Why Microsoft wants to acquire Discord?

Microsoft is having discussions with Discord to buy the communications app, according to the Wall Street Journal reports, the American tech company is in “exclusive talks” to acquire Discord, and a deal could close next month. It’s the latest acquisition target for Microsoft after the company’s failure to get hold of TikTok and Pinterest recently. All three are very different services but they share one common element: community.

Microsoft doesn’t have a huge consumer-facing community like its rivals Google, Amazon, Facebook, and Apple do outside of Xbox. Google acquires YouTube and turns it into the world’s biggest video platform, Facebook acquires both Instagram and WhatsApp to control the way millions communicate and socialize online, Amazon buys Twitch and dominates streaming, and Apple rules mobile with its App Store.

Microsoft is looking for its own community by acquiring Discord and gaining access to a growing list of more than 140 million monthly active users that includes thousands of top YouTubers, creators, and gamers.

A CREATOR COMMUNITY

“Creation, creation, creation — the next 10 years is going to be as much about creation as it is about consumption and about the community around it, so it’s not creating alone,” said Microsoft CEO Satya Nadella in an interview with Bloomberg last month. “If the last 10 years has been about consumption — we’re shopping more, we’re browsing more, we’re binge-watching more — there is creation behind every one of those.”

One of Nadella’s first big acquisitions was Mojang, the studio behind Minecraft with its millions of devoted fans and he also went on to spend big with LinkedIn costing $26.2 billion, and GitHub for $7.5 billion. He was quick to focus on creators and communities in the first year of being CEO at Microsoft.

Microsoft has clearly been on the hunt for a consumer-side creator-led community but TikTok and Pinterest didn’t work out and its acquisition of Beam, eventually rebranded into Mixer streaming service, failed to compete with Twitch, and had to shut down last year.

According to The Verge, Discord offers Microsoft, “6.7 million active servers every single day. It’s a huge community, 75 percent of which are Discord users outside of North America.”

It’s also become an essential tool for many over the past pandemic-inflicted year to keep in touch with friends or participating in remote movie nights, among other socializing things. Millions use the famous Battle Royale game Fortnite to hang out and play together, and Discord is the primary way these communities of friends talk and chat while they’re gaming. 

Discord is a great mix of Zoom video and Slack messaging, combined together with a unique ability to just drop into audio calls freely. 

AZURE AND XBOX

The community and creator aspects for Microsoft’s potential acquisition of Discord are clear, but the company is also driven by its desire to have big public services running on its cloud platform Azure that has fallen behind rival Amazon Web Services (AWS) and it’s particularly relevant when you consider Google Cloud powers Discord. 

Microsoft, years ago, quickly moved Outlook for iOS (part of its Acompli acquisition) away from AWS and has recently also transitioned Minecraft from AWS over to Azure. “Having a big platform like Discord, TikTok, or Pinterest running on Azure allows Microsoft’s huge sales force to sell more businesses on making the switch.”

Discord does not provide growth potential for Microsoft just within the cloud. The instant messaging and digital distribution platform raised $100 million last year to try to move beyond just gaming and attract sports networks, art communities, school clubs, and lots more. This all seems similar to what Microsoft is trying to do with Microsoft Teams for personal use after they struggled to have their own Zoom moment with Skype.

If Microsoft is successful in its acquisition attempt, the crossovers between Discord and Xbox are obvious with Phil Spencer, Xbox chief, previously discussing the importance of Discord as a place “where people come together to talk about games, watch games, watch others play games.” 

Spencer has been open to “cross-talk” between Xbox Party Chat and Discord for years, and this type of integration would only make Xbox more appealing than its rival console, Sony’s PlayStation, just as Microsoft’s $7.5 billion Bethesda acquisition is designed to boost Xbox Game Pass with exclusive games.

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