Microsoft is reportedly in talks with Discord to buy the communications app. The Wall Street Journal reports that Microsoft is in “exclusive talks” to acquire Discord, and that a deal could be closed next month. It is the latest acquisition target for Microsoft, after the company recently failed to acquire TikTok and Pinterest. Although all three are very different services, they have one thing in common: community.
Microsoft is willing to spend a lot of money on these services because, outside of Xbox, it doesn’t have a huge consumer-centric community like rivals Google, Amazon, Facebook, and Apple. Microsoft has seen Google acquire YouTube and turn it into the world’s largest video platform, Amazon bought Twitch and streaming dominated, Facebook acquired both Instagram and WhatsApp to define the way millions communicate and socialize online, and Apple rules mobile with its App Store .
Discord gives Microsoft access to a growing list of more than 140 million monthly active users, including thousands of top YouTubers, creators and gamers. Microsoft wants its own community.
A community of makers
“Creation, creation, creation – the next 10 years will be about creation as well as consumption and the community around it, so it’s not just creating,” Microsoft CEO Satya Nadella said in a statement. interview with Bloomberg last month“When it comes to consumption for the past 10 years – we shop more, we browse more, we watch more binge – there’s all creation behind all of those things.”
Nadella quickly focused on creators and communities in her first year as CEO at Microsoft. One of his first major acquisitions was Mojang, the studio behind it Minecraft with its millions of devoted fans. Nadella has also spent a lot to acquire other communities, with LinkedIn costing $ 26.2 billion and GitHub $ 7.5 billion. GitHub was a prime target for buying developer love and a huge community, and LinkedIn connected Microsoft more deeply with businesses, providing access to a major professional social graph.
Microsoft has clearly been looking for the same type of creator-led community on the consumer side, but TikTok and Pinterest have failed. The software maker has also failed elsewhere. Microsoft bought Beam a few years after Nadella was named CEO, eventually turning it into its Mixer streaming service. Microsoft tried to compete with Twitch, but ultimately failed because it didn’t have the wide consumer reach. Instead, it shut down Mixer last year and helped transition streamers to Facebook Gaming.
Discord provides Microsoft with a large and engaged community. Mainly used by gamers, it has become a Gen Z hub for socializing with friends, especially during the pandemic. Made up mostly of private communities, Discord has 6.7 million active servers every day. It’s a huge community, 75 percent of which are Discord users outside of North America.
It has also become an essential resource for many over the past year. I’ve personally used Discord on a daily basis to keep in touch with friends, or have participated in remote movie nights, streamed games, and just used the app as a hangout. Millions use Fortnite to hang out and play together, and Discord is the primary way these communities of friends talk and chat while they game.
Discord is a great mix of Slack messages and Zoom video, combined with a unique ability to just get into audio conversations freely. You don’t have to organize time to call friends or send them links, you just jump in and out of voice channels that are always ready and open.
Azure and Xbox
The community and creator aspects to Microsoft’s potential acquisition of Discord are clear, but the company is also driven by a desire to run major public services on Azure. It’s one area where Microsoft has fallen behind rival Amazon Web Services (AWS), and it’s especially relevant when you consider that Discord is powered by Google Cloud. Microsoft and Google are in each other’s throats again, so Microsoft migrating Discord to Azure would be seen as a big win for its cloud ambitions.
Microsoft has also switched Minecraft from AWS to Azure, and the company soon moved Outlook for iOS (part of the Acompli acquisition) from AWS years ago. Having a large platform like Discord, TikTok, or Pinterest on Azure will allow Microsoft’s massive sales force to sell more businesses as they make the switch.
Discord also has growth potential for Microsoft outside of the cloud. Discord raised $ 100 million last year to try to move beyond gaming and attract art communities, sports networks, school clubs, and more. This all sounds very similar to what Microsoft is trying to do with Microsoft Teams for personal use, after the company struggled to have its own Zoom moment with Skype.
Discord does open Microsoft to moderation headaches, however. Discord set up a task force last year to combat hate speech about the service, in addition to improving its own racial equality efforts. Like many social networks, it has had to combat toxic users, bots and groups that use the service for hacking, organized hatred, and other nefarious activities. Discord takes advantage of the fact that it doesn’t try to amplify content to keep users engaged, such as Twitter, Facebook or YouTube. Microsoft has a lot of solid experience moderating with its Xbox Live network, and the company has been on a mission for the past few years to combat toxicity in gaming.
If Microsoft succeeds in its takeover attempt, the crossovers between Discord and Xbox will be clear. Xbox chief Phil Spencer has previously spoken of the importance of Discord as a place “where people gather to talk about games, watch games, watch others play games”. That should have been Mixer, but the usergroup was not there. An acquisition of Discord could strengthen integration between Xbox, PC and Discord at a time when consoles are basically becoming powerful PCs.
Spencer has been open to “cross-talk” between Xbox Party Chat and Discord for years, and it’s reasonable to assume that bringing Discord to Xbox would be a priority for Microsoft if a deal goes through. This kind of integration would only make Xbox more attractive than PlayStation, just as Microsoft’s $ 7.5 billion acquisition of Bethesda is intended to boost Xbox Game Pass with exclusive games.
I also think Microsoft has learned to allow its successful acquisitions to flourish independently. Skype is a great example of what goes wrong when Microsoft tries to integrate a complicated service into its extensive network of software and services, but GitHub, LinkedIn, and Mojang have all remained largely independent. Microsoft wants Discord for its active user base; the last thing it has to do is anger a community of millions.