Dec 14, 2022

Discord: How Does The Company Make Money?

Business Model Innovation
by Stefan Lemmerer

What is Discord?

Discord is a free chat application that allows users to communicate via text, voice chat, and video calls. This communication occurs via "servers," which facilitate the organization of communities. Users create servers to which they can connect and which draw an audience.

The Discord platform was originally developed for gamers, but it has now expanded to serve a wide variety of communities and subcultures. There is a Discord server for virtually any topic. A Discord server can be either public (everyone can join) or private (invite only).

Consider applications like Slack and WhatsApp; Discord belongs to the same group of communication chat platforms.

Individuals can create their own online communities and invite their friends to join. Within these servers, users can create specialized channels for a variety of themes, allowing people to make friends with similar interests.

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Discord Logo

How Did Discord Gain Such Popularity?

The platform's inception at a time when e-sports and online video gaming streaming via Twitch were on the rise was a big factor in its growth. However, Fortnite and League of Legends had limited communication options.

Because private Discord servers are so simple to access and develop a community, Twitch streamers began switching to them, generating the ideal marketing campaign for the software.

You might also be interested in our article about Twitch.

Ninja, a celebrity streamer, played Fortnight with the rapper Drake and forced him to download Discord in front of 600,000 viewers. This was one of the most iconic moments in the history of Discord's growth.

In 2019, the rise of content creators, influencers, YouTubers, Instagram meme accounts, and celebrities also contributed to the platform's expansion, as they began using Discord to connect with their audiences and build communities.

As a result, Patreon, a tool used by creators to sell paid subscriptions to their content, incorporated Discord into their service.

Discord once again dominated the gaming industry in the summer of 2019 when the online multiplayer game 'Among Us' was released. Due to the game's popularity, over one million individuals downloaded Discord to play with their friends. This resulted in the app reaching the sixth position on the US App Store.

Discord, like many other social networks and chat platforms, experienced explosive growth in 2020 due to the Covid-19 pandemic's peak. Discord's free voice communication service was the ideal solution for the increasing demand for online connections.

Discord Interface

How Does Discord Make Money?

How does Discord generate revenue if the application is free?

One of the primary reasons for Discord's explosive growth was that the platform was completely free, had no message or call limits, and allowed users to create unlimited servers.

Then, how did Discord generate revenue? The Discord revenue model consists of three main components.

Discord Nitro Subscriptions

Nitro, Discord's $5 per month subscription service, was introduced in 2019.

With Discord Nitro, Citron invited Discord users to support the platform in exchange for additional benefits, such as higher-quality streaming and more customization options. Thus, Citron ceased selling advertisements, which disrupt the user experience.

Discord Nitro offers two plans: one for $4.99 per month or $49.99 per year, and another for $9.99 per month or $99.99 per year. It has attracted more than 1 million Discord Nitro subscribers.

Game Distribution

Additionally, Discord generates revenue through the distribution of games. In 2018, the Discord game store was introduced.

Nitro subscribers could access Discord-exclusive games, such as Into the Breach and Dead Cells, through the game store. After approximately a year, Discord discontinued the game store.

Discord partners with game developers to sell exclusive games on its servers. Discord promotes the game and server to increase their visibility. When a game is sold on a Discord server, the company receives a 10 percent commission.

Server Boosts

Server boosting enables users to optimize their own servers. Discord generates revenue by offering three distinct server boost tiers, with each tier offering a unique set of features and improved performance.

Server enhancements are financed by $4.99 monthly subscription fees. Level 1 requires that two users pay the fee, Level 2 requires that fifteen users pay the fee, and Level 3 requires that thirty users pay the fee. The premium server boost features are available to all users of the server.

Discord Funding

Discord has successfully raised over $980 million across 14 funding rounds, with the most recent round occurring in September.

The fact that Discord has investors like Sony Interactive Entertainment speaks volumes about the company's future potential.

Discord Valuation

Discord is currently valued at approximately $15 billion thanks to its most recent $500 million investment round.

There has been considerable speculation that Citron will sell Discord while the company is at its peak. According to Citron, he has no immediate plans to sell. According to rumors, Microsoft has recently expressed interest in acquiring the platform for approximately $12 billion.

Discord generated an estimated $130 million in revenue by the end of 2020, although the company has not released official figures.

Discord Challenges

Despite the success and expansion of Discord's business model, the platform has continued to face obstacles.

As with other social networks, Discord has been criticized for allowing users to post problematic content, such as hate speech and cyberbullying.

Although this occurs everywhere on the internet, the repercussions on Discord can be more severe due to the platform's private communities and small spaces. Especially since a significant proportion of the app's users are adolescents.

Upon realizing that this was a problem, however, Citron established the Trust and Safety team, which comprises more than 15% of Discord's staff. This made Discord a founding member of the Digital Trust and Safety Partnership, a collaboration between tech companies to develop mechanisms for dealing with inappropriate online behavior.

Another obstacle faced by Discord has been the imitation of its features by larger companies. With the loyal fanbase that Discord has managed to cultivate, it appears that the company does not need to worry about competition for the time being.

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