau In The Near Term?

Tableau Software (NYSE:DATA) is a major player in the business intelligence (BI) market, though the space is becoming increasingly competitive. The company competes (to varying degrees) against software giants such as SAP, Microsoft and Oracle, in addition to smaller niche players such as Domo Technologies, which recently went public. Despite the intense competition in the space, Tableau has performed strongly of late, with its stock price rising almost 45% since the beginning of the year. It has been growing its revenue at close 40% compounded annually for the last five years, driven by a booming customer base. However, the intense competition has made it necessary to spend substantially on R&D in order to differentiate its product offerings and boost its market share. In this note we compare Tableau to newer competitor Domo, and look at how their market shares project to change in the coming years.

You can create your own forecasts and estimates by altering the base inputs (blue dots) on our interactive dashboard for Tableau.

Tableau’s Customer Base Is Increasing, But Revenue Per Customer Is Declining

Being a leader in the BI space, Tableau has been able to grow its customer base from 11,000 in 2012 to over 70,000 in 2017, representing a compounded annual rate of almost 45% over the last five years. At the end of the last quarter, the company had added another 4,000 customers to its existing base, indicating that there is still ample demand for its products from new prospects. Accordingly, we expect its customer base to grow to over 85,000 by the end of 2018.

Contrary to the customer growth, Tableau has experienced a sharp decline in its revenue per customer (including maintenance & services revenue) over the last couple of years, due to the rising competition in the industry. Since this trend is expected to continue, we anticipate that the company’s revenue per customer will continue to see pressure in the coming months. However, the strong customer growth is likely to more than offset the fall in pricing, and drive solid top-line growth for the company.

Domo’s Customer Base Is Small But Growing; Revenue Per Customer Is Notably Higher

Domo is a relatively newer player in the BI industry, and allows customers to access real-time data and analytics from their smartphones. The platform pulls in data stored in different formats and locations, and makes it easy to interpret. Based on the company’s IPO filings, its customer base has grown from 1,199 at the end of January 2017 to 1,521 at the end of January 2018. This implies a rise of roughly 27% on a year-on-year basis, which is solid growth for a relatively new player in the competitive space. Given that Domo has been attracting strong demand, we expect its customer base to grow to over 1,800 by the end of January 2019.

In addition, Domo’s revenue per customer has been increasing at a fast pace, unlike that of Tableau. This is primarily because the product offering is targeted at CEOs and top management personnel of large enterprises, who may have higher budgets. We expect the company to stick to its growth policy going forward, resulting in increasing revenue per customer.

Tableau Versus Domo

Per Gartner, the global business intelligence and analytics market was $18.3 billion in 2017 and is expected to reach $22.8 billion by the end of 2020. This implies an annual growth rate of around 7.5% per year. Accordingly, the global BI market could reach nearly $20 billion in 2018.

Using our estimates for Tableau and Domo’s 2018 revenues, we expect their market shares to be 4.9% and 0.6%, respectively, for 2018. While Tableau’s market share has been growing steadily over the years, its pace of growth has slowed down due to the rising competition. On the other hand, Domo’s share has been growing at a solid rate, but it remains much smaller than Tableau (with the lower base factor contributing to that higher growth rate). While Domo could eventually become a strong threat to Tableau, due to its fast-paced growth and consistent innovation, we believe that it will need to prove its mettle among customers by maintaining its product offering and pricing, before it can capture a sizable portion of Tableau’s market share. Until then, we foresee Tableau maintaining a leading position in the BI space.

Do not agree with our forecast? Create your own price forecast for Tableau by changing the base inputs (blue dots) on our interactive dashboard.