how-does-discord-make-money

How Does Discord Make Money? Discord Business Model In A Nutshell

Discord makes money in several ways. From its Discord Store, where users can buy premium games, to the seller shops, that primarily works with a 90/10 revenue share for developers and game sellers. And the ability for sellers to get more visibility on the platform by adding features to the game visibility.

Origin story

One of the first encounters of Jason Citron, with anything close to a gaming console, as he recounted, was the NES (Nintendo Entertainment System) as he played Super Mario Bros. thinking it was the most amazing thing he had ever seen.

A self-taught coder by age 13, he learned to code by developing small games. As he grew he kept playing any sort of video game, from Final Fantasy VI  to Earthbound. He spent hours and hours playing video games.

Inspired by his grandfather which ran one of the earliest electrician consultancies in the 1900s, and his father entrepreneurial roots, Jason started to fix computers to earn some money at the age of 13-14, when he would drop by the homes of elder people to explain to them how computers worked, from basic games to chat functionalities.

Until, at 16 he figured he could get paid to write code for their websites, and that became a real side hustle, which Jason brought on for a few years as a solo-business. Yet the transition from solo-business to entrepreneur wasn’t automatic.

The first company as an entrepreneur

Indeed, Jason Citron spent a few years as a game developer, working for other companies. From 2005-2007 he worked as a game programmer for several companies, until in 2007, he turned entrepreneur, by joining and founding YouWeb Inc., an incubator where he had the chance to focus full time on developing games to build a business out of that.

As he worked on developing a new game for YouWeb, that turned into a game called OpenFeint, a combination of role-playing-game and puzzles.

As Jason Citron would later recall, “This all happened in 2007/2008 when the mobile gaming landscape was totally different from how it is now.” In short, suddenly, the iPhone had transformed the gaming experience. Going from dumbphones to smartphones, the iPhone turned those mobile devices into a gaming console.

From game to platform

OpenFeint would transition from a game to a social gaming network. In the meantime, as it launched games like Aurora Feint and Tower Puzzles, the company had over a million players, but none was paying.

Then one day, brainstorming what to do with the technology built around OpenFeint, Jason Citron, and his co-founder, realized how on mobile devices it was still missing a similar mechanism to Xbox Live, which enabled players to interact and play together.

As they realized that they had built this technology as they built the first games, they transitioned OpenFeint into a social gaming platform, which would eventually take off, so much, that it had by 2008, 75 million registered users. As the OpenFeint software development kit was free, the company made money via revenue sharing, mobile storefronts, and game features.

That is how OpenFeint transitioned from games to becoming a social gaming platform, that later on would become successful in China and be acquired, in 2011 by a Japanese gaming company for $104 million in cash plus additional growth capital allocated to further grow OpenFeint.

A cross-platform strategy to thrive, nonetheless Apple as the main competitor

OpenFeint at a certain point thrived, also when Apple launched its own Game Center, as a direct competitor. Yet, OpenFeint used a strategy of working to help developers integrate within Game Center and other mobile gaming platforms (a cross-platform strategy).

Starting over: the failure that brought to Discord

With the money from the OpenFeint acquisition, Jason Citron built a game development studio, Hammer & Chisel, which would launch other Fates Forever, which Citron defined as “one of the first serious MOBAs on the iPad before Vainglory.”

And yet, it never became commercially successful. By 2015, however, thanks to the learnings in developing Fates Forever, Citron and his team had realized that “voice and text chat on mobile hasn’t really advanced over the past decade” and that there wasn’t a “reliable and secure way for teammates to communicate when playing team games.

From there, Discord was built, the rest is history.

Discord mission, vision and core values

“To bring people together around games this is how Discord announces its mission, and it further articulates: “Discord’s free voice and text chat is about making it easier for you to spend time with the people you care about, create these memories, and land a headshot or two.”

discord-in-numbers
Discord in numbers, in 2020.

How does Discord make money?

Back in 2015, when Discord was launched, asked how it was going to make money, Jason Citron replied:

Our plan is to keep the functionality — the core usability — free. So everything you’re using right now will stay free. Voice, text, mobile, all stay free. Almost all the new features will be free. Deep integrations and overlays and slash commands and bots — all free.

And he continued:

Our plan is to sell optional cosmetic things. One example is what Stan just mentioned: TTS features like selling voice packs. Something like the Unreal Tournament announcer packs. Selling themes, sticker packs, fancy elaborate emoji, sound packs, different sound effects, etc, are still up in the air but it’s what we’re planning to do.

Backed by several investors, Discord raised over $200 million from venture capital firms, that go from Benchmark to Tencent which helped the platform experiment with several revenue streams.

Discord Store

By October 2018, Discord launched its store in Beta, giving the possibility to 50,000 users in Canada to purchase premium games:

Example of premium features on the Discord store.
Example of premium games on the Discord store.

Discord Seller Shops

As of today, sellers can also set up their own store and start selling through Discord:

shop-in-discord
sell-games-on-discord

Some of the features of the seller shop comprise:

  • Sell directly to superfans inside the server and customize the storefront.
  • 90/10 revenue share on sales.
  • Ability to run private alphas or betas using Discord role-system.

Rich presence: advertising for sellers on the platform

Another monetization mode is that of giving visibility on the platform to game developers through:

  • Viral Exposure by adding art and detailed information to amplify the game even more.
  • Send Party Invites Messages to amplify the launch of games.
  • Launch Game In A Party that enables you to request an invite right within Discord.
  • Launch Game’s Spectate Mode that adds a spectate button to a player’s profile so any of their friends can watch in one click.

Key takeaways

  • Using the funds from a previous social gaming platform Jason Citron, launched a game development agency, which developed another unsuccessful game. Yet from that failure, Jason Citron started Discord.
  • Discord is mostly free and backed by venture capital. However, starting in 2018, Discord began to experiment with its premium store to enable users to purchase premium games.
  • Discord also experimented with the seller store, enabling developers to build their game stores on top of Discord and start selling them.
  • Also, Discord also experimented by giving visibility to stores on the platform through a set of paid services to enhance the visibility of the games on the platform.

Connected Business Models

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Roblox is an online gaming platform where users can create avatars and explore various gaming experiences. Each experience will be monetized based on how its developer has structured the game. For instance, free games allow users to spend the platform’s currency, called Robux, to get specific enhancements or purchase items like clothing accessories for the avatars, simulated gestures from the Roblox Avatar Marketplace. Therefore, Roblox makes money by earning a commission on each transaction and through its internal ad network.

Instagram Business Model

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Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc. overall business model. Acquired by Facebook for a billion dollar in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger, left the company, as Facebook pushed toward tighter integration of the two platforms.

TikTok Business Model

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TikTok is the Chinese creative social media platform primarily driven by short-form video content. It launches challenges of various types to tap into the creativity of its users and generate engaging (if not addicting content) accessible via an infinite feed. TikTok primarily makes money through advertising, thus making it an attention-based business model.

Spotify Business Model

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Spotify is a two-sided marketplace where artists and music fans engage. Spotify has a free ad-supported service and a paid membership. Founded in 2008 with the belief that music should be universally accessible, it generated over €6.7 billion in 2019, almost 90% based on premium memberships, and around 10% is ad-supported.

WhatsApp Business Model

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Founded in 2009 by Brian Acton, Jan Koum WhatsApp is a messaging app acquired by Facebook in 2014 for $19B. In 2018 WhatsApp rolled out customers’ interaction services, starting to make money on slow responses from companies. And Facebook also announced conversations on WhatsApp prompted by Facebook Ads.

Reddit Business Model

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Reddit is a social news and discussion website that also rates web content. The platform was created in 2005 after founders Alexis Ohanian and Steve Huffman met venture capitalist Paul Graham and pitched the company as the “front page of the internet.” Reddit makes money primarily via advertising. It also offers premium membership plans.

Twitter Business Model

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Twitter is a platform business model, monetizing the attention of its users in two ways: advertising and data licensing. In 2019, advertising represented 86.5% of its revenue at almost $3 billion. The remaining part is data licensing at 13.5% (over $465 millions) primarily related to enterprise clients using data for their analyses.

Pinterest Business Model

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Pinterest makes money by selling advertising for marketers and companies that can gain visibility for their brands and more sales for their shops. In 2018, Pinterest made over $755 million in advertising revenue and it had 250 million monthly active users. 

Telegram Business Model

telegram-business-model
Telegram is a messaging app emphasizing privacy and encryption, launched in 2013. It doesn’t make money yet, while it raised over $1.7 billion in Initial Coin Offerings throughout 2018, halted by the SEC in 2019. Telegram wants to keep the app 100% free while trying to sustain its growth.

Snapchat Business Model

snapchat-business-model

Facebook Business Model

facebook-business-model
Facebook is an attention-based business model. As such, its algorithms condense the attention of over 2.4 billion users as of June 2019. Facebook advertising revenues accounted for $31.9 billion or 98.66% of its total revenues. Facebook Inc. has a product portfolio made of Instagram, Messenger, WhatsApp, and Oculus.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"