“The company is going to have to find ways to monetise more aggressively” Would Discord going public be good or bad for its users? We spoke to an expert to find out

Earlier this week, reports indicated that big moves were happening at Discord. According to Bloomberg, the company responsible for gaming’s most popular social platform had confidentially filed for IPO, indicating a major move towards going public.

This would open up Discord to an era of substantial change, both for the leadership of the company and the millions of users who use it every day. Over the years Discord has become the host for an incredible amount of user-generated content and information, and has become a core part of community management for modern releases. Changes to the platform could have a widespread impact on PC gaming, for good or ill.

So what would going public mean for Discord, why has it done so, what challenges does it pose, and should users be worried? To find out, Eurogamer spoke to George Osborn, creator of the Video Games Industry Memo and author of Power Play: Video Games, Politics, and The Global Battle for Influence, to find out.

Eurogamer: What does potentially going public mean for Discord?

Osborn: “The first thing I’ll say is that I don’t think it’s much of a surprise that it’s going public, it’s been talked about for many years. Companies receive lots of investment over the past decade, there was a $500m round that happened in 2022. When you’re getting a business that’s valued at $15bn, whether or not that’s what its final public valuation is, those investors are going to want to cash out at some point. If there’s not an obvious route to an acquisition, going public is the obvious way to go, and it’s the way they’ve gone.

“In terms of the impact on users and the business, I think the most obvious impact is that Discord is going to have to monetise as effectively as possible. It’s a business that has made a decent amount of cash each year, but it’s never achieved profitability by all accounts. “When you look at what it’s made each year, again based upon what figures are reported, people have been talking about figures in the region of half a billion. Let’s not pretend that’s not a big amount of money, but if you’re comparing it to the amount of cash people are expecting from game businesses or social media businesses, the first thing they’ll be expecting is profitability and the second is profitability by a much greater degree than that.

“So, I think the most obvious impact is that the company is going to have to find ways to monetise more aggressively. The question will be how can it achieve that without aggravating its user base too much. Discord is completely reliant on those hundreds of thousands of users, and it’s going to have to strike a different balance than other social networks and media platforms that have gone public before.”

Eurogamer: How challenging will striking that balance be?

Osborn: “I think it’s quite a big challenge for Discord, probably quite a similar challenge Reddit faced when it went public. Here is a platform with a large number of users, genuine influence, and real value. That value though is not necessarily tied to what people are paying for. Discord Nitro obviously does make a decent chunk of cash for the business by all accounts, I’ve seen figures around 200-250 million dollars, so in proportion 40-50 percent of cash. That does offer specific benefit to users, but if you’re talking about this hyper-scale of growth, subscriptions are generally consistent revenue. They aren’t necessarily the massive whopping amounts of cash you need to be generating per-user.

“If you think about free-to-play mobile games, they only actually make a small amount of cash from people spending small amounts. They make much more from people spending large amounts. I don’t know if Discord itself has an obvious pathway to do that, so I think instead the way it’ll have to do it is through two big things.

“One is advertising. They’ve been expanding their ads team and I think they’re probably looking at other social media platforms, in particular Meta, and have seen the amount of money Meta generates from targeted advertising that has transformed it as a business from being at one point unprofitable to one of the largest companies in the world.

“The second interesting option is developing around commerce. They rolled out some stuff around Marvel Rivals in December, where you could buy in-game items and gift them through Discord to other players. They’re probably going to be taking advantage of changing competition and market rules around the world, and in-game economies are being opened up to more direct-to-consumer platforms.

“Discord might well try to suggest to businesses, now let’s say a mobile gaming company has seen that Apple and Google have been told to open up their app stores, actually setting up an entire app store for yourself is a pain in the backside. Partnering with Discord which has a huge community of players to sell items and content to on your behalf may be a much better avenue to go through. I think if they were able to make that model work, that could offer the scale and reach they’re looking for. The trust from the community is there, players would be in support of it because they do want to buy items for their favourite games, and companies will be in support too as it really helps the bottom line.”

Eurogamer: Discord has a dominated presence in the gaming social / community space, and as such possesses a huge amount of user data. Is there a chance this data gets sold off once the company goes public?

Osborn: “In terms of individual user data, there are still lots of data protection rules that can limit what can be done with that data. However, what Discord could be able to say is that while it’s tried to expand to have other Discords in other sectors, say WallStreetBets for stock and trading tips, Discord’s big strength is to say you can reach gaming communities.

“Gaming communities are often difficult to reach in the direct space they’re inhabiting when they’re playing. Yeah sure you can reach people on social media where they’re talking, but Discord is this almost-always operating platform on top of the game. You have people talking and playing at the same time, so it’s in a unique position to reach people while they’re playing.

“Considering the number of people who do play video games and the interest of that audience, I think there would be a lot of advertisers who would be interested in reaching people in that context.”

Eurogamer: There are people who get concerned when they see a company whose service or product they use go public, due to those growth aspirations you mentioned earlier. Are those concerns valid in Discord’s case?

Osborn: “Really interesting question. I would say, whenever a business goes public the pressure changes. With Discord we’ve talked about how much money its made and the number of users it’s got. I can’t actually tell you with absolute certainty that those figures are particularly accurate. Once you go public, especially in the US, you are reporting every quarter. Investors don’t just want to see how much cash you’re making, they want to see user growth.

“So it creates a lot of short-term incentives to create growth quarter-by-quarter. There are lots of companies that found this quite hard. King, for example, went public and then it was very happy to be acquired by Activision Blizzard because the pressure of always having to bring a better quarter than the last one.

“I would also say, on the flip side, Discord is probably looking to go public because it wants more money quite frankly. This could be used to expand the service, especially the audience of the service. It’s obviously been controversial around online safety, but Discord has historically had problems with user safety especially with how the Far Right have used it or for child sexual exploitation. When you become a public company, those kinds of issues become so much more serious that you have to go handle them. I think in particular when you talk about younger users, user safety will likely be prioritised on Discord.

“The question of whether it’s good or not will come down to whether the leadership understands that the value in Discord is within all of its communities, and can it create a sustainable business model that brings together the value players need, that companies need, and frankly they need to make the cash to continue.”