I keep seeing these insane valuation numbers for tech companies and I just don't get it. It makes no sense at all. How is a company that is essentially a chat company create $7 billion in value?
I keep seeing these insane valuation numbers for tech companies and I just don't get it. It makes no sense at all.
How is a company that is essentially a chat company create $7 billion in value?
I dunno, need to know their future monetization to really be sure, but I don't think it's that far fetched. It does that by, especially with the pandemic accelerating their growth to ludicrous...
I dunno, need to know their future monetization to really be sure, but I don't think it's that far fetched. It does that by, especially with the pandemic accelerating their growth to ludicrous heights, being a de facto communication platform for communities of all kinds. Really, the extent of Discord surprises me every day. You have everything from kids younger than 10 years old, to Linux distros (I was surprised that Rocky Linux was using discord!), to far right extremist, to basically every gaming community. I know there are schools where the teachers are making discord rooms for their classes
The traction is truly immense. And that's a network effect that gives them moats. For instance, it's OK now to ask random people (say, if you're starting a new book club, or planning a birthday party) to join a discord, because you know so many people already have an account, and if you have an account joining a room is a 2 click process.
The big question mark is the monetization, which is not disclosed since obviously they don't have to, which really is what is limiting their size.
Aside from the data they have, they have a subscription service. If they can entice enough people to pay for the service, they can theoretically make a profit. Fundamentally though, I think VC is...
Aside from the data they have, they have a subscription service. If they can entice enough people to pay for the service, they can theoretically make a profit.
Fundamentally though, I think VC is just betting on what the next facebook is gonna be.
WhatsApp was last valued at 16b when they had 500m users on the platform (in 2014). That's a 31.25x user to market cap ratio. Scaling Discord's last user report (250m), they would be worth about...
WhatsApp was last valued at 16b when they had 500m users on the platform (in 2014). That's a 31.25x user to market cap ratio. Scaling Discord's last user report (250m), they would be worth about 8b. And hey, looks like it was valued at 7b.
Of course, that's specific calculation is doing all kinds of interpolating where you probably shouldn't, but that's pretty inevitable when it's a private company and I'm not a board member. Either way, the point is that I don't think the valuation is that far fetched from what we know about how valuable user retention and user activity numbers are.
I mean, my response to that would be that I don't think WhatsApp was worth $16 billion. It feels like one overvalued company (Facebook) using it's massive VC funding to buy another massively...
I mean, my response to that would be that I don't think WhatsApp was worth $16 billion. It feels like one overvalued company (Facebook) using it's massive VC funding to buy another massively overvalued company (WhatsApp). I just get the feeling that all of these numbers are ludicrously high. It reminds me of the late 90s and early 2000s tech bubble.
Facebook wasn't VC funded by then, it IPO'd two years earlier. That was its own cash flow that it bought WhatsApp for. And it was also 6 years ago, i.e it's not some recent fervor. If you think...
Facebook wasn't VC funded by then, it IPO'd two years earlier. That was its own cash flow that it bought WhatsApp for. And it was also 6 years ago, i.e it's not some recent fervor.
If you think all tech companies are overvalued for whatever reason, I'm not sure I can produce a projection of Discord you'd be happy with since the only thing you can compare it to... is other social platform/chat services. But I do think the former is pretty extreme; I would not argue that today Facebook is in any way overvalued - it has a fairly normal P/E ratio, on the high side for "traditional companies", but imo not exactly that surprising because of the higher growth, and more predictable revenue numbers.
If it is just a bubble, it's a bubble that's survived two recessions.
The difference is that Facebook has a reliable and fairly natural profit strategy. Putting ads into a social network feed is something that's been proven to work, and is a natural way to monetize...
The difference is that Facebook has a reliable and fairly natural profit strategy. Putting ads into a social network feed is something that's been proven to work, and is a natural way to monetize a website.
Discord has no good strategies for monetization. I very much doubt many people are paying for nitro. They tried selling games for some reason, which no one was interested in either.
There's always selling user data, but that's not really worth a whole lot. Unless you can get people to give you money to serve ads, get far more invasive with data collection, or get your users to give you money for something, your entire war chest is just filled based on blind hopes of VC. Eventually, the chickens will come home to roost though. I kind of doubt Discord has much of a viable long term strategy for that.
Without insider knowledge it's really impossible to know what they're planning as their long term revenue strategy, but that is something that i think is factored into why it's ONLY 7b, because...
Without insider knowledge it's really impossible to know what they're planning as their long term revenue strategy, but that is something that i think is factored into why it's ONLY 7b, because really based on the MAU it should be much higher. There's a number of possible ways to build a revenue strategy from a wide reading chat/social platform. You can start to offer transactions (i.e the WeChat strategy), or integrate ads onto Discord channels (disabled for Nitro ones).
It can start to build out subscription based "prosumer infrastracture", basically trying to become Slack-but-more-casual, for small organizations that want more business-like features, but don't want to pay Slack's very high prices.
But, my personal hot take: Discord is going to be bought by Microsoft in the next 5 or so years for around 20-25 billion (which will be a great exit for these VCs!). It will integrated as the Xbox's default social platform, and the ability to basically transfer over your social connections to Xbox and maintain compatibility with PC/Mobile/etc at the same time will become a selling point for Xbox as a gaming console.
I can see the cursed Discord × Microsoft Teams marketing push already 😄 All kidding aside, that sounds totally plausible. I don't know if they'll want to let Amazon continue to grow their gaming...
Discord is going to be bought by Microsoft in the next 5 or so years for around 20-25 billion
I can see the cursed Discord × Microsoft Teams marketing push already 😄
All kidding aside, that sounds totally plausible. I don't know if they'll want to let Amazon continue to grow their gaming and streaming platform in the form of Twitch (which looks like it's been a very clever acquisition for them) without some form of competition.
It's fairly easy to create that sort of hypothetical value if you consider the revenue a subscription service could generate from its platform. Discord had 100 million monthly active users (MAU's)...
It's fairly easy to create that sort of hypothetical value if you consider the revenue a subscription service could generate from its platform. Discord had 100 million monthly active users (MAU's) in 2020, and only 10 million in 2016. If they can project and anticipate 500 million MAUs by 2024, and an estimate that 10% of MAUs by 2024 will have joined Discord Nitro, currently priced at $99/year, that's nearly $5 billion in gross revenue annually.
It's stupid money mainly because it's all based on hypotheticals—but if they can action those hypotheticals and pivot their growth into a paying product, then that bet pays off and it's worth it for venture capitalists to invest in.
I think it's the same reason Microsoft bought Minecraft in 2014 for $2.4 billion. They're not actually going to recoup the costs by selling more copies of Minecraft, however what they bought was...
I think it's the same reason Microsoft bought Minecraft in 2014 for $2.4 billion. They're not actually going to recoup the costs by selling more copies of Minecraft, however what they bought was 100 million users (not counting duplicates). Which for a company like Microsoft with ambitions to push further into the gaming space, the future value of those accounts is immeasurable.
Think of it like IRL networking (sort of). If you're a person who wants to move up in the company, you meet people, shake hands, go to lunches, meet for drinks. Because you never know who is going to end up in a position to help you later. If you're particularly ambitious you might dedicate no small amount of your personal income to such activities, for years at a time. The idea being that later, it will have been worth it because you'll be able to achieve promotions and salaries that you wouldn't have been able to if you'd never taken Frank out for drinks that one time when he was an intern.
Technically speaking they have made more, Minecraft has sold 200m copies, which at around 30 a pop (depending on platform can be more or less), is around 6 billion in revenue.
They're not actually going to recoup the costs by selling more copies of Minecraft
Technically speaking they have made more, Minecraft has sold 200m copies, which at around 30 a pop (depending on platform can be more or less), is around 6 billion in revenue.
Oh dear, that's not a good sign. Large amounts of venture capital money hasn't exactly had good impacts on pretty much any service I've used. At least the Matrix ecosystem is improving.
Oh dear, that's not a good sign. Large amounts of venture capital money hasn't exactly had good impacts on pretty much any service I've used.
I keep seeing these insane valuation numbers for tech companies and I just don't get it. It makes no sense at all.
How is a company that is essentially a chat company create $7 billion in value?
I dunno, need to know their future monetization to really be sure, but I don't think it's that far fetched. It does that by, especially with the pandemic accelerating their growth to ludicrous heights, being a de facto communication platform for communities of all kinds. Really, the extent of Discord surprises me every day. You have everything from kids younger than 10 years old, to Linux distros (I was surprised that Rocky Linux was using discord!), to far right extremist, to basically every gaming community. I know there are schools where the teachers are making discord rooms for their classes
The traction is truly immense. And that's a network effect that gives them moats. For instance, it's OK now to ask random people (say, if you're starting a new book club, or planning a birthday party) to join a discord, because you know so many people already have an account, and if you have an account joining a room is a 2 click process.
The big question mark is the monetization, which is not disclosed since obviously they don't have to, which really is what is limiting their size.
Right. I get all that. I just don't see how that makes the company worth billions of dollars.
Aside from the data they have, they have a subscription service. If they can entice enough people to pay for the service, they can theoretically make a profit.
Fundamentally though, I think VC is just betting on what the next facebook is gonna be.
WhatsApp was last valued at 16b when they had 500m users on the platform (in 2014). That's a 31.25x user to market cap ratio. Scaling Discord's last user report (250m), they would be worth about 8b. And hey, looks like it was valued at 7b.
Of course, that's specific calculation is doing all kinds of interpolating where you probably shouldn't, but that's pretty inevitable when it's a private company and I'm not a board member. Either way, the point is that I don't think the valuation is that far fetched from what we know about how valuable user retention and user activity numbers are.
I mean, my response to that would be that I don't think WhatsApp was worth $16 billion. It feels like one overvalued company (Facebook) using it's massive VC funding to buy another massively overvalued company (WhatsApp). I just get the feeling that all of these numbers are ludicrously high. It reminds me of the late 90s and early 2000s tech bubble.
Facebook wasn't VC funded by then, it IPO'd two years earlier. That was its own cash flow that it bought WhatsApp for. And it was also 6 years ago, i.e it's not some recent fervor.
If you think all tech companies are overvalued for whatever reason, I'm not sure I can produce a projection of Discord you'd be happy with since the only thing you can compare it to... is other social platform/chat services. But I do think the former is pretty extreme; I would not argue that today Facebook is in any way overvalued - it has a fairly normal P/E ratio, on the high side for "traditional companies", but imo not exactly that surprising because of the higher growth, and more predictable revenue numbers.
If it is just a bubble, it's a bubble that's survived two recessions.
The difference is that Facebook has a reliable and fairly natural profit strategy. Putting ads into a social network feed is something that's been proven to work, and is a natural way to monetize a website.
Discord has no good strategies for monetization. I very much doubt many people are paying for nitro. They tried selling games for some reason, which no one was interested in either.
There's always selling user data, but that's not really worth a whole lot. Unless you can get people to give you money to serve ads, get far more invasive with data collection, or get your users to give you money for something, your entire war chest is just filled based on blind hopes of VC. Eventually, the chickens will come home to roost though. I kind of doubt Discord has much of a viable long term strategy for that.
Without insider knowledge it's really impossible to know what they're planning as their long term revenue strategy, but that is something that i think is factored into why it's ONLY 7b, because really based on the MAU it should be much higher. There's a number of possible ways to build a revenue strategy from a wide reading chat/social platform. You can start to offer transactions (i.e the WeChat strategy), or integrate ads onto Discord channels (disabled for Nitro ones).
It can start to build out subscription based "prosumer infrastracture", basically trying to become Slack-but-more-casual, for small organizations that want more business-like features, but don't want to pay Slack's very high prices.
But, my personal hot take: Discord is going to be bought by Microsoft in the next 5 or so years for around 20-25 billion (which will be a great exit for these VCs!). It will integrated as the Xbox's default social platform, and the ability to basically transfer over your social connections to Xbox and maintain compatibility with PC/Mobile/etc at the same time will become a selling point for Xbox as a gaming console.
I can see the cursed
Discord × Microsoft Teamsmarketing push already 😄All kidding aside, that sounds totally plausible. I don't know if they'll want to let Amazon continue to grow their gaming and streaming platform in the form of Twitch (which looks like it's been a very clever acquisition for them) without some form of competition.
It's fairly easy to create that sort of hypothetical value if you consider the revenue a subscription service could generate from its platform. Discord had 100 million monthly active users (MAU's) in 2020, and only 10 million in 2016. If they can project and anticipate 500 million MAUs by 2024, and an estimate that 10% of MAUs by 2024 will have joined Discord Nitro, currently priced at $99/year, that's nearly $5 billion in gross revenue annually.
It's stupid money mainly because it's all based on hypotheticals—but if they can action those hypotheticals and pivot their growth into a paying product, then that bet pays off and it's worth it for venture capitalists to invest in.
It looks like they have ambitions to become something more like a social network?
I think it's the same reason Microsoft bought Minecraft in 2014 for $2.4 billion. They're not actually going to recoup the costs by selling more copies of Minecraft, however what they bought was 100 million users (not counting duplicates). Which for a company like Microsoft with ambitions to push further into the gaming space, the future value of those accounts is immeasurable.
Think of it like IRL networking (sort of). If you're a person who wants to move up in the company, you meet people, shake hands, go to lunches, meet for drinks. Because you never know who is going to end up in a position to help you later. If you're particularly ambitious you might dedicate no small amount of your personal income to such activities, for years at a time. The idea being that later, it will have been worth it because you'll be able to achieve promotions and salaries that you wouldn't have been able to if you'd never taken Frank out for drinks that one time when he was an intern.
Technically speaking they have made more, Minecraft has sold 200m copies, which at around 30 a pop (depending on platform can be more or less), is around 6 billion in revenue.
I sit corrected.
Oh dear, that's not a good sign. Large amounts of venture capital money hasn't exactly had good impacts on pretty much any service I've used.
At least the Matrix ecosystem is improving.