BUILD, RACE, Fight . . . AND CHAT

Dis­cord’s com­mu­ni­ca­tions ser­vice for gamers has al­ready out­grown mes­sag­ing gi­ant slack. As it nears uni­corn sta­tus, the two-year-old startup aims to cash in on its suc­cess.

Forbes - - CONTENTS - by KATH­LEEN Chaykowski

Dis­cord’s com­mu­ni­ca­tions ser­vice for gamers has out­grown mes­sag­ing gi­ant Slack. As it nears uni­corn sta­tus, the startup aims to cash in.

Six days a week, a 26-year-old videogam­ing celebrity who goes by the name “Lirik” re­gales his 1.7 mil­lion fol­low­ers on the stream­ing ser­vice Twitch as he broad­casts him­self play­ing Destiny (a shoot-’em-up con­test), Colony Sur­vival (a city-build­ing sim­u­la­tion) and other pop­u­lar on­line ti­tles. As he plays—from an undis­closed lo­ca­tion in Mas­sachusetts, lest he be mobbed by fans—an­other app called Dis­cord floats on his screen. Lirik uses it to chat in real time via voice or text with team­mates and to mes­sage with thou­sands of fans in chan­nels ded­i­cated to pop­u­lar games like League of Le­gends and Mario Kart. Lirik, who re­fuses to pub­licly re­veal his real name, be­came an avid user of Dis­cord two years ago. He has since been cho­sen by the San Fran­cisco-based startup as one of about 200 in­flu­encers it pays to pro­mote the ser­vice. He says Dis­cord fos­ters a sense of com­mu­nity among his fans, who chat, min­gle and form friend­ships with each other. “I have Dis­cord open 24-7,” Lirik says.

Dis­cord’s em­brace by fa­mous Twitch and YouTube gamers like Lirik helped turn the free desk­top and mo­bile chat ser­vice into one of the big­gest app break­out hits in re­cent mem­ory. Grow­ing vi­rally since its May 2015 launch, it has more than 45 mil­lion reg­is­tered users, who send some 200 mil­lion mes­sages daily. Ev­ery day 9 mil­lion peo­ple across the globe use Dis­cord. By com­pari- son, the cor­po­rate mes­sag­ing phe­nom Slack had just 2.3 mil­lion daily users two years af­ter its launch and has since grown to 5 mil­lion. Dis­cord, which has been called “the Slack for gamers,” is adding 1.1 mil­lion new users ev­ery week. “I haven’t seen a prod­uct that has grown this quickly, with this daily us­age, in a long time,” says Josh El­man of Grey­lock Part­ners, an in­vestor in Dis­cord. “If you’re a gamer, Dis­cord speaks to you.” Co­founder and CEO Ja­son Citron says, “Dis­cord was just some­thing that was miss­ing from the world. It needed to ex­ist.”

Dis­cord has quickly over­taken in­cum­bents like Team­s­peak, Mum­ble, Ven­trilo and, in some cases, Skype with a sim­ple for­mula: an all-in-one ser­vice that com­bines text and voice com­mu­ni­ca­tions— and, soon, video chat and screen shar­ing—and in­te­grates eas­ily with on­line games dur­ing play­time. The bulk of Dis­cord users are 18-to-34-year-old

gamers who con­nect with a core group of friends for hours on end to dis­cuss strate­gies for slay­ing a dragon or chat about work or their ro­man­tic lives. Dis­cord’s mo­bile app shows users when friends are play­ing and makes it easy to set up fu­ture play ses­sions. Richard Hordijk, an an­a­lyst at the gam­ing-fo­cused re­search firm New­zoo, says fea­tures like these “set Dis­cord apart from lon­grun­ning ap­pli­ca­tions” and have turned it into the mar­ket leader.

The tan­ta­liz­ing prospect of be­com­ing a lead­ing pick-and-shovel ven­dor to the gam­ing gold rush has helped Citron, 32, and co­founder and CTO Stanislav Vish­nevskiy, 28, raise nearly $100 mil­lion from a list of mar­quee ven­ture in­vestors that also in­cludes Spark Cap­i­tal and In­dex Ven­tures. The com­pany won’t dis­close rev­enue, which comes mostly from $4.99 monthly sub­scrip­tions for ex­tra fea­tures like an­i­mated avatars, cus­tom emo­jis and larger file-up­load lim­its. But a $50 mil­lion cash in­fu­sion in June val­ued Dis­cord, which has just 65 em­ploy­ees, at about $770 mil­lion. In­vestors know gam­ing fans are a lu­cra­tive au­di­ence. In­dus­try rev­enue, which in­cludes PC and mo­bile games, will top $94 bil­lion this year, ac­cord­ing to New­zoo. The firm es­ti­mates that growth will con­tinue as PC gamers, al­ready at 1.2 bil­lion glob­ally, reach 1.4 bil­lion in 2020.

Citron and Vish­nevskiy be­gan their gam­ing ca­reers as 5-year-olds play­ing Nin­tendo on Long Is­land and in Los An­ge­les, re­spec­tively. They were pro­gram­ming for money by their teenage years and fur­ther honed their com­puter skills in col­lege—citron at Full Sail Uni­ver­sity in Florida and Vish­nevskiy at Cal State Northridge. Af­ter grad­u­at­ing, Citron worked for gam­ing stu­dios for a few years be­fore launch­ing his own Tetris-like game on the day Ap­ple’s App Store opened. When he couldn’t mon­e­tize the game, he took the so­cial fea­tures he had built and turned them into a ser­vice for game devel­op­ers. He ex­panded the com­pany, Open­feint, to 100 em­ploy­ees and sold it to the Ja­panese me­dia com­pany GREE for $104 mil­lion in 2011. Citron left a few months later and, af­ter un­wind­ing through three straight weeks of play­ing Fi­nal Fan­tasy IV, de­cided his work wasn’t done. “I had this itch, and still have the itch, to build some­thing en­dur­ing and im­por­tant,” Citron says.

At the time, ipads were boom­ing in pop­u­lar­ity, and Citron thought Ap­ple’s tablet could be­come the next block­buster de­vice for gamers. He founded his next com­pany, Ham­mer & Chisel, in 2012, to de­velop a mul­ti­player ipad game, re­cruit­ing Vish­nevskiy, who had worked at GREE. The game won ac­co­lades for its de­sign, but when it strug­gled to gain an au­di­ence, Vish­nevskiy pushed Citron to con­sider an idea he had shelved: a text and voice chat ser­vice for gamers. Citron was in­trigued and as­signed half his 18-per­son staff to work on what would be­come Dis­cord. Even­tu­ally, Citron made the wrench­ing

de­ci­sion to stop de­vel­op­ment of his ipad game— and lay off about half the work­ers—to fo­cus on Dis­cord. “It wasn’t even clear Dis­cord was go­ing to work, but I knew we couldn’t do two things at once,” he says.

(In­ter­est­ingly, Slack, which is worth an es­ti­mated $9 bil­lion, also emerged from a failed gam­ing ex­per­i­ment: It was de­vel­oped as an in­ci­den­tal in­ter­nal tool for a team of coders build­ing a com­puter game that was later scrapped.)

Dis­cord launched two years ago into a mar­ket dom­i­nated by a hand­ful of ri­val ser­vices. But most had failed to in­no­vate or adapt to rapidly chang­ing gam­ing be­hav­ior, leav­ing them vul­ner­a­ble to an up­start with a bet­ter mouse­trap, says Lau­ren Foye, an an­a­lyst at Ju­niper Re­search. Dis­cord seized the op­por­tu­nity with a more seam­less ex­pe­ri­ence. While most ri­val apps have to be in­stalled, Dis­cord can run inside a Web browser, mean­ing users need only click an in­vite link and cre­ate a user name to get started. (Play­ers who stick with Dis­cord typ­i­cally in­stall the desk­top ver­sion later for bet­ter per­for­mance.) Dis­cord also caused fewer game-play de­lays than com­peti­tors, elim­i­nated the typ­i­cal monthly us­age fee and re­moved the need for gamers to tog­gle be­tween pro­grams. “The so­cial group moves from a frag­mented mes­sag­ing ex­pe­ri­ence with Team­s­peak and maybe What­sapp or Messenger, and then they just all use Dis­cord,” Citron says. “There’s no wait­ing to call into chats. It’s like an al­wayson con­fer­ence call.” Gamers also ap­pre­ci­ate its se­cu­rity, which pro­tects their IP ad­dresses and pre­vents them from get­ting kicked off­line. Mean­while, Mil­len­ni­als are drawn to Dis­cord’s vis­ual mes­sag­ing, which sup­ports GIFS and graph­ics tied to in­ter­net memes.

Dis­cord’s first spurt of users fol­lowed a fan’s rave re­view on Red­dit. Citron and Vish­nevskiy shared links to in­vite users to the en­su­ing dis­cus­sion thread, and us­age took off. The founders still mes­sage with users ev­ery day, and Citron, who is more ex­tro­verted than Vish­nevskiy, is known to spend hours at gam­ing events like Twitch­con hand­ing out swag. Mean­while, a cus­tomer-care team of 15 em­ploy­ees and 20 con­trac­tors works to pre­vent abuse and as­sist—and ban­ter with— users. “It’s a lot of lit­tle sub­tle things that make a big dif­fer­ence,” Citron says.

For now, Dis­cord’s mon­ey­mak­ing po­ten­tial is hemmed in by the founders’ prom­ises to users: The core ser­vice will re­main free, and they won’t run ads or sell user data. And as the com­pany grows, the monthly sub­scrip­tions for ex­tra ser­vices aren’t likely to pay the bills. But Nabeel Hy­att, a part­ner at Spark Cap­i­tal, says Dis­cord’s user base should lend it­self to plenty of mon­e­ti­za­tion op­por­tu­ni­ties over time. Sell­ing games and mer­chan­dise could be an op­tion, an­a­lysts say. The com­pany may also sell tools and ser­vices to devel­op­ers who cre­ate games with Dis­cord’s chat fea­tures and come up with bots for the ser­vice.

Dis­cord is al­ready be­ing used by nongamers inside some busi­nesses, and some an­a­lysts see an­other po­ten­tial op­por­tu­nity there. “Dis­cord very much has its roots in gam­ing, but you could see it branch out more broadly,” Ju­niper’s Foye says.

Citron and Vish­nevskiy say they pre­fer to re­main firmly grounded in the fan­tasy world of games. They’ve built Dis­cord’s head­quar­ters into a child’s idea of what a work­place should be. There’s a hand­ful of ar­cade games lin­ing the en­trance and meet­ing rooms equipped with comfy re­clin­ers, an­ti­quated tele­vi­sions and gam­ing con­soles, which could eas­ily dou­ble as play­rooms. Groups of couches of­fer seat­ing for monthly game nights. Plushies, par­tic­u­larly Poké­mon, dec­o­rate desks. “That’s why Stan and I wake up ev­ery day and do this,” Citron says. “Bring­ing peo­ple to­gether around games is re­ally the light­ning rod we con­nect to.” And who’s to say fun and games can’t turn into real prof­its?

Stanislav Vish­nevskiy (left) and Ja­son Citron turned a pas­sion for gam­ing into a block­buster com­mu­ni­ca­tions app.

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