How does Discord Make Money & Understanding Discord Business Model

How does Discord Make Money & Understanding Discord Business Model

Discord Business Model
Discord Business Model

About Discord, Funders, Founders, and Facts

Let’s be honest, Everyone loves playing games.  I play World of Warcraft, God of War, Assassin Creed and what not  Some people like my spouse play candy crush and toon blast and the rest who don’t play anything play mind (less) games in office 🙂 .  Well, this was well understood by the team at Discord and they came up with a mind-blowing solution to connect the 2 Billion+ real gamers across the world.

Discord Founder: Jason Citron, currently leads Discord as their Founder and CEO.  As of April 2018 the valuation of Discord according to a new round of funding is 1.65 Billion USD.

Discord Funding: Lead Investors including Index Funds and Greylock ventures have put in a total of $130 Million across 5 investment rounds including one seed round.

Discord is such a fierce competitor to Skype and other VoIP tools that I feel someday it would end up doing exactly same as what they do but Better (Discord for Non-Gamers), in fact, a small group of other artists is also using Discord to connect with like-minded individuals.  Let’s look at the Discord Business Model and How does Discord Make Money.

Discord vs Skype vs TeamSpeak
Discord vs Skype vs TeamSpeak

How does Discord Make Money

How does Discord Make Money
How does Discord Make Money

How does Discord Make Money has been asked by many.  There is a clear and simple answer to it which is Discord does not Make Money.  Behind the scenes and the complex answer lies in Discord Business Model.   Let’s first understand Business Model of Discord in detail.

Discord Business Model

Discord Business Model is a direct correlation to the fact that about 2 Billion+ active gamers generated close to $150 Billion in revenue.  Now don’t look at the ARPU here, because that’s an incorrect value to represent since it doesn’t include merchandise sales (which is almost 2x of this revenue), live sporting and ticketing revenue (which is again 2x of this revenue) – This revenue figure just represents the sale of games, gear, and accessories.  Now, this is a business model example that I consider can directly leapfrog with the rise in gaming.

Discord Business Model

Business Model of Discord ring fences its users from rest of the world. Everyone considers gamers as geeks/weirdos/nerds etc. but they are same as rest of the world but with different liking and tastes. They like hanging out with other gamers and talk to them – Discord does exactly that, it has built a platform that lets them have a voice chat while playing and help them make communities and interact with their gaming friends offline.  All of this for FREE.  Yes, you got that right.

Similar Read: How does Robinhood Make Money?

Discord is ultimately a B2C company with 90 million+ registered users, which means its userbase is everything to it. They know who you talk to, how much you talk to them, what games you play where all do you hangout to play etc. They can use this (and must be) data to target specifically for their merchandise and other services.  They are yet to figure out a fully viable and long term business model.

Here is what they say on their website:

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Wondering how we plan to stay afloat as a company? We thought it’d be tasteless and boring to stuff ads into every nook and cranny of Discord, so we’ll be exploring a few less intrusive options, like optional cosmetic items, such as sticker packs, sound packs, and skins. Don’t fret, we’ll never charge for Discord’s core functionality!

In the meantime, we’ve released Discord Nitro – a small set of extra perks that you can subscribe to monthly as a way to show your support and help us continue making a super-cool extra-awesome! Not only will your contribution help us along our journey, but you’ll look super stylish doing so.

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Discord Business Model

Just to reiterate Discord Business Model is an example of Freemium (SaaS) business model.  Here they are giving away most used part as free and asking users and gamers who regularly use it support it by buying the pro version and by getting Discord Merchandise (basically upselling) to their users.

Now that we’ve understood the Discord Business Model let’s look at How does Discord Make Money from this business model?

How does Discord Make Money from Discord Nitro

How does Discord Make Money from Discord Nitro is similar to how Google Makes Money from gSuite (premium version of Gmail and other tools). Some core functionality is free to use for unlimited time and upgrades and add-ons are chargeable to the end user.

Here is a comparison to show why users would pay for Nitro rather than using other similar services:

What is Discord
What is Discord

Discord Nitro is a $4.99 monthly subscription plan, paying for which the gamer gets access to a lot of stickers, animated avatars, boosted upload speed etc.

Discord Nitro
Discord Nitro

How does Discord Make Money for Merchandise Store

Discord Makes Money by selling self-branded merchandise as well. A service like Discord will have a lot of fans which are so hooked on to the platform that they will end of showing up at a party wearing a Discord T-Shirt!  This contributes to a very small portion of the company’s earnings and the majority are coming via Discord Nitro.

Actually, I feel there are a lot of ways in which Discord can make money, below I’ve listed them down:

  • API Integration: Game developers can use Discord API for integrating within their Game so that they don’t reinvent the wheel to include text chat and voice chat features within the app – This feature is called GameBridge and is being tested out by Discord
  • Discord for Gaming Arenas: Lot of Gaming marathons are happening across the world, where Discord can be pitched in as the Defacto tool to carry on the gaming seamlessly
  • Discord for Business: Basically Discord can disrupt the current VoIP solutions being used by corporates (similar to Skype for Business)
  • Partner Games: API integration can be free against a royalty payment in the form of shared revenue from the games

I hope after reading this you would have definite clarity on How does Discord Make Money and Discord Business Model.  Please feel free to ask your questions in comments below.

Unicorn Economy
Unicorn Economy is your answer to all startup related queries with respect to business strategy, business model analysis and consulting. One stop stop for business plan and financial model development.

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