Thread by @avibhuiyan

Last week Discord dropped a bombshell announcement that flew remarkably under the radar.

It was framed as feature rollout and "evolution" rather than strategic upheaval, but it points to a challenging shift for perhaps the most interesting company in gaming. [A THREAD]

Discord is the go-to comms platform for 130M+ gamers, and its best-in-class product has driven meteoric user growth since 2015.

As is common for start-ups, Discord is free + monetization hasn't been a top priority... but less common is Discord's aversion to monetizing user data.

CEO @jasoncitron has been *vocal* in interviews about how Discord is different from Facebook and believes in selling TO gamers rather than selling gamers' info to advertisers.

Unlike FB/Insta, Discord believes subscriptions + sales > targeted ads as a matter of user trust.

Rejecting ad dollars is unusual for a social platform w Discord's scale, which is one of many reasons why the company is so interesting.

Still-- with venture backed companies, for a time growth is everything, but at some point investors will expect revenue (if not profit.)

Last fall, Discord unveiled its grand plan:

(1) A new PC game storefront (Direct Sale)
(2) Discord Nitro including games (Subscription)

This was much more than challenging Steam-- it was Discord outlining a path to profitability that didn't sell users.

theverge.com/2018/12/14/181…

Selling games isn't an original idea-- plenty of storefronts like Humble Bundle and Origin compete w Steam.

What made Discord's decision smart is that their platform already operated as a social layer on top of ALL games regardless of what storefront or launcher they came from.

You can't buy+launch Division 2, Anthem, Rocket League, etc. all from one place, but you can (and millions do) chat w friends on Discord while playing all of them.

Many already default to Discord as their hub to communicate while gaming... why not for buying+launching games too?

Moreover, Steam has struggled mightily w discovery-- more games were released on Steam in 2017 than between 2006-2014 COMBINED.

Finding good games amidst the ocean of content is a significant challenge for gamers, but Discord believed its user data gave it an edge.

Unfortunately for Discord, shortly after they announced their intent to challenge Steam for gamers' hearts, minds, and wallets, Fortnite publisher Epic Games announced the launch of their gamefront + its deep integration with the Unreal Engine and perks for devs.

It's hard to say how successful Discord might have been without Epic entering the fray, but Epic's dramatic upending of Steam's notorious 70/30 revenue split with an 88/12 model and leveraging of deep dev relationships was... not great for Discord.

theverge.com/2018/12/4/1812…

Still, given Discord's vast insights into

- what users are playing
- how much they play
- who they're friends with

plus the fact that Discord is game/platform agnostic, they still had an edge on Epic and Steam.

Right?

"We’ve learned that devs want to avoid the friction and cost of a traditional storefront by selling directly to their community. So, you can now create a store channel within your server where anyone can get your game."

-- March 14, 2019

blog.discordapp.com/empowering-dev…

After this announcement last week, most of the focus was on the second sentence in the above quote, noting that Discord was now allowing game devs to sell games directly.

Less focus was placed on the fact that Discord is abandoning its much-touted store.

While Discord is still offering game sales via dev channels, this is a major shift in strategy that seems to signal their storefront, which was only live for a few months before having the plug pulled, was faring... not well.

Discord's Nitro subscription-based revenue approach is still very much alive, but like storefronts, the "Netflix of Gaming" arena is getting VERY crowded w powerful players-- just this week Google unveiled their entry into the field with #Stadia.

Monetizing without selling users is difficult for social platforms, and Discord deserves credit for trying.

That said, their most recent announcement revealed that they're exploring new monetization routes, including selling reach to developers.

Pivoting is nothing to be embarrassed about, and Discord would hardly be alone if it shifted its stance on monetizing users.

Still, the company is careful to distinguish that it's selling increased reach and NOT targeted access to users based on demographic/psychographic info.

That's a very different approach from Facebook and leaves money on the table by not directly monetizing user data.

Despite setbacks + pressure on the company to produce revenue, Discord is still aligned with its founder's principles on user privacy.

What does it all mean? Discord is:

- likely struggling with monetization (the Discord Store is no more)
- really, REALLY good at PR
- still standing by its principle to not sell its users
- experimenting with selling to gamedevs (and not just their own users)

For a company whose origin was a pivot out of a floundering MOBA, having to shutter a game store is hardly the end of the world.

Discord's leadership team is undeniably sharp and as well equipped as anyone to solve its monetization puzzle.

In the meantime, though, it's fascinating to watch Discord reject massive ad dollars on principle to instead run high stakes monetization experiments in real time vs. the biggest players in tech and gaming.

For my money, they're the most interesting company in gaming today.

(h/t to @Recode for the excellent interview)

You can read it in its entirety here:

recode.net/2018/8/9/17665…)