Discord is no longer just for gamers. While it’s still the messaging app of choice for a sizable chunk of the gaming community, its user base has expanded far beyond it. The platform connects over 150 million monthly active users with diverse interests from League of Legends to stock trading. And the latter bunch might soon have one more ticker symbol to discuss.
The company is in talks with investment bankers about going public within the year, according to Bloomberg. These moves come as the company has been steadily growing and has rebuffed takeover bids from major tech companies. Discord brought in more than $500 million through its latest funding round led by Dragoneer Investment Group, which took place last September. Its valuation was then estimated at $15 billion, more than double what it was a year prior.
Discord is currently considering the possibility of a direct listing in lieu of the traditional IPO route, sources told Bloomberg. This would enable it to lower its cost of capital by bypassing many of the intermediaries that are usually involved in an IPO. Executives at the company are reportedly counting on Discord’s brand recognition and strong funding to float its stock on a public exchange – not bad for a company that once aspired to do nothing more than help gamers talk while playing.
Discord as a gamer stomping ground
Discord was launched in 2015 by two video game enthusiasts Jason Citron and Stan Vishnevskiy, as a tool for coordinating strategy in multi-player games. Both had worked in the gaming industry and were aware of gamers’ frustration at the shortcomings of existing chat apps. The primary irritation was the high lag time in most voice chats, which made it difficult to keep up with the fast pace of events in the in-game world.
To fix the problem, they built Discord out of the chat feature in the multiplayer game Hammer & Chisel, which was created by Citron’s game development studio.
Discord’s low-latency chats and user-friendly interface quickly attracted legions of dragon slayers and minecrafters. The initial features allowed for text and voice communication, but soon expanded to include video calling and screen sharing. Users congregated on private and public Discord servers (similar to subreddits or Slack workspaces), with each server functioning as a community built around a shared interest.
Soon enough, gamers were not the only contingent on the platform. The app became popular with internet dwellers from all walks of life, blockchain bros – it’s nearly impossible now to be involved with crypto without using Discord – and anime aficionados alike.
Pandemic brings new users
New groups were already finding their way to Discord, but the pandemic turbocharged the diversification of Discord’s user base. Discord servers began to function as remote classrooms, workplaces, and gathering spots for various groups.
As its non-gamer user count reached a critical mass, the company decided to rebrand. It changed its slogan from “Chat for gamers” to “Your place to talk” and promised to use less gamer in-jokes in its communications. The aim was to appeal to a broader audience and make the platform feel more welcoming to those outside the joystick-wielding crowd.
To accommodate the new use-cases brought about by pandemic realities, Discord added some new features to the platform. It introduced noise suppression mode so users could work around the pesky background noise created by their cohabitants. It also unveiled the “community server” designation, which gives administrators the ability to track server activity and set up a server welcome screen. It also makes it easier for new members to discover the community.
The road to a potential public offering
Discord brought in $130 million in revenue in 2020, nearly triple what it made the previous year, although it was still not profitable at the time. The company has not released new figures that would reflect any growth since.
The platform does not have ads and makes money through its Nitro subscription plan, which it offers for $9.99 a month (or $99.99 a year). Paying subscribers enjoy exclusive perks like access to animated and custom emojis, as well as opportunities to upgrade their server functionality.
In early 2021, the company was courted by potential buyers, among them Microsoft. The tech giant reportedly offered at least $10 billion but the talks did not lead to an acquisition. Instead, Discord hired former Pinterest executive Tomasz Marcinkowski as its first CFO. The move was interpreted by many as a first step toward a public offering as Marcinkowski oversaw Pinterest’s successful IPO in 2019.
Apart from the rumored talks with bankers, the company seems to be focused on continuing to grow its revenues, for now. After the latest funding round, Citron said that he plans to use the raised cash on improvements to user safety and new community tools. He also expressed his intention to “continue to invest in our Nitro subscription service, which is how we make money.” Recently, the platform began testing a Premium Membership feature that allows creators to monetize their servers.
The focus on subscription revenues sets Discord apart from its social media competitors and allows it to position itself as a place people actively want to be where their privacy is respected. “If you don’t pay for the product, you are the product,” Citron recently told CNBC.
