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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Discord's Vulnerability

Despite its current market leadership position, we believe that Discord’s existing product leaves it vulnerable

Discord’s Vulnerability

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:

  • Lack of Identity: Although it seems like a prerequisite for a social platform, Discord lacks a true profile system. A user’s identity is effectively relegated to a simple avatar and a name or pseudonym. Most notably, your Discord identity / name can vary from server to server. In fact, this is effectively encouraged considering the platform’s premium “Nitro” offering highlights additional identity customization in each server. The opportunity cost of this flexibility is a lack of core social features like personal activity feeds that enable you to share posts, highlights, or achievements in a centralized hub. This limits users’ profile “equity” earned through the time and effort spent building up your digital persona, which reduces the switching cost for any given user.
  • Discoverability is Too Hard: In line with the lack of a central user profile, there are no effective ways to find other users without knowing their exact username. This means you need to be in a mutual server or know each other outside of the Discord platform entirely. While there is an embedded discovery platform for servers, there are no tailored recommendations or suggestions. Simple features such as “players you may know” or “recommended friends” are surprisingly nonexistent. Rather, searching for a new community effectively requires a user to know exactly what they are looking for. There are no natural discovery methods either (i.e., on YouTube and Twitch you can search through the most popular live genre-specific streams). Clicking into Discord’s high-level categories such as “gaming” or “music” only provides you with the most popular communities that are often bloated groups that provide more notification spamming than engagement.
  • Customization Is Time-Consuming: The functionality of a server is fairly customizable, but the barrier to creation is extremely high. There is a very steep learning curve to truly get the most out of the platform, and the user interface is generally difficult to navigate and understand intuitively. In our team’s experience, this yields rather minimalistic servers for the average peer group and overwhelming applications for larger communities with more experienced moderators.

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:

  1. Profiles: We have seen a number of startups aim to create social networks for gamers, but a universal gaming profile needs to meet players where they are and be integrated into the gaming experience. Chat platforms are the most ubiquitous third-party tool that players use while gaming (and as a general way to keep up with people outside the game), making them the perfect candidate for hosting players’ core gaming identity. Having one verifiable identity is also one of the most effective potential approaches to combat toxicity, a notorious problem in online gaming.
  2. Channel / Notification Management: There is serious server and notification fatigue that is not solved by Discord’s design today. Discord users today are overwhelmed by the sheer number of message notifications they come back to and do not have a way to filter through the noise. A user is only able to see the number of messages they missed, and can jump to where they last viewed, instead of being served a high-level “what you missed” or “hot topics since you last visited” that packages and flags what a user would find helpful in a short period of time.
  3. Discovery (of anything): As we mentioned, Discord interactions are highly siloed within servers and there is not a good way today for gamers to seek connectivity outside of their immediate social bubble. We believe that in order to be a true social network, there need to be features that encourage and support these types of organic network effects. Matching profiles through common interests, personality and skill level is a compelling way to ensure that any user will always be incentivized to use the platform even if none of their friends are online or playing the same game.
  4. Competition: PvP gaming platforms (i.e., GameBattles, UMG, CMG) have historically struggled to meaningfully scale due to a commoditized product that allows players to bounce around competing offerings with similar experiences. This can result in player liquidity constraints that constantly leaves players looking for the next thing. Embedding this functionality within an established and multi-functional social application could both increase adoption from casual players and make it more sticky for existing users that are more inclined towards competitive gameplay.
  5. In-Game Challenges: Bridging the gap between in-game and social experiences can be made more immersive through individual and group missions within games. Game-agnostic benefits such as an XP system, advanced profile customization options, and even monetary rewards (i.e., sponsored challenges) can encourage players to always be utilizing the platform.
  6. Social Games: Embedding proprietary social games (think of Jackbox.TV) onto the platform will likely serve as more of a retention tool than part of a user acquisition strategy, but it is another viable way to engage the user base and extend the amount of time they spend on the platform.

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.