Discord has become central to the lives of over 140 million people; most of them are gamers. It makes the world of gaming go round. However, Discord does not gatekeep non-gaming users. Its customer base also extends to people who want to conduct business meetings, participate in group study sessions or share experiences with their friends by listening to music together — Anyone who wants a platform for hassle-free communication.
Singing up on Discord is free, and unlike Facebook or Instagram, you don’t even see any advertisements on it. So how does Discord work? How does it make money?
In this article, we will go through the business model of Discord to explain how it managed to generate $130 million in revenue in 2020.
Overview Of Discord
Discord is a VoIP (Voice over Internet Protocol) or IP telephony that delivers voice communications and multimedia sessions over the internet. Its headquarters are in San Francisco, California. Discord allows people to communicate with their friends and communities via voice calls, video calls, text messages, media and files in private or public chats.
Discord’s Journey Through The Years
Discord has a fascinating journey. Let’s start with the factors that pushed the founders — Jason Citron’s (CEO of Discord) and Stanislav Vishnevskiy (CTO of Discord) — to create Discord.
Before Discord came into existence, applications like Skype, Slack and Teamspeak had problems with:
- Server capacity
In addition to the problems mentioned above, some of the inspiration for creating Discord came from Citron’s personal experiences. While developing the multiplayer game Fates Forever, he inferred that the technology behind voice calls and text chat could use some improvement. Citron also noted how the available voice over IP (VoIP) software was unable to support games like Final Fantasy XIV and League of Legends.
Jason Citron and Stanislav Vishnevskiy acknowledged these problems in the gaming market and made a run for it with their solution: Discord.
Who Invested in Discord?
For any business idea to work, you need investors. Discord gathered its funds from the Business Incubator, Benchmark Capital, and Tencent. As the company progressed, it also raised funds from WarnerMedia, Firstmark, IVP, Index Ventures, and Technology Opportunity Partners.
Releasing Discord: The New Sheriff in Town
Discord, initially known as discordapp, was launched in May 2015 and quickly gained popularity among esports, LAN tournament gamers, and subreddit communities for playing Diablo and World of Warcraft. With its low latency and minimum delays during voice calls, secure communication, rich performance and user-friendliness, Discord became the new sheriff in town.
According to Stanislav Vishnevskiy, what made Discord really stand out was “Being able to just jump on an empty voice chat, basically telling people, ‘Hey, I’m here, do you want to join and talk?'” He also said that it feels like, “a neighborhood, or like a house where you can move between rooms.”
Citron describes it as a channel, “where it felt like your friends were just around, and you could run into them and talk to them and [hang] out with them.”
Linking Discord With Xbox Live
In 2018, Microsoft provided Discord support for Xbox Live, allowing its users to link their accounts with Discord and connect with their friends, whether they play video games on PC, mobile devices, or their Xbox consoles.
Chat For Communities And Friends
When the COVID-19 pandemic hit, seamless video conferencing became vital for everyone; teachers, students, healthcare professionals, office workers, etc. Discord saw an astronomical surge in the number of people signing up on their platform for reasons other than gaming and decided to change its motto from “Chat for Gamers” to “Chat for Communities and Friends.” It also raised the user limit on Go Live from 10 to 50 people, allowing teachers to host classes with their students.
Your Place To Talk
Discord revised its website in June 2020 and grew even more inclusive with its new slogan, “your place to talk,” encapsulating study groups, gaming groups, art communities, fitness enthusiasts — any group of people or friends.
The future plans of Discord include:
- Switching up the built-in jokes, making them less specific to gaming.
- Improving the user onboarding experience
- Increasing server capacity and reliability
- Combating hate speech
- Integrating AI (Artificial Intelligence) that suppresses background noise for voice clarity.
What is the Business Model of Discord?
Like Zoom, Spotify, Skype, and other internet-based businesses, Discord follows the freemium business model. Under this model, you can sign up for free and enjoy all the basic features of the application. Free features of Discord include:
- Availability on desktop and phone.
- Connecting with friends via voice chat services.
- Adding as many people as you’d like to your friends’ list.
- Smart push notifications.
- In-game overlay.
- Multiple channels.
- Modern text chat.
- Rich Presence. Here, players get to jump directly into your client and share your game.
- Stream Kit: integration of bots.
- Safety in terms of keeping your IP address private.
- Maintenance of anonymity.
- Protection against DDoS attacks.
However, charges apply for premium features. Such as, in the case of Discord, Nitro packages, server boosting and downloading skins.
How does Discord make money?
Here, we discuss seven ways in which Discord makes money.
1. Discord Nitro Classic
Discord Nitro Classic is a premium feature that costs $4.99 per month or $49.99 per year. After the purchase, Discord will allow you to:
- Upload a GIF avatar.
- Customize your four-digit tag. The tag reverts to randomization after the package expires.
- Use custom emojis everywhere. Normally, every server has a set of custom emojis you can use in DMs. With Nitro classic, you get to use any custom emojis you like from whichever server.
- Improve video quality while sharing screens with 720p at 60fps or 1080p at 30fps.
- Stream with 1080p at 60fps whenever you go live.
- Upload files as big as 50 MBs.
- Display the cool nitro badge on your profile.
2. Discord Nitro
Discord Nitro is another premium feature that you can purchase for $9.99 per month or $99.99 per year. Most of Discord’s revenue comes from here. Let’s look at the perks of this package.
- All of the features of Nitro Classic.
- Share and upload files the size of 100MBs.
- Power up your servers with TWO server boosts.
- Message character limit increased to 4000.
- Enjoy up to 200 servers!
3. Server Boosting
After activating your Discord Nitro subscription (not Nitro Classic), you get to buy server boosters! They improve the performance and functionality of servers.
Each server boost costs $4.99 per month. Sever boosting splits into three levels. Let’s review their features.
Level 1: Requires two users to pay the subscription fee
- 50 additional emoji slots (for a total of 100 emojis)
- 128 Kbps audio quality
- Go Live streams boosted to 720P 60FPS
- Custom server
- Invite background
- Animated server icon
Level 2: Requires 15 boosts
- Quality and 50 emoji slots (for a total of 150 emojis)
- 256 Kbps audio
- Go Live streams boosted to 1080P 60FPS
- Server banner
- 50 MB upload limit for all members (server only)
- Inclusive of everything from Level 1
Level 3: Requires 30 boosts
- 100 additional emoji slots (for a total of 250 emojis)
- 384 Kbps audio quality
- 100 MB upload limit for all members (server only)
- Vanity URL
- Inclusive of everything from Level 1 and 2
Note: All active Nitro or Nitro Classic subscribers get 30% off on every server boost purchase!
4. DLC (Downloadable Content)
Downloadable content is an add-on for games. It involves “skins” that can change the way your avatar or character appears within the game. They can take the form of outfits or costumes, facial features, body shape and size, skin tone, fashion accessories, weapons, and more.
Gamers love to see themselves represented in the games they play, which is why they wish to buy such graphics that add personalization to their gaming experience. Skins are for either aesthetic or status purposes. They don’t add to the functionality of the game except in the case of weapons or armor. They impart certain properties like attack, defense, healing powers, etc.
5. Partnership With Game Developers
Discord used to sell games on their game store, which were only available for the Nitro package subscribers. When the store didn’t pan out as planned, its business model took a new direction: partnering up with game developers.
Game developers put their games on the servers, and Discord promotes them. After every sale, Discord takes 10%, and the remaining 90% goes to the game developers. So if you buy a game for $15, the game developers will receive $13.5, while $1.5 will go to Discord’s revenue.
6. Merchandise Store
Gamers have a strong sense of community among them. Their fan bases are receptive to buying hoodies, hats, t-shirts and sweatshirts, and other accessories related to their favorite games and the platforms they use for playing those games. It is a way for gamers to let others know what they are all about and where other gamers can find them. Some consider it a matter of pride.
Selling merchandise not only makes money but also serves as an exceptional marketing tool for brand awareness.
7. Funds And Investments
Raising funds from investors is not a business model per se, but it still helps companies bring innovations to their platform. Over 12 rounds of fundraising, Discord has raised a total of $482.3M. In 2020 alone, it amassed $100M from Index Ventures and another $100M from Greenoaks Capital. The latest funding brought in $3M from Sony Interactive Entertainment on 3rd May 2021.
Gamers want to have a real-life experience with their friends online. They want an all-in-one platform for their gaming activities, and Discord caters to these demands. Today, Discord has over 140 million active monthly users and 300 million registered accounts. In 2021, it is valued at $7 billion! Discord continues to grow and is likely to generate a lot more revenue in the coming years.