Why a $ 10 billion Discord sale might not match fans of the messaging platform | Business news
If you’re not an avid gamer or have one in your family, you may not have heard of Discord before.
After the final round of funding in December last year, the communication and messaging platform loved by gamers is already valued at USD 7 billion.
That just seems to be the beginning.
Gaming technology website GamesBeat reported yesterday that Discord is going through a sales process that could result in a “more than $ 10 billion” acquisition.
Bloomberg reported today that one of the potential buyers Discord is talking to is Microsoft.
Events seem to have gained momentum.
Just last week, Discord announced that it had named its first CFO, a move that is seen as a precursor to an IPO.
Many analysts still believe the company would prefer to be listed on the stock exchange rather than sell itself.
Other close followers, including one quoted by GamesBeat, said there was no reason for Discord to sell itself right now as its founders “were in complete control of their own destinies at the moment”.
These founders, Jason Citron and Stanislav Vishnevskiy, would each become billionaires with an IPO or acquisition that valued the company at $ 10 billion.
The two, both dedicated gaming fans, launched the platform in May 2015 with a simple premise – to create a service that combines both text and voice communication and that can be easily integrated into online games.
The growth was phenomenal.
Within two years of its inception, Discord was being used by nine million people every day.
To put that into context, Slack Technologies, the Workplace Messaging Technology Group Discord was often compared to, attracting 2.3 million users in the first two years.
Discord now has more than 140 million monthly active users and claims that people can talk on the platform for up to four hours a day.
The website says, “Discord was originally designed for people who love to play games, but these passionate people have realized that it can be enjoyed for more purposes.
“The growth of other uses on the platform began to explode.
“Today, Discord is used by everyone from local hiking clubs to art communities to study groups.”
Despite this phenomenal growth, Discord is still not profitable, despite sales increasing from $ 45 million in 2019 to $ 130 million in 2020 as usage increased during the pandemic.
The product is free to use but costs two premium services – Discord Nitro ($ 9.99 per month or $ 99.99 per year) and Nitro Classic ($ 4.99 per month and $ 49.99 per year).
Not all customers who have used Discord in the past are necessarily the ones the company wants itself to be.
The far-right groups that organized the infamous Unite the Right rally in Charlottesville, Virginia in August 2017, which later disrupted Donald Trump’s relations with Donald Trump US business leader supposed to have done this with Discord.
That appalled Mr. Citron and Mr. Vishnevskiy, who then stepped more than 100 alt-right groups off the platform.
Recalling what happened last year, Mr Citron said to Forbes, “I am a Jew.
“My grandfather fought the Nazis for America during World War II.
“It definitely bothered me that I would work to facilitate the radicalization of people.
“It made me sick.
“I felt I was dishonoring the legacy of my family, my ancestors.”
Mr. Citron, who has called the service “digital third place,” was wealthy even before Discord was founded.
After graduating, he worked for game studios before launching his own game which later evolved into a service for other game developers.
The company, called OpenFeint, was sold to a Japanese buyer named Gree in 2011 for $ 104 million.
Shortly thereafter, Mr. Citron left the company and started his own game developer called Hammer & Chisel.
Mr. Vishnevskiy, who Mr. Citron worked with at Gree, was an early recruit and convinced him to develop a voice and chat service that became Discord.
The big question is how would the Microsoft owned business go?
Discord is seen as a natural addition to Xbox Microsoft’s gaming console, and specifically to the Xbox Live multiplayer service, which has now been renamed the Xbox Network.
Microsoft has already announced its ambitions to incorporate a social media element into its Xbox business and thus appeal to younger consumers Failed attempt last summer to buy TikTok’s US operations after Mr Trump forced its Chinese owner to sell the business.
Although it and its partner Walmart lost on that occasion, Microsoft showed its ambitions when it soon paid $ 7.5 billion for it the game developer ZeniMax, Maker of the games Doom, Fallout and Skyrim.
There have also been reports of attempts to buy the Pinterest photo sharing app in the recent past.
So buying Discord would be another logical step in this direction.
Discord’s Nitro customers would instantly increase the number of paying customers using Microsoft’s Game Pass service.
Microsoft would also assert itself against one of its competitors.
Discord currently uses the Google Cloud service, but would switch to its Azure service if owned by Microsoft.
Discord could also be integrated into Microsoft’s own team service itself.
A deal, however, would not be without risks.
Microsoft bought a game streaming service called Beam five years ago and renamed it Mixer. After Twitch, an Amazon company, outperformed the competition, the company closed the deal last year.
Microsoft’s ownership of Skype after acquiring $ 8.5 billion in 2011 also alienated long-time users of the online video and voice calling service.
Accordingly, today social media was full of comments urging Discord not to sell to Microsoft.
Sports advisor Tom Breslau tweeted sardonically: “Because of the history and the state of Mixer and Skype, I’m sure nothing can go wrong.”
Another user called a takeover “literally the worst idea on earth”.
A third said, “We already know how badly this is being handled because these companies only want aspects of the apps they get and NEVER resist destroying them by flooding their own unsuccessful ‘functions’ in front of them great existing ones. ” User base.
“Microsoft isn’t taking Discord away from us.”
However, Microsoft seems to have learned from its mistakes.
For example, Minecraft has made few changes since purchasing the game two months after Satya Nadella became its CEO in February 2014.
And Mr Citron himself knows how easy it is to alienate game fans.
Gree eventually shut down OpenFeint after buying it from him, but turned out to be an unpopular owner.
He may well be speaking to potential buyers to boost Discord’s valuation prior to going public.
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