Discord is a communication platform that allows gamers (and everybody else) to organize themselves in so-called servers. The platform is available on Android, iPhone, Mac, Xbox, PlayStation, and PC devices.
Discord makes money from its Nitro subscription packages. Other sources of income include server boosting as well as fees it receives from games sold on its servers. The core app remains free-of-charge, meaning users only pay when trying to access premium features.
Founded in 2015 and headquartered in San Francisco, Discord has quickly risen to become one of the world’s most prominent chat apps. The company now hosts over 100 million active users, which are spread out across 6.7 million servers.
What Is Discord?
Discord is a chat application specifically tailored towards video game players. The platform supports communication via text, voice chat, and video calls. The application is available for Android, iPhone, Mac, Xbox, PlayStation, and PC devices.
Discord allows its users to organize themselves in communities, which are referred to as Discord Servers. Its functionality is similar to Slack groups. These servers are filled with various channels, which are used to discuss and coordinate on different topics.
A single user can join a maximum of 100 servers. Public ones can be accessed via a link while private ones are subject to invites and approval. The maximum number of channels for any given server is 500.
If you are tired of group chats, then Discord also allows its users to directly chat with each other. The app is furthermore integrated with other platforms, such as YouTube, Spotify, or GIPHY, which allows users to share third-party content on Discord.
Discord is not limited to gamers only, though. Communities, ranging from book clubs to dance classes, use the app to discuss any topic and organize upcoming events.
According to the company, there are now over 100 million active users on the platform, which spend around 4 billion minutes conversating on 6.7 million active servers.
A Short History Of Discord
Discord, headquartered in San Francisco and publicly released in 2015, was founded by Jason Citron (CEO) and Stan Vishnevskiy (CTO).
Prior to starting Discord, both founders already had some serious skin in the gaming industry. In 2011, at age 26, Citron sold OpenFeint, a mobile platform for social gaming, to Japanese game maker GREE for a combined $104 million. The company had been started just two years prior to that.
While both founders have been avid gamers from an early age, Vishnevskiy’s gaming resume has been a little more impressive. As a teen, he woke up every day at 5 am to cram in a few hours of Final Fantasy XI.
He became so good at it that he soon assembled a team of 40, which ultimately became the game’s highest-ranked team. Part of the team’s success was grounded in the fact that Vishnevskiy developed a few software tools, which allowed his team to better organize themselves (I think you already know where this is headed).
He then packaged these tools and tried to make a business out of them, but no one would buy them. Hence, it was time for him to get a real job. He bounced around, working for a few startups in the Valley until mutual friends introduced him to Jason Citron.
In 2013, he joined the gaming studio Hammer & Chisel, which had just been launched by Citron. The studio’s flagship game, which it introduced on TechCrunch’s Disrupt Conference, was named Fates Forever. The game, an iPad exclusive, was a three-versus-three arena game. Its core functionality was similar to that of League of Legends.
The game was released to Apple’s iOS Store on July 3rd, 2014. Unfortunately, Fates Forever, while critically acclaimed, never really took off. Consequently, the app and its community webpage were shut down in October 2015.
Luckily for the founders, Vishnevskiy’s experience of building communication tools for games came in quite handy. The team already dabbled with building social networking and chat features into Fates Forever – and ultimately decided to pivot their business into this direction.
At the time, applications like TeamSpeak, Ventrilo, or Mumble were dominating the video game communications industry. But all of these platforms had something in common: they were clumsy and extremely complicated to navigate.
Players would need to rent a server from a third-party vendor (normally from a company that had a shaky reputation, at best) and pay a monthly fee for accessing that server. Furthermore, they’d need to send an email to their friends with the server’s IP address, who then would need to go on and download another app. And the design of those apps would often be confusing and outdated.
As history has so often proven, disrupting an industry where incumbents are just collecting money and not innovating can often be a path to quick disruption. Zoom, the video communications app that has taken the world by storm, has done something similar in its industry.
In January 2015, the team started working on Discord. Five months later, the first version of the app was shipped to the public. What caught the attention of gamers, apart from the app’s ease of use, low friction, and its intuitive design, was the fact that Discord’s feature-rich product was absolutely free-of-charge.
Gamers from all over the world were flocking to the platform almost immediately. The company amassed a user base of over 25 million gamers within a little over a year of being operational. To sustain operations, the company continued to raise venture funding over the coming years while continuing to offer its core product for free.
Furthermore, Discord understood the importance of listening to its users as well as capitalizing on influencers in its target industries. In 2018, for instance, Discord launched its so-called Verified Servers in cooperation with various eSports teams.
These verified servers act as a badge of authentication, similar to verified accounts on platforms like YouTube or Instagram. The teams can not only use these servers to communicate during gameplay, but also to engage with fans and organize community events with them.
It also partnered with other companies, such as Spotify, to host third-party content. In 2019, Discord teamed up with Tencent to host PUBG (PlayerUnknown’s Battlegrounds) live tournaments.
Others, such as Mike Rose from RageSquid’s Descenders, used Discord to give gamers exclusive access to alpha and beta versions, new content, and other features. That audience, in turn, brings in other users through word-of-mouth, which further accelerated Discord’s growth.
Unfortunately, not all was as positive as the founders had expected. Over the years, Discord had to shut down countless servers that were attached to racial discrimination, terrorism, online crime (such as selling usernames and passwords or credit card information), or distribution of sexual content.
In response, Discord implemented various security measures. It hired dozens of people that formed a trust and safety team, which now makes up 15 percent of its workforce (for comparison, Facebook has pledged to have 20 percent of its employee base dedicated to content moderation).
Additional measures included a 24/7 customer support team, automated systems that constantly monitor and filter out unwanted activities, as well as clear community guidelines, which if broken, result in immediate bans.
The added safety measures are a direct response of Discord’s plan to grow beyond its gaming-centered user base and become a communication tool that is used by the wider public. As for now, that plan seems to work out.
Discord now counts over 100 million active users on its platform. There are now various groups, such as teachers, boy scouts, or even book clubs, that use the Discord app to organize themselves. The company itself now employs over 750 people across its San Francisco office.
How Does Discord Make Money?
As previously stated, Discord’s core product is free to use. That allows the company to sign up users at a rapid space.
Just like any other company, it had to eventually figure out a revenue model. In 2017, Discord introduced its so-called Nitro package. Other sources of income have followed in the years after.
But not all of the company’s initiatives have panned out as planned. The company shut down its merchandise store, in which it was selling Discord-branded clothing, two years after operation.
As startups experiment with various revenue models, some pan out while others don’t hold up. For now, Discord generates revenue from three distinct sources of income, which we’ll detail below.
Nitro is a premium subscription package offered by Discord. Discord Nitro comes in at $9.99 per month or $99.99 per year. The cheaper version, named Nitro Classic, costs $4.99 per month or $49.99 per year, respectively.
Premium features include:
- Personal profile, including an animated avatar and custom tags
- Creating your own custom emojis
- Getting two server boosts and a discount of 30 percent (more on that later)
- Ability to upload files of up to 100MB (free limit is 6MB)
- High-resolution videos, screen sharing, and Discord Go live streaming
Nitro can be tested free-of-charge for the first 30 days and can be canceled at any time. This is similar to Netflix’s model, which championed having a frictionless experience and pricing flexibility.
In 2018, Discord launched its own game store to compete against the likes of Steam. The game store allowed Nitro subscribers to get access to Discord-exclusive games, such as Dead Cells or Into The Breach.
The store never really went anywhere and was phased out just a year after launch. Discord quickly pivoted into a new model, in which it now partners up with game developers that sell games exclusively on their servers.
To get started, developers first need to get their servers verified. Afterwards, Discord will promote the game and server on its platform to grant developers the necessary exposure.
Discord makes money whenever a game is sold on its servers. The company takes a 10 percent cut from each sale. If, for instance, a game sells for $14.99, Discord will receive $1.49.
Server Boosting allows a community to up the functionality and performance of their Discord Server. Servers can be boosted to three different levels and include the following perks:
|Level 1||Level 2||Level 3|
|+50 Emoji Slots (for a total of 100 emojis)||Quality +50 Emoji Slots (for a total of 150 emojis)||+100 Emoji Slots (for a total of 250 emojis)|
|128 Kbps Audio Quality||256 Kbps Audio||384Kbps Audio Quality|
|Go Live streams boosted to 720P 60FPS||Go Live streams boosted to 1080P 60FPS||100MB Upload Limit for all members (server only)|
|Custom Server||Server Banner||Vanity URL|
|Invite Background||50MB Upload Limit for all members (server only)||+ everything from Level 1 and 2|
|Animated Server Icon||+ everything from Level 1|
A server boost costs $4.99 per month. As stated above, Nitro subscribers will receive a 30 percent discount for the server boost. Level 1 is unlocked when two users pay the subscription fee. Level 2 requires 15 boosts and Level 3 30.
The premium features apply for everyone that is part of the server, whether they are paying for the boost or not.
Discord Funding, Valuation & Revenue
According to Crunchbase, Discord has raised a total of $479.3 million across 11 rounds of venture capital funding. Notable investors include the likes of Spark Capital, Tencent (creator of League of Legends and PUBG, amongst others), Index Ventures, Benchmark, Accel, General Catalyst, and many more.
During the company’s latest funding round, which it announced in December 2020, Discord was valued at $7 billion. This represents a 100 percent increase from its $3.5 billion valuation that Discord was able to amass in July 2020.
Forbes estimates that Discord will generate annual revenues of $120 million for the year 2020, up from the $70 million it made the year prior.
Who Owns Discord?
As a privately held company, Discord is not obliged to disclose any ownership figures to the public. Citron, given his prior $104 million exit, was most likely able to raise on favourable terms. As such, him and Vishnevskiy should remain majority stakeholders in the company.
On the institutional side, Benchmark as the firm’s lead Series A investor (and participator in successive rounds) will possibly be one of the largest shareholders.
Exact ownership stakes should be revealed once Discord files to go public. So far, no immediate plans of an IPO have been disclosed.