Why Microsoft was dying to buy Discord
Published 2021-03-25
EDIT: As of April 20, 2021, talks between Microsoft and Discord have ended without an agreement.
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Microsoft is expanding their games business, bolstering their Xbox brand with acquisitions of Zenimax, the parent company of Bethesda Softworks, makers of The Elder Scrolls and Fallout, for $7.5 Billion, and the 2014 acquisition of Minecraft for $2.5 Billion.
Discord, on the other hand, is a booming social networking platform with one glaring hole - profit. They offer premium subscriptions to users, which has generated $130 Million dollars in revenue in the last year, but they’re still not profitable. Other social networking platforms make money by injecting ads into their platforms, but Discord has steadfastly avoided doing so, with their CEO Jason Citron saying the ads would be too intrusive.
Just last week, I was reading in the Wall Street Journal that Discord had hired its first finance chief, Tomasz Marcinkowski, a veteran of Pinterest. Microsoft had previously courted Pinterest, in a deal valued up to $51 Billion dollars, that has since gone dead. Microsoft courts Pinterest, Pinterest finance chief joins Discord, Discord starts getting into talks with Microsoft. Great job, Tomasz! You’re making headlines less than a week after you’ve been hired!
Microsoft have the third largest war chest of cash, behind only Apple and Alphabet, at $75.2 billion dollars, and they’ve been making moves to spend that money. Like I said earlier, Microsoft courted Pinterest, and they were involved in last year’s notorious TikTok acquisition talks, as well. But why is Microsoft so dead-set on buying a social networking platform? And why is Discord their best bet?
As I said in the intro, Discord is obviously a shoe-in for synergy with Microsoft’s Xbox brand. Discord has 20 million daily active users, and this would be a tremendous onramp to familiarize those users with Microsoft’s Xbox platform and games. Discord integration in Xbox would be a no-brainer, and integration on the Windows platform would be right behind it.
But whereas Xbox is the obvious benefactor of this deal, there are lots of less obvious potential synergies as well. Discord actually wouldn’t be Microsoft’s first social network, considering their 2016 acquisition of LinkedIn for $26 billion dollars.
You see, owning large social networks with lots of users helps Microsoft. This is why they were so interested in buying Pinterest and TikTok - when they have a large userbase uploading information about what they like, that is a massive data trove for Microsoft’s marketing services, and can also serve as material for training their AI services. Every post and photo uploaded to LinkedIn is fodder for Microsoft better understanding the tastes and trends of its userbase. Better AI means better performance for all of Microsoft’s services, from their productivity apps, to their cloud platform, Azure.
Discord is a social networking platform in the video game space. Instant messaging, voice, and video chat, originally all focused around connecting users to play videogames, but now as the service has become more widespread and more widely adopted, it’s been quietly adjusting its branding to be more of a lifestyle platform, rather than focused solely on videogames. People run school groups, organizations, and even companies on Discord, and all of these groups would be uploading photos, and videos, and hosting virutal conversations that all could be fodder for Microsoft’s marketing and AI services. And if this is starting to sound similar to Slack, then you’re thinking in the right direction.
Slack, a similar messaging service, sometimes lovingly referred to as boomer discord, was acquired by Salesforce last year for $27.7 billion dollars. Salesforce is a huge enterprise software company that definitely competes with Microsoft’s bread and butter Office suite. So when we start thinking of Discord as not just a tool for Xbox, but an infinity stone in the MS Office Infinity gauntlet, we see how it can improve Microsoft’s other products, such as Teams.
Microsoft had the opportunity to buy Slack in 2016 for $8 billion dollars. This was way before Salesforce was part of that conversation, and obviously much less than the $27.7 billion dollars Salesforce paid for Slack, but in 2016, Microsoft decided to invest their resources into Microsoft Teams. Teams is Microsoft’s Slack killer, and like Slack or Discord is a messaging and collaboration platform. But it differs from Slack in that it has more than 75 million daily active users compared to Slack’s 12 million. Watch the video for the rest!
All Comments (8)
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Hey do you think Discord is a good buy for Microsoft? 👾🎮
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Never even heard of slack before this video.
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Hello from Korea.... great video sir... I enjoyed watching your videos.... Subbed !
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i wish discord would be that good company it looks like in this video. :( microsoft buying discord could be the thing discord need. i have seen to much and im so pissed by discord but suprised too how good they are to keeping it an unknown thing
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I feel like this could be a really good buy for Microsoft.
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Cancelled my Nitro subscription and all my boosting. Lessons will and have been learned.
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If you file an anticompetitive lawsuit, are you just the sorest loser? 🤔
