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Billion Dollar Unicorns: Discord Going Strong

Posted on Thursday, Aug 2nd 2018

A recent Newzoo report estimates the global gaming industry to have grown 13% to be worth $137.9 billion with 2.3 billion gamers worldwide. Billion Dollar Unicorn player Discord is a social networking site focused on these gamers.

Discord’s Offerings

San Francisco-based Discord was founded in 2015 by Jason Citron to help gamers stay connected. Prior to setting up Discord, Jason had founded OpenFeint, another social gaming platform for mobile games and Hammer & Chisel, a game development studio. While Jason was working on game development at his studio, he realized that his development team had a lot of issues regarding the existing VoIP options. To address these, he decided to work on developing a chat service that would offer a secure voice and text messaging service to the community. This development led to the founding of Discord.

Today, Discord has over 130 million registered users of which 19 million are daily active users. It records more than 15 billion messages a month and 530 million messages per day. It has 8.2 million peak concurrent users. It now has over 750 verified servers, some of the most popular of which are Fortnite, Vainglory, Rainbow 6 Siege, PUBG, Critical Ops, and Unreal Tournament.

Discord may have begun as a messaging service, but since then, it has added several additional features to make it more relevant to the gaming community. For instance, it has integrated its service with Spotify to allow gamers to listen to music of their choice while playing. It has also added video chat and screensharing and is bringing verified game channels to its service. It has essentially become a social place where gamers can hang out and talk with each other while playing games.

Discord’s Financials

Discord is privately held and does not disclose detailed financials. It operates on a freemium model where the basic product is free forever. Users have to pay a subscription fee of $4.99 a month if they want access to its premium products that include cosmetic extras like GIF avatars, custom emotes, a Nitro badge, and higher file upload size limits.

With nominal subscription fee, Discord can not be a very profitable opportunity. Its operating expenses include operating free voice chat servers, and paying game streaming celebrities hefty sponsorship fees to keep their communities on Discord. Adding the eSports teams to its service will surely improve user engagement.

It has raised $129.3 million in funding from investors including Index Ventures, Greylock Partners, Spark Capital, Benchmark, and Tencent Holding. Its last funding round was held earlier this year when it raised $50 million at a valuation of $1.65 billion. An earlier round of $50 million held in January 2017 had valued the company at $725 million. Besides nearly doubling valuation, the company also doubled its user base from 45 million in 2017 to 90 million earlier this year.

Discord’s popularity is impressive considering that it was launched in 2015 and has already surpassed other networking options such as Skype and Teamspeak. Analysts believe that its growing popularity is attributed to its features such as game integration and server verification. Its ability to allow gamers to have a real-time communication across teams and fans has also made it a preferred service for esports teams such as Cloud9 and Team Liquid and event and gaming organizer DreamHack. It has tied up with more than 20 teams as part of this effort. Netherlands-based Team Liquid, for instance, uses Discord for its official communications and allows team members and fans to chat with each other through its secure Verified servers.

Discord still has to worry about competition and a profitable business model. Two years ago, Amazon stepped up efforts in the space by acquiring Discord rival Curse to add to its game streaming service Twitch. It is rumored that Amazon was evaluating the possibility of acquiring Discord at that time instead.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.

This segment is a part in the series : Billion Dollar Unicorns


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