A social network without ads? Discord Defies Convention

In an interview, Discord co-founder and CEO Jason Citron, 36, said the company discouraged the advertising model favored by its peers because advertising would be too intrusive. People use Discord to conduct real-time conversations, he said, as opposed to reading, commenting or commenting on posts. He also said he thinks consumers generally do not like ads and do not want their data to be shared with brands.

“We really believe that we can build products that make Discord more enjoyable and that people will pay for it. It keeps our incentives in line, ”he said.

Mark Shmulik, analyst Mark Shmulik, and AB Bernstein, say analyst Mark Shmulik for a company like Discord will be difficult to earn through advertising. “You then compete with the big positions in Google, Facebook and the other social platforms for advertising dollars, and it’s not an easy task,” he said. “It’s a heavy lift.”

The San Francisco-based Discord launched in 2015 as a platform that made it easy for video game enthusiasts to chat while playing online games. Mr. Citron, an avid gamer and game developer, saw its technology as a more robust alternative to the options of the day. Discord’s career has since expanded to groups of high school doing homework together, friends watching a movie on a shared screen, and individual investors from the WallStreetBets community of Reddit Inc., who gained notoriety earlier this year for his role in the GameStop -trade madness.

Discord said it doubled its monthly user base to about 140 million as daily life moved online in the coronavirus pandemic. Last year, the company generated $ 130 million in revenue, compared to nearly $ 45 million in 2019, according to a person familiar with the company’s finances.

Nevertheless, Discord said it was not profitable. Most of the growth has been verbal, but over the past few months, the company has said it has invested in promoting itself to college students.

Disagreement users form groups called servers consisting of friends or communities dedicated to topics such as houseplants or cryptocurrency. They can chat by text, audio or video, and most of Discord’s servers are invited only. Users can choose to pay $ 9.99 monthly or $ 99.99 per year for Nitro, a subscription that offers benefits like special emojis and enhanced video resolution.

Mr. Citron said Discord plans to continue to rely on its large base of dedicated users to help it become profitable as vaccines expand and virus restrictions increase. Users will often buy Nitro subscriptions for the servers they belong to, as a way to provide support, he said, adding: ‘It’s almost like giving your friends a group hug or taking them out after lunch . ‘

According to analysts, subscriber-based business models are attractive to technology investors because they can provide consistent and therefore predictable revenue. But the strategy depends on users liking a platform enough to commit themselves to recurring payments for services or products.

‘You earn more revenue from a small group of passionate customers who are willing to pay for the product, than you can earn by showing ads to the entire customer base,’ says Doug Clinton, managing partner of investment and research firm Loup Ventures. “It’s risky to rely on consumers paying over long periods of time, but nice if it works.”

Other communication platforms, such as Signal Messenger LLC and Facebook’s WhatsApp, also do not earn money through advertising. Signal is a non-profit organization that relies on donations. Facebook planned to launch ads to WhatsApp last year, but reversed.

Discord doubled its valuation to $ 7 billion in December after raising $ 100 million in a round of financing led by venture capital firm Greenoaks Capital, which has already been an investor in the company. Overall, according to Crunchbase data, Discord raised about $ 480 million. Mr. Citron said he was not thinking of announcing the company now.

Most Discord servers are private, while other social platforms are primarily public dialogue. Although Discord is primarily for consumers, some businesses have set up servers to share news and support customers, as well as to communicate with their employees.

“There is no comparable product that looks and feels the same as Discord,” said Neil Mehta, a partner at Greenoaks Capital.

College junior Heather Navarro said she belongs to a private Discord server with about three dozen friends and a handful of community public servers, including one for singles and another dedicated to Richmond, Va., Where she lives. Sometimes she will jump to a server where students of all ages help with school assignments.

Me. Navarro, 20, joined Discord a few years ago as a way to chat with friends while playing video games. Recently, she purchased a monthly Nitro subscription because “I’ve been using a lot more lately,” she said. “My friends and I use it to talk about our lives. We talk every day. ”

Discord tests more paid features, including original multiplayer games and digital stickers.

Like other social platforms, there are challenges to moderation and the company has sometimes struggled to curb bad actors because it does not monitor the conversations of users. “Privacy is built into our product from the ground up,” he said. Citron said.

Discord uses a combination of machine learning, employees, and volunteer moderators to erase behaviors that violate the rules of conduct. A trust and security team of approximately 45 staff members, or 15% of the total number of Discord staff members, are proactively trying to form people who are not welcome on the platform. “We have no tolerance for hate and online extremism,” he said. Citron said.

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Write to Sarah E. Needleman by [email protected]