Discord Business Model – Powerful ways through which Discord makes money
Ever met some group of game fanatics?
Maybe you are an ardent gamer on your own.
Now, what bothers you most during a game session?
If you have been in the game for a long time or have had this conversation with an insatiable group of gamers you will discover that nothing gets them upset as much as having disruptions during a chat session with their playmates.
Of course there have been many efficient communication applications for gamers over the years. Skype and TeamSpeak easily comes to mind. But none of them ever considered the call quality, group chat functionalities, security issues as priorities therefore leading to some sort of sub-standard performance. Well, games-enthusiasts were frustrated by that and it has always been obvious. .
Jason Citron (co-founder and CEO of Discord) and Stanislav Vishnevskiy (co-founder and CTO of Discord) spotted that frustration themselves being avid gamers.
And what did they do, they quickly recognized that as a big opportunity. They acted immediately. And the result is what you and I have today – Discord (born in 2015)!
It was developed as an all-in-one voice and text chat platform with high-quality and lag-free voice chat facilities. It is a free, secure, and high-level messaging gaming app, far better than what the likes Skype or TeamSpeak offered.
Amazingly, Discord provides this service to millions of users for free, yet there are no ads on the platform. So, that will naturally prompt you to ask the question of, how then do they make money?
So that is what this blog post is about to address. We want to look at the Discord business model to understand exactly how they make money to remain in business.
But before we delve fully into Discord Business Model, let’s answer some basic questions:
Discord is a social network specifically tailored towards avid video game players. It supports communication through text, voice chat, and video calls. With its headquarters in California the platform is easily accessible on all manner of devices; Android, iPhone, Mac, Xbox, PlayStation, and PC devices.
Discord allows its users to organize themselves in communities. And these communities are referred to as Discord Servers.
Though the company initially started as a niche product within the online gaming community, but it has since grown to encompass an even more comprehensive range of popular communities.
The company now hosts over 150 million active users, which are spread out across millions of servers.
But an interesting aspect of this app is that unlike most other social networks Discord is committed to offering its services ad-free. And this would naturally lead anyone to want to understand Discord business model and how it makes money.
Discord Business Model – What They Do
Discord business model was originally built for gamers. And though you will still find a lot of communities dedicated to gaming on the platform, but Discord has transcended far beyond gaming and grown into a space where other conversations take place. Discord is now into music, culture, politics, art, finance, and even dating.
With its multimedia experience, you can use Discord to stream videos, play board games remotely with friends, listen to music together, and generally just hang out.
Discord business model also offers users the chance to set up their own servers. With the servers they can attract an audience for streaming whatever event they choose online. Basically, the server acts as a community hub, displaying relevant content for those on the server.
The owner of the server moderates the community in any way they choose.
Discord Business Model – How it Works
Unlike other social media platforms that are oriented around one central community, Discord is divided into many servers otherwise known as communities.
The servers in Discord can be either public or private spaces.
You can join a big community of people who share a common interest. And you can equally start a smaller private server and invite people of similar interests to join. If it is a private server, people will need an invite and approval to join. But for public servers, those ones can be accessed via a link.
There is however a limit to the number of servers a particular user can join. A single user can join a maximum of 100 servers. Similarly, there is also a limit for the number of channels a given server is permitted to have. And the maximum is 500,000.
Furthermore, the app also has a third party integration with other platforms. And some of the popular platforms it is integrated to are YouTube, Giphy and Spotify. This integration allows users to share third-party content on Discord. Discord equally partners with Twitch to encourage Twitch players communicate through discord servers even while live streaming.
Information from Discord website, shows that there are now over 150 million active users on the platform. Additionally, the platform boasts 19 million active servers at any given time.
Discord Business Model – Key Terminologies
For a proper understanding of Discord platform and how it works there are two particular terminologies that have to be explained.
On the Discord platform, the definition of the word ‘server’ is not the same thing as its usual meaning in everyday computing. In fact, on Discord Servers do not refer to any physical or online resource. Rather, it refers to a community within the platform where users can communicate via text or voice options known as channels.
See Servers as ‘Groups’ on WhatsApp or Facebook or as ‘Channels’ on Telegram.
Like we have explained earlier Servers may range from small invitation-only chat rooms consisting of a few friends and a single text channel to large public spaces with thousands of members supporting many voice, text, and video channels. Access to a private server is usually shared by sending an invitation link that is unique to that particular server. But anyone can join a public server simply by clicking on the link.
Due to the potential size and versatility of a Discord server, the platform is organized into various dedicated communication media known as channels. A channel could be a text channel, a video call channel, or a VoIP.
On the Discord platform, a channel is simply a dedicated medium within a server through which players can communicate one on one or with all members of the server on specific topics.
See Channels as a chat room with a community or group.
So it is a collection of Channels put together that forms a server in Discord.
Server Boosting allows a community to up the functionality and performance of their Discord Server. This is one of the ways in which Discord business model enables it to make money (more on this later).
Servers can be boosted to three different levels. They ultimately entail the following features and benefits:
A server boost costs $4.99 per month. As stated above, Nitro subscribers will receive a 30 percent discount whenever they decide to boost their servers.
Discord Business Model – The Value Propositions
As a social platform you don’t accumulate 150 million users by chance. Discord business model provides such a compelling value proposition that consist of:
1. Discord is divided into many servers otherwise known as communities.
2. There are varieties of topics on offer
3. Over 19 active servers to select from
4. A powerful learning community
5. Individuals with similar hobbies and interests can interact using the best available online communication technologies and services.
6. The service is free for all basic features
7. There’s no requirement to disclose the identity to others, and users can keep themselves anonymous.
8. You can run the app on both desktop and phone just like you use WhatsApp on your smartphone.
9. It has Discord Rich Presence, a feature that enables easier integration of games and users of Discord. With this feature, players can easily see friend’s screen and share the games. They can send party invites to their playmates, launch games in a party, or simply watch and spectate during matches and competitions.
Discord Business Model offers the following free features:
- You can connect with your friends through its free voice chat services.
- You can add as many friends in your Friends List as you want.
- For updates and messages, you can customize your notifications.
- It requires minimal CPU usage and low latency.
- Anyone can create an account on Discord, and it offers ultimate privacy.
- You can also add bots to your Discord server if you want to enhance functionality. In fact, many cool bots are available on servers created by different developers.
- Other features include in-game overlay, multiple channels, custom hotkeys, modern text chat, direct messaging, and smart push notifications.
Users can join up to 100 servers, accessing public ones through links or receive an invitation to a private server. Servers have caps on the number of channels they can join, with the maximum for any Discord server being 500 channels.
Discord Business Model – How They Make Money
When it comes to making money, Discord business model relies heavily on a freemium model to grow its business. What this means is that the core platform is free to use.
However, users who make use of much advanced features that significantly enhances their user experience will have to pay for that.
By relying on a freemium model, Discord is able to grow its user base at a much more rapid pace.
As with every other business that uses the freemium model, the key to making it work is to provide just enough features in the free version to create habits around using the product.
Once users become attached, they can elevate their experience by subscribing to those very same features.
This is exactly what Discord business model has succeeded in doing.
However, the Discord Business Model provides multiple revenue streams. And here are the major ones among them:
1. Premium Model Subscription Fees
While the core features of the Discord platform are offered to users for free, there is also a premium model which allows members to take advantage of additional functionality and greater server efficiency for a subscription fee. The subscriptions are based on each price-tier system, with Discord Nitro Classic costing $4.99 per month, while Discord Nitro costs $9.99 per month.
Once a user subscribes for any of these premium packages the person gains access to server boosts.
And the server boosts contains the following advantages:
- Faster upload times
- A larger upload limit of up to 100MB
- HD video chat options
- Greater degree of emoji customization
- personal profiles with animated avatars and custom tags
- profile badges to highlight how long you’ve supported Discord
2. Distribution Fee from Discord Store
The discord platform initially released a game distribution service that sold exclusive games to members. However, following the failure of the service to meet expectations, they decided to pivot and instead partnered with game developers to allow them to market their games on the discord platform.
This became another revenue stream for the Discord business model as it charges 10% commission on any sale made on the platform. That commission is known as distribution fee.
3. Discord Merchandise Store
The company also operates an e-commerce platform where they sell a wide range of merchandise. The popular merchandise on Discord store include:
- Gaming goods
- Keyboards etc
4. In-app Purchases
Another way of making money in the Discord business model is the in-app purchases.
Users on Discord platform can also choose to purchase additional features such as emojis and stickers.
5. Ticket Sales for Virtual Events
The platform is currently testing a new feature that allows them to sell virtual tickets to live events that are hosted by server moderators on the platform.
6. Funds and Investments
A significant amount of the income from the company came from various rounds of funding which raised a total of $995.4 million as at March 2022.
Discord’s Customer Segments
Discord customer segments consist of the following:
- Online gamers
- Content creators
- Gen Z – 42% of Discord users are between the ages of 25 to 34 years
- Tech-savvy individuals
Is Discord Profitable?
The company currently boasts 300 million registered members, with over 150 million active users. The company was valued at $15 billion in 2021 and posted an annual revenue of $130 million in 2020. This represents 188% year-on-year increase from 2019. The platform recently reached a new record of 10.6 million concurrent users and made an estimated revenue of $300 million in 2021, showing a continuation of its strong growth trend.
Future Growth Potential
The company intends on adding additional services and features to the Nitro Package in the coming years. Discord says it will always keep the chat and messaging services free, but it intends to expand its premium offering.
The company released GameBridge with the hope of improving its service offering and its revenue model. However, Discord withdrew it within a few months after its launch. Still, it aims to bring GameBridge back with an improved offering.
We can expect Discord to expand its gaming arena and stores in the future, as it brings on new developers and users, enticing them with a new revenue-sharing model. The company wants to reward game developers that bring new games and new users to the platform.