Community and Cookies: What Microsoft Wants With Discord

Microsoft has spent the year shopping, making it painfully clear it wants a new consumer property. After unsuccessful entreaties to buy TikTok and Pinterest, Microsoft has turned its gaze toward chat app Discord. The two companies are now in “exclusive talks” and could complete a deal in April, according to the Wall Street Journal. Discord might also benefit Microsoft-owned LinkedIn, and could ultimately position Microsoft for dominance in a post-cookie world. “[Microsoft] can bring Discord in and leverage it for the Xbox community,” said Whitney Fishman Zember, managing partner for innovation and consumer technology at the media agency Wavemaker. “People are already there talking about games, watching other people playing games—it’s already a massive power play into [the concept of] community.” Slack Attacks or a Marketer’s Dream Come True With Slack Connect? Discord: Slack for gamers and 140 million monthly users Discord is a chat application with text, video and audio components. Sometimes styled as “Slack for gamers,” the app currently claims 140 million monthly active users. You can find Discord “servers”—or invite-based chat rooms—on various subjects: Minecraft, memes, the NBA, LGBT issues, Harry Potter and plenty of not-safe-for-work topics. The platform was once the favored app of the far-right, but has improved its trust and safety measures in recent years. Discord does not currently sell advertising, opting instead for a subscription-based revenue model. Discord Nitro, which goes for $10 a month or $100 a year, lets users customize their username, emojis, enhance their servers and improve their streaming quality and download capacity. The plan has worked well enough: Discord, which debuted in 2015, was valued at $7 billion after its most recent funding round in December. Today, its reported price tag is north of $10 billion. Future-proofing Microsoft With the Xbox platform, Minecraft and Game Pass (the company’s video game subscription product), Microsoft owns gaming infrastructure, but lacks a robust community, which Discord offers. “The idea of an acquisition isn’t out of left-field,” Mike Proulx, vp and research director at the market research firm Forrester told Adweek. “This is all about future-proofing Microsoft and keeping the brand relevant to an entire generation of consumers who have grown up on social media.” Proulx added that Discord’s origins and its previous partnership with Xbox Live provide some foundations for the deal. The risk lies in messing up a formula that already works. “If you look at a platform like GitHub—when Microsoft acquired it, a lot of people jumped ship,” Wavemaker's Fishman Zember said. Once you have a “massive, big-name corporate owner” a platform can lose its “indie” or “niche” appeal. And Microsoft already failed once in acquiring a gaming community. After buying the video game streaming platform Mixer for an undisclosed amount in 2016 and signing big-name talent like popular video game streamer Ninja in order to compete with Amazon-owned Twitch, the company shut down Mixer last summer and announced a partnership with Facebook Gaming. Microsoft and Discord declined to comment for this story. Monetization opportunities While marketers’ opportunities with Discord are limited due to its current ad-free setup, the platform can be a way for brands to organically reach audiences—or listen to their consumers’ wants and needs, at least. “Video game companies can use the super active servers to engage with their most passionate fans to tell them about new video game drops, or continue to build that community,” Melanie Nelson, director of social media at Horizon Media said. “The same thing could happen in any other category that has active servers on the platform.” The young male demographic is “such a sought after” audience, said Jed Meyer, a former media analyst at Ebiquity, who added that a new owner could pivot Discord’s business model to tap into its user base. "There are opportunities for brand integrations down the road,” he said. Clubhouse Taps Instagram’s Fadia Kader to Lead Media Partnerships Clubhouse and cookies Microsoft’s pursuit of Discord could put it in the running to compete with social audio app Clubhouse, the app that’s found meteoric success in recent months, said Debra Aho Williamson, eMarketer principal analyst at Insider Intelligence. Both LinkedIn and Clubhouse are professionally-minded experiences and Discord’s tools could help expand LinkedIn's capabilities. “It’d be very easy for a platform like LinkedIn to do something like Clubhouse, and to bring an audio feature into the platform—whether it be for conversation or events or both,” she said. “Discord could certainly serve that function with LinkedIn.” Discord CEO Jason Citron told NPR on Tuesday that the app is adding features that mimic Clubhouse, including functionality through which speakers could be invited on stage. Nelson added that she thinks Microsoft could use Discord to better compete in a post-third-party-cookie world. “When we think about who’s going to be the big winners in a post-third-party-cookie world, it’s either the people with massive reach—like Google, Facebook and Amazon,” she added. “Or the people with hyper-targeting from their first-party data like [Reddit and Pinterest], where users are constantly demonstrating what they’re interested in on the platform. Discord falls into a really similar category.” Microsoft could also responsibly incorporate first-party data from Discord into its established ad sales partnership with Verizon Media, so as not to disrupt the ad-free Discord experience, Nelson added. “They have expressed their aversion to advertising in the past," said Nelson. "If a larger company like Microsoft were to come in, they could potentially use that audience.” Microsoft Aims to Define the Future of Work For the Post-Pandemic Office Note: If you want to learn how to change your status on Discord, check out Adweek’s article: Discord: How to Change Your Status.

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Community and Cookies: What Microsoft Wants With Discord

The ad-free platform fits perfectly into its gaming ambitions

Scott Nover

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