Written by Erin Griffith, Karen Weise and Kellen Browning
Discord, a social media company popular with gamers, has been in agreement with Microsoft for a transaction that could exceed $ 10 billion, according to people briefed on the situation.
The talks were preliminary and no agreement is imminent, said one of the people, who declined to be named because the discussions are confidential. The talks took place as video games exploded during the pandemic, and Microsoft, one of the world’s most valuable technology companies, has bolstered its gaming business by striking deals.
Many of Microsoft’s acquisitions in recent years have focused on online communities, such as its LinkedIn purchases, GitHub, and the game developer who created Minecraft. Last summer, Microsoft was in talks to buy the video app TikTok in what would have been a highly successful acquisition; discussions later fell apart. In September, Microsoft also bought ZeniMax Media, the parent company of several large game studios, for $ 7.5 billion.
Discord, which has more than 100 million monthly active users, has been very popular in the pandemic, as people have used the service to chat with each other while playing games. The San Francisco-based company, which has raised nearly $ 600 million in funding since 2014, has had preliminary conversations with various suitors over the years, another person with knowledge of the matter said.
The private company, whose investors valued at $ 7 billion in December, is also a candidate to go public. This month, Discord hired its first CFO, a sign that it may be gearing up for an initial public offering.
Spokesmen for Microsoft and Discord declined to comment. VentureBeat previously reported that Discord was holding deal talks and Bloomberg reported Microsoft’s involvement.
Joost van Dreunen, a New York University professor who studies the video game business, said that if a deal were to be struck, Discord would “be a perfect fit” with Microsoft’s Xbox video game business. He said Microsoft has been “building hardware, buying software and now it’s putting it all together together with the connective tissue of a community layer.”
Microsoft has said it wants to make it easier for people to play games at home on their Xbox consoles or on their mobile phones. In the last three months of 2020, its gaming business generated $ 5 billion in revenue for the first time, following the launch of new Xbox consoles.
Discord was founded in 2015 by Jason Citron and Stan Vishnevskiy, programmers and entrepreneurs, as a platform for video game players to chat and hang out while playing games. It gained widespread attention as a gathering place for the far-right, who used Discord to host the Charlottesville, Virginia, white nationalist rally in 2017.
Discord has since implemented stricter content moderation rules and banned far-right communities. The app, which allows people to create private servers, essentially small communities, features audio, text, and video chat options.
Last year, Discord announced plans to expand beyond gaming to everyday use among online groups of all kinds. It has been used for activities such as college classes and organizing events such as the Black Lives Matter protests.
The company topped $ 100 million in revenue last year, one of the people said. Discord makes money by selling subscriptions to a premium version of the service.