In 2016, Discord made it clear to its users that they will never stuff their interface with ads to generate revenue. With a large fan base & ever emerging popularity among the gaming community, the temptation to earn millions & boost the Discord business model through ads must have been difficult to turn down for CEO & founder of Discord Jason Citron. Like many other apps, the question of how does Discord make money has relied mostly on capital investments. They have adapted a freemium model where core features are always free and accessible to all, but some value-added features are put up for users for an extra one-time or periodic fee.
Citron’s previous venture OpenFeint was based on a similar concept. It provided a social platform for gamers where they could maintain leaderboards, bet with virtual currencies and award achievements. OpenFeint was predominantly targeting mobile games & was eventually acquired by Japanese mobile gaming giant GREE for a fee of $104 million. The idea of the Discord came from the difficulties many users faced while connecting through VoIP. Citron wanted to create servers where users can connect and chat or speak to each other making them feel like they were sitting next to each other. Competing against the likes of TeamSpeak & Skype, it was going to be an uphill task.
How Does Discord Make Money?
In a first attempt to seek financial support from its users, Discord urged their loyal fan base to contribute to the company as a “THANK YOU” gesture. There was no hiding from the fact that the sole purpose to launch the Nitro feature was to address the core issue of how discord makes money! They made it very clear that they needed contributive help from their users to grow as a company. A little honesty hurt nobody. It was an appealing gesture. An excerpt from the Nitro launch article read “We wanted to give our Discord family an easy way to show support for Discord, grab a couple of nifty perks, and help us continue what we love doing: pouring our heart & soul into making a super wonderful chat & voice experience for gamers and communities alike”.
What is Discord Nitro?
As mentioned earlier in the Discord business model and promised by the company, the core feature of Discord remain completely free but for a premium fee of $4.99 per month or $49.99 annually, you can get a few value-added features such as customizable skins and larger upload capacity. Having cool animations and emojis and other stuff that normal people don’t have is pretty much a royal feeling for the premium users. Here are some things that Discord Nitro offers for the premium fee.
- GIF Avatar for a profile. You can create your own customized GIF avatar for your profile picture. This GIF of you will show across all the text messages and all chat rooms where you converse with your friends.
- Selective custom emojis. You can use a variety of emojis to express your feelings in all the chat rooms across all channels. You can also send these emojis in direct messages to your friends.
- Increased upload limit. With Nitro, you can upload individual files up to 50mb as compared to non-Nitro users who have an upload limit of 8mb.
- Nitro-badge. You get to brag about being premium by having a Nitro badge on your profile.
Features like these don’t really discriminate between normal users and premium users. These are hardly any core features. What it gives is a premium feeling to those who don’t mind spending an extra amount to get some cool perks.
Discord Merchandises as Alternative Source of Revenue
Another source of revenue and a key to answering the question of how does Discord make money is their online merchandise store. Gamers are often fanatics about the things they are in to. Many like to associate themselves by putting on a Discord cap or a sweatshirt. Having a user base of 90 million, it is only fair that Discord introduced merchandises for fans to engage to a new higher level.
Though this is not a huge source of revenue, it helps generate funds for Discord in ways more than just one. It creates a brand value & publicizes Discord to non-gamers which is also a massive target audience for them.
It is a phenomenal story how Discord managed to recreate the magic of Citron’s earlier venture OpenFeint by making the user experience best and without worrying much about how discord makes money. The gaming community has grown since the emergence of mobile gaming. Social media has helped the popularity of games. It was a very smart idea to gather all of them on a single platform. What keeps Discord apart is their social connectivity. The innovation led to a remarkable platform where people can have legit conversations, share everything, and make voice & video calls and much more. It is a very inspiring story for anyone who wants to target a niche but massive fan base. While the profitability still remains a challenge, they can always introduce more features to entice premium users. Now that they have promised to never put annoying ads, may be sponsored chat rooms or sponsored servers can be one of the ways forward to generate more revenue.
How Does Discord Work?
There are over 2 billion gamers in the world. While many games offer features to connect to your opponents and play online, it was a miracle how almost nobody thought of plotting a platform to land this entire community on a single device. In their launch in 2015, the tagline of the Discord read “It’s time to ditch Skype and TeamSpeak” which was regarded as very bold.
3 years after its launch, it has over 14 million daily log-ins and reportedly 90 million active users. With these numbers, they never had to worry about the future. It is basically a chat/VoIP app focused mainly to serve gamers to make their gaming communication better. Free to download and use, Discord allows voice and text chats and video calls as well. It helps you find people as crazy about a game as you and allows you to add them to your friends list.
If we were to consider anyone aspect in Discord that makes it more popular than others, then it is the social aspect. Users can create communities or “servers” which others can join & chat, hang out, make video calls or play games together. Discord is not limited to just gamers. The non-gaming community has also welcomed the app with open hands. People are creating communities & servers for a lot of other topics to discuss.
Discord has basically handpicked all the top features of apps like Skype and Slack and made it into one amazing app. The focus was on making the experience better than these already existing apps rather than to think about how Discord will make money. So they made sure that the UI was as simple as possible and the app uses minimum resources of your computer or mobile phone.
The chat room remains the most popular feature of Discord where people with similar interests communicate with each other. These chat rooms have titles with hashtags so you can talk about that on other social mediums as well using the same hashtag. The accessibility is widest. To make Discord vast and accessible to all markets, the platform is available on android play store as well as apple app store with the customary PC version and a web-based service as well which means you can run Discord from your web browser page also. So no matter what device you are using, you can socialize with your gaming community from anywhere you are.
You can create servers which are like chat rooms and invite people via a link to join you. You can further categorize these servers into channels dedicated to specific topics or games. You can choose to make your servers public or private based on your preferences. You can imagine WhatsApp groups as these servers and you can switch back and forth on every group to socialize. There are many public servers for some latest gaming crazes like PUBG & Battleground Mobile. You can discover more about popular public servers through their website www.discordbots.org. Very recently, Discord has tied up with gaming studios to launch verified servers. These are launched by some popular gaming companies for their fans to socialize & interact with each other as well as game developers. The developers reckoned that this could impact on how well Discord performs!
Inter-connectivity of Discord
Another very popular feature from Discord is the ability to connect your other social media profiles like Facebook and Twitter. This helps you find friends easier. Also, you can share game results & other stuff on other mediums connected through Discord. It has basically all the features of your normal social media app. You can add, remove, and invite people to your forums. You can also pick and choose the people you want to block or mute while you are in a voice discussion.
Discord Business Model
Citron received his first investment for his idea of the Discord business model from Benchmark Capital who also invested in his previous startup OpenFeint. When OpenFeint was sold to GREE, Citron’s company Hammer & Chisel received the first round of investment from Benchmark Capital & a few others to which Jason Citron is forever grateful. This initial investment was reportedly around $8.2 million.
Soon after its launch in 2015, the Discord managed to generate funds through a series of investments. The first major breakthrough came in January 2016 when they officially answered the unanswered question of how Discord is earning with an announcement that they have raised $20 million from people who helped massive companies like Riot, Snapchat & Twitter. This investment helped them incorporate the video chat & screen sharing features which were widely anticipated.
In 2017, Index Ventures, Spark Capital & some other groups invested further $50 million into Discord. Earlier this year, Discord managed to gain another $50 million from Spark Capital, GreyLock Partners, Benchmark Capital and others.
Citron has always impressed his investors by pitching an intriguing idea of creating a social community of over 2 billion gamers across the globe. A lot of ad-free startups have struggled to generate funds. Many giant companies like Twitter have failed to make money for over a decade. But credit to the Discord business model for never indulging into the ad business to continuously improve the user experience on their app. Citron suggests a rather community supported revenue plan to generate money that can further be used to repay the investors and to make the experience even better.
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