What if, and call me crazy, but what if buying discord is about a lot more than gaming.
I have 50K in the bank. It’s finite. I might use it to build an extension on the house. Or to buy a car. I’m probably not spending it on hookers and coke though.
And that’s the point Microsoft might spend tens of billions on stuff that meets their wider business objectives but wouldn’t spend that money just on games studios.
The house extension is probably a good investment but the car might not be 
Microsoft can certainly try and make money off of Discord as a social media platform and I have no idea how much money could be made there. From what I’ve read Discord is currently not profitable but that could of course change. I’d still be worried about user migration but it’s of course something very difficult to predict.
It is one of the reasons too. MS wants to spend money. Amazon for example invests all the time and with MS generating 15 bil. per quarter of profit spending money is no-brainer. Especially considering that the huge inflation might be on the horizon.
By purchasing the Discord, for example, it becomes less of money drain simply because it would not need to pay much to host itself on Azure for example, considering that it is MS’ cloud.
I feel like Microsoft is aware that that user migration is a concern, especially after seeing Skype stagnate and users leaving in droves.
I would look at how Microsoft handled GitHub if you want to see how they would handle Discord. GitHub users were echoing the same doom & gloom that I’m seeing from Discord users now, but ultimately GitHub is undoubtedly in a better state post-Microsoft acquisition. They clearly valued users over profit by removing paywalls from certain features and adding a lot of great QoL features to GitHub.
Acquisitions like GitHub & Discord are strategically motivated. Microsoft aren’t looking to make their money back anytime soon on these purchases, as both platforms weren’t/aren’t profitable. I see a lot of synergies with a Discord acquisition and I’m sure Microsoft & Discord see this too, which is likely why Discord approached Microsoft about a potential sale.
if people have noticed recently, look at their major acquisitions like Mojang, GitHub, and LinkedIn. They leave them alone as they know that culture is fundamentally the most vital component of a company succeeding. They will do the same with Bethesda and their past studio acquisitions. All MS will do is just provide the resources to scale while the company continues to execute its vision.
Discord is not profitable. The owners don’t want any ads in it and failed to make profit with Nitro and their store. Microsoft need to make some changes if they acquired Discord.
In the beginning they will at least have less expenses for server infrastructure. Then if they add Xbox and Game Pass integration, it would serve as ads without ads for games basically. And the potentially brings somebody from Discord community to Xbox and Game Pass, which in turn will generate more revenue.
But itself, the platform might be hard to monetize, but with Xbox integration it will serve as a trampoline - for example - for new customers and not necessary the money drain. Bigger communities engaging in gaming, bigger profits for MS and third parties.
Just buying based of potential and engagement this would definitely be a good acquisition but I don’t trust the owners at all. Discord is based on a failed game by them and failed to monetize even in the pandemic. It seems like they struck gold by pure luck.
The problem is that the traditional way to monetize such platforms is using the ads. They vowed not to do that that. And that’s the result. They tried game shop - did not work, because there are titans on market already and to have a shop you have to make deals which is not cheap either. They tried Nitro - but out of hundreds of millions users they have only 3 mil. or something subscribers right? Very low.
And that’s why I don’t know if it’s the right way to let them to their thing after an acquisition. Going public would be the best outcome.
Nah, going public will literally lead to ads fest because they cannot find a way to generate profit. Becoming public implies that you will have the stakeholders that will require you to increase the revenue one way or another. Being a part of the bigger entity is the best way to preserve their ways.
Regarding monetization; I agree that Discord has failed to monetize their platform properly. Their gaming store hasn’t done well and Nitro doesn’t offer enough for many people. I do appreciate how they’ve kept everything accessible and didn’t lock important features behind a paywall.
Talking about a possible Microsoft acquisition; Microsoft leverages a couple of things which they can use to make Discord profitable:
Including Xbox Game Pass (for PC) into Discord will make Discord Nitro a far more interesting option. Imagine including Discord Nitro into Game Pass. And for an extra (Game Pass Ultimate) users will be able to stream games by simply right clicking or tapping a friends name.
Microsoft isn’t Google. But they do have a search engine and an ad platform. Using this to make Discord more profitable could scare away users, but would help make the platform sustainable.
While Windows is becoming less relevant by the day, it is still a way for Microsoft to promote applications. Office365/Microsoft365 has made Microsoft Teams the behemoth it is today as it was part of a subscription. Microsoft can leverage their marketing power to increase Discord usage. Especially since it doesn’t have a tainted image unlike Skype.
They aren’t buying Discord to be profitable, they’re buying it for the massive network effects and being able to funnel communities to MS services like Xbox
I believe Discord would be a strategic purchase. Not necessarily a financial one. One of the biggest reasons for its value is the number of customers on the service along with its integration and general acceptance within gaming communities. If Microsoft could get Discord, it provides a lot of indirect opportunities and synergizes with other business objectives. Its long term impact might be greater than any single publisher even ignoring its benefits outside of gaming. Putting it on Azure and adding Xcloud integration to whats already there could lead to very cool possibilities for gaming.
This was my thinking as well. They kind of missed the train when it came to twitch. So this would be their way in. I could see them adding features like if you are in a community and you see someone playing a game that’s in gamepass it could instantly launch and group up with them for instance.
A lot of interesting things could be done with a discord/Microsoft partnership. A native discord app on the console would be welcome.
Will be thier big acquistion this year
As for Skype, that was a Ballmer purchase back in 2011. Much like Nokia, was a purchase for a different Microsoft who had a different identity, leadership group and overall strategy. No big purchase has flopped under Nadella. Things like Beam (Mixer) are tiny investments used to try building up a service from the ground floor and are entirely different than large scale purchases from established brands with high mindshare and usability. Small investments are easy to “try” something and pivot if they don’t like what they see. I believe they also salvaged the backend tech from Mixer.
A lot of the memes regarding “ruining Discord” are not based on fact but are emotional.
Thanks for this post, it’s helpful context for someone who hasn’t really paid much mind to what’s happened in this particular field. In the end, this makes me feel the same way as I did about the Bethesda acquisition, despite how different they are:
I agree in general, but I also think the one train Skype missed would never happened under Ms.
Smartphone chat apps became huge because they don’t require you to create a regular account, just use your phone number and also all your contact list is immediately accessible. Ms would never let them use this instead of a Ms account.
So what’s going on with this?
We haven’t heard anything in a few days.