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Game on

9 December 2020 By Gina Chon

Microsoft still has a shot at going viral without TikTok. The software giant lost out on the chance to buy the video app after its Chinese owner was forced to sell on national security grounds. But a better fit may be gaming chat service Discord, recently valued at about $7 billion according to TechCrunch. It’s a cheaper, and less politically fraught, way for Microsoft to chase new users.

By trying to acquire the U.S. assets of TikTok, Chief Executive Satya Nadella showed where his firm’s ambitions lie. TikTok would have given the $1.6 trillion Microsoft a social network of younger-skewing adherents. Owner ByteDance decided to instead sell a 20% stake to Oracle and Walmart in a deal that values TikTok at around $60 billion. In September, Microsoft bought ZeniMax Media, owner of popular game “Doom,” for $7.5 billion.

Discord offers some of what Microsoft missed out on. Its users chat in topic-based channels – called servers – by text, voice, video and pictures, all of which can be public or private. In June, the network co-founded by former game developer Jason Citron had over 100 million monthly aficionados, twice the number it had a year earlier. That’s around one-seventh of TikTok’s global users, but roughly the same as Microsoft’s Xbox Live gaming service.

There’s more overlap than with TikTok too. As well as gaming, Discord is gaining ground in education, where teachers and students use it for remote learning and study groups. Discord arguably looks like a consumer-facing version of Microsoft’s Teams messaging service. It also makes money through subscriptions rather than advertisements, which puts it closer to Microsoft’s own model. With $138 billion in cash, Microsoft can easily afford Discord.

Not that it needs a deal. Analysts already expect the software giant to grow revenue more than 10% for the next three years according to Refinitiv. And chasing consumers brings its own perils. Discord had to do damage control after white supremacists used its platform to plan a rally in Charlottesville, Virginia, in 2017. Social networking isn’t for the faint hearted. If that’s where Nadella’s desires lie, though, Discord may not be a bad way to gratify them.

 

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