Discord to start showing ads for gamers to boost revenue
Social-media startup Discord plans to start showing advertisements on its free platform in the coming week after long dismissing them, becoming the latest tech company to turn to ads to try to boost revenue.
The paid promotions are from video game makers and will offer users gifts for completing in-game tasks while their friends watch on Discord.
Discord is looking to hire more than a dozen people for ad-sales positions, according to people familiar with its plans.
The introduction of ads on Discord represents a pivot for the closely held company, whose chief executive, Jason Citron, has repeatedly said it would not depend on ads the way Facebook, Instagram, TikTok and others do.
Ads can intrude on the user experience and raise privacy concerns. Still, Uber Technologies, Lyft, Instacart, DoorDash, Netflix, Reddit have all embraced ads in recent years as have streaming services by Disney and Amazon.com.
Discord’s decision to join the crowd could alienate users, said Meghana Dhar, a former Snap and Instagram executive who is now a tech adviser and investor.
Discord “has famously promoted itself as committed to being ad-free, so this step-change could impact user trust and potentially have them looking for alternative platforms,” she said.
Discord said users will be able to turn off the ads in their settings.
Discord’s move speaks to a common challenge for consumer-tech companies. They must work to balance the interests of users with the need to generate revenue and, eventually, a profit.
Launched in 2015, Discord was designed to make it easy for video game enthusiasts to chat while playing games online together. It expanded its appeal amid the 2020 pandemic lockdowns to a broader range of users including retail stock investors, students seeking help with homework and friends who want to watch movies together. In March, Discord said it had more than 200 million monthly active users.
The company has been trying to turn its popularity into a big payday for years. In 2021, Discord was in talks to sell itself to Microsoft for at least $10 billion. Later that year, it raised $500 million at a $15 billion valuation.
Since then, many on Wall Street have been expecting an initial public offering from the San Francisco startup. Citron told recently that the company would probably go public at some point.
The company has long relied on its Nitro subscription service, which offers the ability to upload large files and other perks, to boost revenue since its introduction in 2016. Prices range from $2.99 to $9.99 a month. Discord’s revenue has reached $600 million on an annualized basis, quadruple from what it made in 2020, according to a person familiar with the matter. In January, the company laid off 17% of its workforce .
Discord in March announced plans to launch the new ads, which it calls Sponsored Quests, and they will become part of the platform beginning in the coming week. The ads will be targeted to users based on their gameplay, age and geographic location data, and they will appear in the bottom left corner of users’ screens, said Peter Sellis , Discord’s senior vice president of product, in an interview.
To earn rewards, users must stream themselves, completing an in-game task from the advertiser while at least one friend is watching. Users who watch their friends can then set off on quests of their own.
“We’ll get you in front of players,” reads a slide in a presentation Discord is using to show Sponsored Quests to game developers. “And those players will get you into their friend groups.”
Some users who were given descriptions of the ads said they seem minimally intrusive and the need for them is understandable given the platform is mostly free. Others worried the ads would make people pressure their friends to watch them.
“I don’t want my friendships to be monetized or productized in any way,” said Zack Mohsen, 32, a longtime Discord user and computer hardware engineer in the Seattle area. “I think this risks pushing people away from it, myself included.”
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