How Discord Built a $7 Billion Platform—Without Ads

Business is good at Discord. The popular chat app that’s been styled “Slack for gamers” has seen its user base soar in recent years. But 2020 has led to a different magnitude of growth, doubling Discord's valuation in less than six months. With the pandemic keeping many people indoors and searching for virtual ways to connect, Discord has grown to 100 million monthly active users. Users join different chat rooms, which Discord calls "servers," where they can talk in open channels or direct messages. These are set up around different niche interests such as popular games, comic books or television shows. Joining a Discord server requires an invite, though some are effectively open and post their links publicly. There are Discord servers about lots of topics: memes, anime, podcasts, Harry Potter, the NBA and, of course, because it’s the internet, plenty of not-safe-for-work servers. At the tail end of a landmark year, aided by our new stay-at-home culture, the company, which has 250 employees globally, is reportedly on the heels of securing a new round of funding that would see it valued at $7 billion, merely six months after its last funding round priced it at $3.5 billion. At the start of the pandemic, global monthly downloads surged from 6.1 million in February to 13.5 million in March, according to the app analytics firm Sensor Tower. The second spike came when the multiplayer game Among Us peaked in popularity: New monthly downloads shot up from 11.3 million in August to 22.7 million in September. The enduring popularity of Fortnite, Minecraft and Roblox play a hefty role in Discord’s growth, not to mention Among Us—which even Rep. Alexandria Ocasio-Cortez livestreamed herself playing. It's all helped drive the app into the Apple iOS App Store’s top 5 free apps in late September. Despite a troubled past, mixed up with the more vile forces in American politics, Discord has cleaned up its act, made a consumer revenue play and expanded outside of its gaming origins. And while it says advertising isn’t in its future, we’ve seen other platforms do an about face. Taking responsibility for a checkered past Discord was founded in 2015 as a place where gamers could connect. But its anonymity and privacy also attracted far-right political groups. Only a few years ago, Discord was known as the favored platform for the alt-right and infamously used as the organizing platform for the 2017 Unite the Right rally in Charlottesville, Va., a white supremacist and neo-Nazi march during which a woman, Heather Heyer, was murdered by a man who drove his car into a group of counterprotesters. In a recent interview with Adweek, Amy Spitalnick, executive director of Integrity First for America, a group funding a lawsuit against the organizers of Unite the Right, said that Discord was integral to its planning. “In many ways, social media has become the Klan den of the 21st century,” Spitalnick said. “These extremists are no longer meeting in the forest wearing white hoods; rather, they’re meeting in Discord chats and other online forums.” Since then, Discord’s executives have expressed regret for their once-laissez faire approach to policing their platform. The company has booted off hundreds of alt-right groups and accounts, and built up a Trust & Safety team that Forbes reports comprises 15% of its workforce. What’s notable is Discord has taken more responsibility independent of pressure from advertisers. Compare that with Reddit: Once a haven for “free speech,” Reddit only tightened its content rules after advertising became a sizable part of its business. The platform banned hate speech for the first time this summer as advertisers boycotted Facebook for its own policies toward online hate. Discord recently took action against groups that promote Nazism, QAnon conspiracy content and revenge porn. How does Discord make money? One media strategist, who spoke on condition of anonymity, said that while the platform has improved in recent years, it’s still a tough place for any brand to organically interact with users. And the platform doesn't run any advertising. So how does it keep the lights on? While Silicon Valley is known for eliciting valuations based more on user base and potential monetization than actual revenue, many social media apps that started ad-free, like Reddit and Snapchat, eventually reversed course. And while Slack (bought this week by Salesforce for $27.7 billion) relies upon business-to-business sales to larger companies and organizations, that’s not really an option for Discord, which doesn’t market itself as a professional tool. Rather, Discord has opted for a consumer revenue play, offering a premium version of the service, Discord Nitro, for $10 a month or $100 a year. Nitro lets users customize their username, use custom emojis across different servers, use “boosts” to enhance the features of their servers, and enjoy higher-quality streaming and download capacities. (A scaled-back version called Discord Nitro Classic goes for $5 a month or $50 a year, which doesn’t include the boosts.) It’s also tried to sell games through a virtual store, but quietly shut it down after limited success. Discord doesn’t plan on introducing advertising, CMO Tesa Aragones told Adweek, but is “always thinking about new ways to generate revenue in a way that makes the experience better and puts our users’ interests first.” The company would not disclose how many people pay for its premium products. In June, before its recent surge, Forbes estimated that Discord would exceed $120 million in sales in 2020, up from $70 million in 2019. But some plucky brands are appearing organically on the platform. The media strategist, who works with entertainment industry clients, said they havee ventured onto Discord on behalf of a client with a theatrical release. A conversation on the platform had already organically sprouted up, and it felt like a natural fit to join in. “There was a significant amount of conversation and community on Discord that was in line with what one of our entertainment clients was looking to promote and launch a campaign around,” the strategist said. While advertising wasn’t possible, the strategist opted for an organic play on the platform. “The best way to join a conversation is join the conversation rather than start one,” they added, likening it to organic brand strategy on Reddit. A Discord spokesperson pointed out that companies like Adobe and YouTube, musicians like Wiz Khalifa and Imogen Heap, and even the NBA’s Sacramento Kings have all created servers for their fans. A shift in audience These days, Discord wants you to know it’s not a bad place on the internet—and it’s also not just about gaming. “It’s your place to talk,” reads the company’s new tagline, which was introduced this summer. The media strategist suggested Discord can definitely expand beyond gaming toward “gaming adjacent” interests and tap into fandoms. Discord’s lack of a newsfeed, algorithm or sophisticated discoverability functions means it’s more of a “communications service” rather than a social network, according to a spokesperson. However it defines itself, it shares characteristics of social networks: attract users and keep them on the platform while making sure it’s a safe space for everyone. And broadening beyond gaming will help drive those goals. “To be clear, we are not leaving our gaming roots. We will always honor and support our gaming roots, and now hope other communities and passionate people will enjoy new homes on Discord too,” Aragones said. “We are simply embracing what has been a reality for some time now—that people use Discord for a lot more than playing games.”

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How Discord Built a $7 Billion Platform—Without Ads

A look at how the chat service began, its stance on moderating content and where advertisers can fit in

Scott Nover

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