Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.
Despite its current market leadership position, we believe that Discord’s existing product leaves it vulnerable
Discord is the gaming industry’s communication platform of choice. As of today, it has grown to over 150m monthly active users since its launch in 2015. Through an industry-leading voice and video chat technology stack, it is the best destination for gamers to communicate both in and out of their favorite games. The next closest competitor is its predecessor TeamSpeak, which was created in 1999 (the user interface reflects this). For context on Discord’s scale, Xbox’s integrated party chat system boasts “tens of millions” of users on their platform (i.e. Discord is likely 3-10x larger than Xbox’s chat system).
Through its market dominance, Discord has become one of the largest gaming companies in the world with an estimated valuation of $15b. However, we believe the current Discord product has significant fundamental shortcomings that will lead to the platform losing its leadership position over time (if left unaddressed). Discord is certainly best-in-class, yet this dominance is only held in relation to objectively sub-par competitors (TeamSpeak, Guilded) or none at all. We believe their dominance is taking place within a vacuum.
Here are three of our core concerns with Discord:
In short, we believe that the current iteration of the Discord product is more of a communication tool than a social network. To date, it has clearly been valued by the investment community as a social network, but we disagree. It is a gaming communication tool that is broadening outside of gaming too quickly.
While there is certainly a large captive audience, the points above dilute the strength of network effects. The enablement of micro-communities is not the same thing as truly owning online social experiences, and ultimately these groups will migrate to the platform that provides the best experience. This does not mean that it will be simple to attract users away, but it does open up Discord to significant competition based on their lack of depth and deteriorating quality of the user experience.
Additionally, the company’s evolving go-to-market strategy leaves it particularly susceptible to new entrants. Discord was initially positioned as a social offering for gaming use-cases, but voice and video chat have virtually unlimited applications. As a result, the Discord team has very intentionally pivoted the company to go after a broader audience. The primary consequence is that the platform is no longer being designed for anyone in particular. It has become a general communication tool.
To this point, we believe this will eventually lead to Discord being an insufficient communication tool for gamers in the medium / long term. We believe the long-term winners in this space will establish ownership of the entire social value chain for a player. Though voice and video chat will always be a main attraction, here are six enhancements that we believe either Discord or an emerging competitor can make for a superior and more comprehensive experience:
Each of these features have been pursued as standalone businesses in the gaming ecosystem, but they are exponentially more scalable as part of a unified platform. It is important to note that we do not automatically view these as “Discord killers” as the platform still has the opportunity to adapt (for now). While there is not much public information available, it has been rumored that a bot marketplace could be coming to Discord later this year. This would allow third-party developers to create endless add-ons to supplement the current core capabilities.
We view this as Discord’s best opportunity to defend its product and avoid obsolescence over the coming 3 to 5 years as social infrastructure competition ramps up.
Takeaway: Despite its current market leadership position, we believe that Discord’s existing product leaves it vulnerable. The lack of sufficient identity infrastructure and user / community discoverability limit social connectivity, and the complexity of customization leaves the product relatively inflexible and unapproachable for most users. These flaws leave Discord primarily as a communication tool rather than a genuine social network. Although there is a massive market for such a tool, this means that Discord will need to compete on product quality rather than relying purely on network effects. This is particularly true as more competitors with gaming-focused utility (profiles, channel management, matchmaking, competition, in-game challenges, and social games) cater specifically to players.
Despite its current market leadership position, we believe that Discord’s existing product leaves it vulnerable
Discord is the gaming industry’s communication platform of choice. As of today, it has grown to over 150m monthly active users since its launch in 2015. Through an industry-leading voice and video chat technology stack, it is the best destination for gamers to communicate both in and out of their favorite games. The next closest competitor is its predecessor TeamSpeak, which was created in 1999 (the user interface reflects this). For context on Discord’s scale, Xbox’s integrated party chat system boasts “tens of millions” of users on their platform (i.e. Discord is likely 3-10x larger than Xbox’s chat system).
Through its market dominance, Discord has become one of the largest gaming companies in the world with an estimated valuation of $15b. However, we believe the current Discord product has significant fundamental shortcomings that will lead to the platform losing its leadership position over time (if left unaddressed). Discord is certainly best-in-class, yet this dominance is only held in relation to objectively sub-par competitors (TeamSpeak, Guilded) or none at all. We believe their dominance is taking place within a vacuum.
Here are three of our core concerns with Discord:
In short, we believe that the current iteration of the Discord product is more of a communication tool than a social network. To date, it has clearly been valued by the investment community as a social network, but we disagree. It is a gaming communication tool that is broadening outside of gaming too quickly.
While there is certainly a large captive audience, the points above dilute the strength of network effects. The enablement of micro-communities is not the same thing as truly owning online social experiences, and ultimately these groups will migrate to the platform that provides the best experience. This does not mean that it will be simple to attract users away, but it does open up Discord to significant competition based on their lack of depth and deteriorating quality of the user experience.
Additionally, the company’s evolving go-to-market strategy leaves it particularly susceptible to new entrants. Discord was initially positioned as a social offering for gaming use-cases, but voice and video chat have virtually unlimited applications. As a result, the Discord team has very intentionally pivoted the company to go after a broader audience. The primary consequence is that the platform is no longer being designed for anyone in particular. It has become a general communication tool.
To this point, we believe this will eventually lead to Discord being an insufficient communication tool for gamers in the medium / long term. We believe the long-term winners in this space will establish ownership of the entire social value chain for a player. Though voice and video chat will always be a main attraction, here are six enhancements that we believe either Discord or an emerging competitor can make for a superior and more comprehensive experience:
Each of these features have been pursued as standalone businesses in the gaming ecosystem, but they are exponentially more scalable as part of a unified platform. It is important to note that we do not automatically view these as “Discord killers” as the platform still has the opportunity to adapt (for now). While there is not much public information available, it has been rumored that a bot marketplace could be coming to Discord later this year. This would allow third-party developers to create endless add-ons to supplement the current core capabilities.
We view this as Discord’s best opportunity to defend its product and avoid obsolescence over the coming 3 to 5 years as social infrastructure competition ramps up.
Takeaway: Despite its current market leadership position, we believe that Discord’s existing product leaves it vulnerable. The lack of sufficient identity infrastructure and user / community discoverability limit social connectivity, and the complexity of customization leaves the product relatively inflexible and unapproachable for most users. These flaws leave Discord primarily as a communication tool rather than a genuine social network. Although there is a massive market for such a tool, this means that Discord will need to compete on product quality rather than relying purely on network effects. This is particularly true as more competitors with gaming-focused utility (profiles, channel management, matchmaking, competition, in-game challenges, and social games) cater specifically to players.
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