Discord: What is it and why is Microsoft after it?

Reports emerged early on Tuesday that computing giant Microsoft Corp (NASDAQ:MSFT) is in talks about potentially snapping up the Discord platform in a deal that could be worth as much as US$10bn. While those outside the video gaming sphere may think of Discord more in terms of when a debate turns heated, the platform that bears the name is one of the biggest players in the gamer communication space. READ: Microsoft in talks to snap up gamer chat platform Discord Similar to its rival platforms such as Slack and Skype, Discord offers users the ability to create their own discussion groups, known as ‘servers’, which can then serve as a conduit for instant messaging, audio or video chats. However, Discord is primarily designed for audio conversation, mostly due to its gaming heritage and a need for players to have lag-free audio communication in the midst of fast-paced online matches. It also allows users to drop in and out of audio and video conversations with little interruption, rather than having a joining process akin to meeting platforms such as Zoom. Gaming is not its only use, however, with Discord servers also existing for a vast array of interest groups and hobbies from Ariana Grande to anime. The platform’s integration of multiple communication methods, as well as its lack of a price tag for a comparably extensive range of features including customisable emojis, is the prime reason why its registered user base has ballooned to around 300mln since its launch in 2015, massively outpacing the 12mln users of the more business-focused Slack and even more than Skype which has around 200mln. So why is Microsoft interested? Given it already owns Skype and recently launched its Teams video conferencing platform, Microsoft’s interest in Discord may be puzzling to many, given the company has already covered both the personal and professional angles of the online communication universe. Similarly confusing may be the firm's decision to buy in at such a late period in the growth story. Growing a user base almost as big as the US population will take some effort. However, it may be the public reputation of Discord, namely its presence in the gaming community, that is likely to be the main attraction for Microsoft. Throughout the coronavirus pandemic, video games have seen business boom as lockdown measures and quarantine left million stuck inside and turning to electronic entertainment to pass the time. This, in turn, has exposed new customers to the market and resulted in sales booms for multiple video game developers as well as those providing services to develop games and the hardware to play them. Microsoft is not new to the video game industry, with its Xbox consoles already a well-established contender in the market alongside Sony’s PlayStation line and Nintendo’s various console iterations such as the Switch and the Wii. However, snapping up Discord may offer the company an opportunity to expand its video game presence beyond hardware and into the wider industry, which could offer a chance to monetise its products to a new and growing audience. Microsoft has already made moves in this direction, buying up well-known video game maker Bethesda Softworks last September in a US$7.5bn deal that is expected to be completed in the second half of 2021. However, a deal for Discord is anything but in the bag, with reports also postulating that the paltform may decide to go it alone with a public listing instead. Given the recent good fortune of ‘gamer’ stocks such as GameStop Corp (NYSE:GME), Discord could see itself given a warm welcome on the public market.