Once upon a time, games like World of Warcraft and Second Life included their own voice chat systems directly within the game. Not only was it important that players be able to chat with each other, but these games also derived a lot of value from owning that interaction themselves – both in terms of controlling the player’s experience, and because of the data they acquired from these interactions.
Of course, there were a few issues. By far the largest was that gamers were simply dissatisfied with the audio quality of existing voice chat options. This sometimes didn’t matter, especially for more socially oriented games, where repeating yourself is painful but not especially costly. But with the rise of e-sports and competitive online gaming, the need to be clearly understood has grown in importance, precipitating a shift of players from in-game voice chats to third party tools such as Skype, TeamSpeak, and, most recently and dominantly, Discord.
Discord didn’t have any fancy integrations into games, nor any particularly unique innovations on the chat experience. They really only had two key advantages over the games at the beginning.
The first advantage was that they had engineering talent focused specifically on making a great chat experience. Before Discord, voice was largely a second-class citizen in gaming (and to some degree remains so today, though the situation is rapidly improving.) Games poured their focus into improved graphics, efficiency, and of course developing the story and gameplay themselves. They were forced to rely on outside developers – primarily Vivox, which was recently acquired by Unity – to develop voice chat tools on their behalf. But Vivox and others like them could only work as hard and as fast as games were willing to pay them to, which led to Discord’s second advantage. Discord took extensive venture capital and poured it all into the chat experience. While Vivox did raise some capital, it primarily sustained itself on revenue from its customers. But games chronically are underfunded for everything they’re working on, and many games ended up shortsightedly pulling what little funding was invested in voice into other features. The result is that the war chest of companies like Vivox simply couldn’t stand up to Discord’s.
This leads us to the situation today. By and large, Discord owns the game chat scene, with roughly 50M monthly users. But, in the age of immersive experiences and player analytics, games are realizing how much they’re missing out on without voice. They’re preparing to compete seriously again – which is one of the reasons Unity was so eager to acquire Vivox now.
So, in light of this renewed interest from games to own chat, what is Discord doing?
To answer that, we have to remember that Discord got where they are by pouring in venture capital without any regard for immediate profits. The result is that, while they have an enormous user base, they’ve struggled to show monetary returns to their investors. Now valued over $2B, they’ve outgrown their “loss-leader” phase, and need to start earning real revenue.
They have chosen to solve this problem by emulating one of gaming’s most successful platforms – Steam, which primarily sells games while taking a cut as a distributor. Discord launched their competing store in late 2018, and has been pouring nearly all of their attention into competing with the entrenched Steam and the newcomer Epic Store. Discord sees their competitive advantage here being their network. Since players are already in Discord whenever they chat for gaming, Discord has their attention, and can leverage that to quickly reach a level of distribution that’s a match for Steam.
All of this sounds pretty sensible, but the title of the post is “Why Discord is Wrong.” So, what’s wrong with this approach?
The issue is that Discord sees themselves as Facebook – where, now that they’ve reached critical mass, network effects will naturally reinforce their social dominance, allowing them to focus on monetizing while largely ignoring the core product. There are a few key problems with this thinking, though.
First, Discord is necessarily an additional app a player opens. So, if the games are now willing to build a good enough offering, it’s frictionless (and actually saves time and effort in many cases) for players to transition into using the game’s service, as that’s one less tool they need to have open. Since Facebook is both the app and the network, it doesn’t face this problem.
Second, if you were to leave Facebook for a rival network, your friends wouldn’t be there, so it would provide no social value to you. In contrast, gamers use Discord to chat with a constant set of a couple friends. If I’m playing on an esports team, I only need to convince the team of 5 or so to use the game’s chat service instead, making it near-costless to experiment. What’s more, my choice to use one game’s chat doesn’t degrade my Discord experience when playing other games. So, the marginal costs of my trying out a game’s new chat offering, or transitioning to the games with the best chat support, are nearly zero, despite the overall size of Discord’s network – meaning Discord can die by a thousand cuts as each group individually transitions away.
Finally, Discord lacks deep integrations to the game you’re playing. They do have bots that connect with public APIs for things like leaderboards, but you cannot interact with a game through Discord. In contrast, game developers can offer voice skins with their unique IP, allow players to control the game through voice commands, or otherwise build voice deeply into the game. These kinds of hooks are great at shaking things up in the gaming world, meaning games have a clear path to convince players it’s worth giving their chat service a shot – and as gaming continues to evolve, voice-based features will rapidly be moving from neat perks to vital components of gameplay. (Fallout 76 is a great example of a game already experimenting with interesting ways for voice to be a deeper part of the game.) Once again, since Facebook is itself the core app, it can easily emulate any competing service which offers more interesting features, a feat Discord is unfortunately not positioned to imitate.
The result of all this is that, while Discord focuses on earning money from its current users, it’s going to be leaking users more and more rapidly, and doesn’t have any clear argument for how to get them back once it does. Ultimately, their core mistake is thinking that their moat involves much more user friction than it actually does. As soon as their engineering moat disappears (and there are many companies, including those like Vivox, who are approaching or even surpassing Discord’s quality), they’ll no longer have a strong enough argument to hold onto their current users. If they want to prevent this outcome, they need to focus more on developing features that take advantage of the breadth of their current customer base to create more lock-in. What those features are, I can’t say for sure, but they certainly have some unique advantages – Discord servers which bring in huge numbers of people (not just gamers) to discuss specific topics, combined with their detachment from games, means they have an incredibly wide view of what the chat experience is like in different games and contexts. One of the biggest issues today in gaming is toxicity – Discord may have more data relevant to combating this issue than almost any other organization, and building tools to leverage their player base and fight this would be a very sticky feature for players.
Of course, it’s easy to theorize from my armchair. I’m not basing this off any info that isn’t public – Discord’s team surely ought to have access to the same information. I hope for their sake to learn that I’m wrong, and that they have additional initiatives in place to preserve the size of their network; or else that they have evidence it’s much stickier than I claim. But without that information, the only conclusion I’m able to draw is that they’ve miscalculated their advantages – and that this might be just the opening the big games need to finally retake control of the full player experience.
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