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Hi friends 👋 ,
It was inevitable that I’d write about Discord. It’s a mashup of a bunch of my favorite companies and themes, a web3 interface, and a third space in which I’m spending more and more time.
But Discord is too big, too potentially consequential to write alone. So when Mario Gabriele tweeted that he was planning to go deeper on Discord, I texted him, and we decided to join forces.
Mario is one of the best writers on the internet and has been on fire as he goes deeper down the web3 rabbit hole, writing bangers on OpenSea and FTX, coordinating a group piece on DAOs with the best people in the space, and even launching his own NFT project, Philosophical Foxes. (I proudly own one named Second Life.) If you don’t subscribe to The Generalist, subscribe now.
Plus, if Discord’s taught us anything, it’s that imagining is more fun together.
Let’s get to it.
Imagine a human website.
Imagine a place where dank memes flow like honey.
Imagine a place where potatoes thrive.
Imagine a place where humans and bots live in harmony.
Imagine, in other words, a place like Discord.
As part of its latest ad campaign, Discord asked users to describe the chat platform to someone who had never used it before. It’s a testament to the company’s customer love and broad usage that the results read like dispatches from an unknown and invisible realm; Lucy and Edmund trying to explain Narnia, Harry relaying the magic of the wizarding world, Neo stumbling through a depiction of the The Matrix.
Imagine a closet that opens onto a kingdom of talking animals.
Imagine running through a wall to find your new school.
Imagine a pill that melts reality.
The fact that these work just as well for Discord as the official entries tells us something subtly profound. Discord is not justa communication platform, it’s a hidden world.
While Mark Zuckerberg believes he is best placed to homestead the metaverse, he may be surprised to find a thriving, indigenous species has already taken hold: Discord. More than any other business, the company is truly “metaverse native,” unwittingly built for the future. First designed for gamers — the metaverse’s pioneers — time has allowed it to flourish on adjacent plots. Educational groups, investing communities, and avid fandoms rely on Discord’s service to commune and converse.
Of course, it has also become the platform of choice for the many new entities, from protocols to NFT projects to DAOs, building in the lustrous, inchoate world of web3.
Yet the fact that Discord is best described in such rich, intricate metaphor is also an indication that its identity has not settled. Unlike almost any other social business, Discord feels fluid, biotic, an organism that has yet to fully evolve. Though the company has succeeded in securing a $15 billion valuation and earns hundreds of millions in revenue, there’s the sense that its current manifestation is perhaps only halfway to its end state. For Discord to reach its obscene potential, CEO Jason Citron — no stranger to pivots — may have to embrace new technologies, consider different revenue streams, and lean into the novel paradigms of web3.
Discord has the chance to be the metaverse’s natural social infrastructure. That is a prize potentially so large that attempts to quantify it risk being off base by several orders of magnitude.
To build such a consequential business, Discord will need more than imagination. In today’s piece, we’ll be sliding into Discord’s DMs to unpack different facets of the company. That includes:
- The circular origin story. Discord’s lore involves more headfakes and false starts than almost any other business.
- A dizzying product. Discord can be hard to understand, especially for aged millennials like Packy and me. We do our best to dissect the chaos of Discord’s chat.
- A forking user base. Though it began as a tool for gamers, Discord is now widely used. We’ll talk about its primary constituencies.
- Slow monetization. While it has grown rapidly, Discord’s been conservative when it comes to extracting money from users.
- The web3 opportunity. Discord has become the platform-of-choice for web3 entities, but it doesn’t seem to have totally won over hearts and minds. The company needs to capitalize on its lead and protect its positioning. We have some ideas.
- The Great Online Game. How Discord has become the home for those learning, living, and winning on the internet.
Time to join the server and get started.
Jason Citron might be one of the great startup pivoters of all time. Not only is Discord a tale of accidental product market fit, it’s the second instance of that occurring in Citron’s entrepreneurial journey.
The story begins with Aurora Feint.
On July 10, 2008, Apple unveiled the App Store. In its first wave of 500 apps was an indie puzzler: Aurora Feint, the Beginning.
It was the creation of a 23 year old Jason Citron and an obscure incubator: YouWeb.
Founded by former Webvan CTO, Peter Relan, YouWeb began around the same time as Y Combinator but took a radically different tack, working with a small selection of entrepreneurs, and maintaining a slimmer cohort size. In a recent TechCrunch piece, Relan explained, “[W]e don’t have hundreds of companies. Over 15 years, we’ve incubated about 30 companies.”
YouWeb’s model in those days was an indication of the market. In exchange for 50% of the business, the incubator helped with ideation, marketing, and hiring. When Citron arrived as a fresh-faced college graduate, he knew he wanted to build something in gaming, but had no direction beyond that point. YouWeb paired him with entrepreneur-in-residence, Danielle Cassley, and gave him the support to launch Aurora.
It was a critical success. With a World of Warcraft aesthetic and mechanics borrowed from Tetris and Puzzle League, Aurora was considered one of the App Store’s most thoughtful debutants.
One reviewer called it “the most fun and addictive of the early iPhone games,” comparing it favorably to better-known hits like Super Monkey Ball. (Remember that one?)
But acclaim does not always translate into revenue. Though Aurora released a series of follow-ups over the succeeding months, it never broke out as a commercial venture. Citron cut pricing from $8 to $1 but it made little difference.
Despite that, a number of Aurora’s features seemed extremely promising, not least the social elements Citron had baked into his game. Chat rooms, profiles, asynchronous multiplayer games, and leaderboards gave Aurora a sense of community that other larger games lacked.
Citron made his first pivot.
During a conversation about Aurora’s future, the young executive made an off-hand comment:
Nobody [sic] built the Xbox Live on this thing yet. I wonder if we can take some of our chat and video board stuff and spin it into an Xbox Live for iPhone?...Let's just announce it and see if people would want it.
What Citron foresaw was a future in which nearly all game developers would want their products to have a strong social element. Rather than starting from scratch, they could pay for the tooling he’d already built.
As it turned out, people did want it. After managing to snag TechCrunch coverage, the new company — now called OpenFeint — was almost immediately inundated with potential customers.
“Oh crap,” Citron thought, “this is going to be big.”
Everything after that point seemed to happen at warp speed: customers and funding flowed in, OpenFeint added a standalone mobile app to manage social interactions across games; a deal was struck with AT&T to pre-install the app in new phones.
It didn’t take long for the company to attract M&A interest. In 2011, Japanese social network and game maker GREE made too good an offer to refuse. OpenFeint sold for $104 million, securing a significant payday for Citron, his investors, and of course, YouWeb.
After spending a few months at his acquirer, Citron sent YouWeb founder Relan an email: “I’m back.”
This story may sound familiar.
A young founder is accepted into an incubator. He has no set business plan, just the goal to build something in gaming. He creates a beautiful multiplayer game that is adored by critics but fails to win over a sufficient audience. In search of product market fit, the founder unearths an infrastructural feature and turns it into a standalone hit.
The tale of OpenFeint is the tale of Discord. Virtually beat by beat, it hits the same notes, almost as if a very earnest, rather drunk storyteller is not quite sure you heard them the first time and will go bigger on their second attempt.
This time on better terms, Citron partnered up with Relan and set about creating Phoenix Guild, quickly renamed to Hammer & Chisel. Given his pedigree post-OpenFeint, Citron was able to raise a $1.1 million seed, followed by an $8.2 million Series A. Benchmark led the second round with then-partner Mitch Lasky apparently impressed by Citron’s presentation at TechCrunch Disrupt’s 2013 demo day.
Hammer & Chisel released its first vehicle Fates Forever in 2014. A battle arena game designed for tablets, Fates failed to garner the success Citron and his investors had hoped for. As they’d done previously, Citron and his team built additional communication into the game. Citron noted:
We had a hunch that there was an opportunity around a service where people could hang out before, during, and after playing games, but we didn’t know how that would shake out.
It was time for Citron to pivot again.
When considering the company’s next move, CTO Stan Vishnevskiy spoke up.
I don’t want to make more mobile games. We’ve been talking about building a chat service, and I have an idea for how we can do it.
For the next couple of months, the Hammer & Chisel team scoped out a chat service designed for gamers. The idea was to create something like an “always-on conference call” or “your own private cafe for games.”
When they released the product — named Discord — in 2015, it failed to make a dent. A few dozen people might mosey into the company’s servers on a given day, but it didn’t seem to be gathering real momentum. That might have been in part due to the fact that alternatives existed — Teamspeak and Skype were both used by gaming communities — but seemingly had more to do with getting the word out and winning early customer trust.
The tipping point arrived via Reddit. The team was connected with a member of the Final Fantasy subreddit and asked them if they’d mention Discord. According to Citron, they posted something along the lines of, “Has anyone ever heard of this new voiceover IP app called Discord?”
A few Redditors trickled in, checked out the product, and spoke with the development team via the platform. One reported back, “I just talked to the devs, they’re in there. It’s really cool. Check it out.”
That one comment was a miniature inflection point. More users flowed in, and Discord had figured out a grassroots distribution model.
Citron says, “That’s the day we say we launched.”
In the years that followed, Discord succeeded in growing rapidly, accumulating hundreds of millions of users and close to $1 billion in funding. Perhaps more impressively it has managed both to capture gaming culture, and to help evangelize it.
Discord was built for gamers, by gamers. While the company has opened its arms to all sorts of new user groups since the beginning of the pandemic, the product retains its gaming speed and verve. As a result, Discord can be a little scary to outsiders.
We like to consider ourselves comfortable with technology; nowhere makes us feel older than a Discord server. To newcomers, it can feel like the Tower of Babel. But slowly, server by server, we’ve learned the language, and we’re here to translate for you.
So what is Discord?
Quartz attempted to capture the multi-faceted magic via analogy mashup: “Picture a combination of Slack, AOL Instant Messenger, Zoom, and a sketchy chat room, and you have something approximating Discord.”
PCGamer explained all of the things that Discord lets its users do:
Today Discord lets me do so much, and it's all free:
- Talk with as many friends as I want with high audio quality, virtually zero lag, for an unlimited amount of time
- Stream games live to anyone in the server with two clicks, also lag free (somehow)
- Watch multiple streams at once with individual volume sliders (again, lag free)
- Create virtually unlimited text chat rooms with archives that go back years
- Share small-ish files with friends
- Bring bots into the mix that can, among many things, broadcast music to everyone
- Oh yea, this all works on phones too, including video streaming and screen capture
Discord, though, has a loftier view of itself, one not capturable in analogies or feature lists.
It asks users, current and would-be alike, to imagine a place…
Discord’s first brand marketing campaign invites people to treat its product as a blank canvas on which to project any digital space they can dream up. All types of people are doing just that.
Since the beginning of the pandemic, users of all stripes have flocked to Discord, attracted by its chat features, high-quality audio and video chat, privacy, ability to facilitate direct connections, and, unlike Slack, free servers.
The company chose to open its arms to non-gamers at just the right time. As every community moved online, they were faced with a choice:
- Pay $6.67 per user per month to use the more familiar Slack.
- Set up a Discord server and invite unlimited members in for free.
The choice was easy. So easy that people Discord never expected to find in a chat tool for gamers knocked down its doors and put down roots.
In 2019, Taylor Lorenz wrote an article in The Atlantic about the influencer invasion of Discord. Instead of letting Facebook and Twitter’s algorithm-based feeds mediate their relationships with their fans, influencers began spinning up Discords in droves. According to Forbes, the article, and Discord’s growing non-gamer user base, surprised Citron and Vishnevskiy.
No strangers to letting user behaviors pull them in new directions, they dug in.
When Discord sent out a 23 question survey to its community, they discovered that over 30% of Discord’s users weren’t using the product primarily for gaming. They were hosting book clubs, friends’ group chats, fan communities, and even companies. Discord had become the internet’s “third place.” As Citron told Patrick O’Shaughnessy:
I read the book, The Great Good Place, by Ray Oldenburg, which was written in the '80s where he actually talks about this, and starts to put labels and words to describe the concepts of how these third places work. And as I was reading the book, I was just like, "Holy crap, this is what we built, except it's digital. This is incredible."
To their credit, Citron and Vishnevskiy, at this point masters of the pivot, heard their users and moved swiftly to make all of them feel at home. They evolved the company’s mission…
… and redesigned its brand and homepage.
Internet Archive Wayback Machine
They launched the “Imagine a Place” campaign, the company’s first ever brand marketing campaign, in May this year, and with it, a 6-minute video starring Danny DeVito and Awkwafina:
Source: Business of Apps, Discord
Source: Business of Apps
Source: Business of Apps
Public Company Data from Atom Finance