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Microsoft may dispense with $10B for Discord in Xbox ploy

Microsoft is casting its eye over chat community Discord, just as Abu Dhabi invests $150 million in Telegram.

With a $10 billion price tag being reported for Discord, chat apps, it seems, have never been bigger.

The San Francisco-based service, originally built for gamers, has grown beyond that world to 250 million registered users.

Money talks: Microsoft could add Discord, the chat app originally for gamers, to its stable of social platforms.  (Source: Alexander Shatov on Unsplash)
Money talks: Microsoft could add Discord, the chat app originally for gamers, to its stable of social platforms.
(Source: Alexander Shatov on Unsplash)

After all, if there's been one trend to Satya Nadella's shopping list in recent years, it's been online communities.

In 2016, Microsoft bought LinkedIn for $26.2 billion. Two years later, it spent $7.5 billion to buy the code-repository community GitHub.

Discord has been increasingly pitching itself as a "place to talk," by video, voice, or text. Reaching beyond gamers has boosted its monthly active users to 100 million, drawn to book clubs, dance classes and study groups.

Satya got game

With spending on video games hitting record levels – $11.2 billion between June and August last year, 24% more than a year before – games aren't such a bad place to start, either.

Microsoft may be eyeing the Discord community as a natural bedfellow for its Xbox business. It's been looking for perks to offer subscribers to its Game Pass service, which it needs to grow from a comparatively paltry 18 million users.

In 2014, Microsoft bought Stockholm-based game developer Mojang Studios, the people behind Minecraft – with 200 million sales, the best selling game of all time.

Earlier this month, after securing regulatory approvals in the US and Europe, it finalized its $7.5 billion acquisition of ZeniMax Media and thereby bagged Bethesda, the famed ZeniMax-owned developer behind the Fallout and Elder Scrolls series.

IPO?

Discord, which has raised $600 million since 2014, may instead decide to plump for an initial public offering.

Its decision to hire a chief financial officer earlier this month may be a sign its CEO and founder Jason Citron is keeping his options open in that regard.

This month Citron pinched former Goldman Sachs vice president Tomasz Marcinkowski from Pinterest, where he was head of finance. (Microsoft, incidentally, has tried to buy Pinterest too.)

Discord's talks with Microsoft are at an early stage, so don't expect marriage bells to peal anytime soon.

It had made earlier approaches to Epic Games and Amazon, before feeling out Microsoft. Xbox head Phil Spencer has so far handled negotiations on Redmond's end.

Privacy first

Meanwhile Telegram, which in January ranked number one by worldwide downloads, has soaked up $150 million from Abu Dhabi. Launched in 2013 by brothers Pavel and Nikolai Durov, Telegram has its operational headquarters in Dubai.

The brothers previously founded Russia's social network VK before it was taken over by allies of President Putin. Then they moved to Berlin between 2014 and 2015, but couldn't obtain residence permits for all their employees. So Dubai beckoned.


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With 550 million monthly active users, Telegram has made much of its "privacy-first" reputation.

But it will also owe creditors $700 million by the end of April, amid rising bandwidth and equipment expenses. It's the downside of quick growth.

Ideas the Durov brothers have tried out include a Clubhouse-like voice chat feature, and the introduction of adverts this year. This could be dicey given protecting users' data has been what's fueled Telegram's growth.

Pavel Durov has said ads won't appear in private one-to-one or group chats – so that just leaves the platform's public and one-to-many chats, and paid-for premium features.

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Pádraig Belton, contributing editor special to Light Reading

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