#2 - Discord and the Creator Economy

Why is Discord winning? What opportunities and challenges lie ahead?

I write about the ideas, products, and technology that advance the creator economy every week or two. Join the list by subscribing below.

Hello subscribers! Today I want to share a deep dive into one of the most popular hangout spots for creators and communities—Discord. I’m going to breakdown why I’m excited about Discord for creators, and why you should be too.

What is Discord?

At the risk of putting you to sleep, here is the Wikipedia explanation:

Discord is a VoIP, instant messaging and digital distribution platform designed for creating communities. Users communicate with voice calls, video calls, text messages, media files in private chats or as part of communities called "servers".

Still awake? Let’s try that again: Discord is your place to talk. For millennials or older readers, think of Discord as Slack/AIM for (mostly) gaming communities.

In June 2020, the company simplified their tagline to “Your place to talk”. In doing so, Discord is shedding its former position as a gaming centric voice-chat platform, and establishing a new framing as the place for all flavors of communities to congregate.

Is Discord growing?

Yes, the numbers speak for themselves. In 2020, 5 years since launch, Discord eclipsed 140M monthly active users (MAU). Today, users spend more than 66M hours each day on Discord. Discord has shown impressive and consistent growth, going from 9M daily active users (DAU) in 2017 to roughly ~40M in 2020.

In terms of revenue, it’s early but the company shows promise, delivering 4X growth from 2018 to 2020. Its estimated $120 million USD annual revenue comes almost entirely from its subscription product, Nitro. I’ll touch on this again below.

An interesting metric Discord tracks is concurrent active users. Discord’s core user interaction is groups of people chatting with each other, so getting lots of people to use Discord at the same time is key to the network effects that power Discord’s growth engine. Discord touts a record of 10.6M concurrent active users. To put that in context, Twitch, a prominent destination for Live Streaming content, averages 1.4M. 🤯

How does it grow?

Discord has strong momentum, and its growth is powered by a community engagement flywheel. The majority of Discord activity revolves around gaming, but this flywheel is relevant for a multitude of interest groups beyond gaming.

  • Community creation is easy. It takes mere seconds for a creator to spin up a server for a new community. Invitations are easy to send and accept, and creators frequently hook new members by offering special experiences such as “movie night” or “gaming sessions” for their Discord members.

  • Once people have logged into the server, they're able to enjoy all manners of delightful interactions spanning media formats (text, video, gif, emoji, stickers, live streaming). Discord is a lean-forward product, and the more you participate, the more frequent touchpoints you have with other members of a server.

  • This results in a casual yet sticky behavior of lightweight engagement on a daily basis. Ultimately, this habitual “hang out” produces a feeling of belonging, complete with its own inside jokes and memes — a perfect example of “Come for the creator, stay for the community”.

  • When these things add up, existing users become strong advocates for Discord. They invite people to the server, create servers of their own, and recommend it to other creators / community leaders, thereby starting the flywheel over again.

Why does Discord matter for creators?

If aggregation site (e.g. Facebook, Twitch) are where creators get discovered and build a following, then Discord is where creators mold that following into a community.

Digital creators use aggregation sites to distribute content and build (read: rent) an audience. From the perspective of their fans, these are places for content consumption. Any interaction with creators on these sites happen in the context of content. When the content is done, so is the interaction.

How many people chat on Ninja’s Twitch channel when he’s not streaming? Hint: it rhymes with gyro.

So what happens between one live stream/VOD/post/story and the next? Simply put, out of sight, out of mind. Creators understand this intimately, and they try to bridge this period with Twitter and Instagram by posting light weight content. But these too, are perceived as content consumption sites.

Enter: Discord

Discord is all about lively community engagement. It bridges content gaps by giving an “always-on” chat where fans may get a chance to interact with creators, but critically, it allows members of the community to carry on a continuous, fun conversation with each other outside the context of a creator’s content. This is valuable for creators as it 1) relieves them of the pressure to engage all the time (common feedback, and given creator burnout is the top cause of creator anxiety, it’s no surprise), 2) facilitates social bonds and mutual recognition amongst members of the community, and 3) creates the space for creators to identify hyper-contributors within their audience, whom the creator can entrust with responsibility later on.

“Discord is the only place where I can hang out with friends and really feel like I’m hanging out with them.” —Carson King, YouTuber (3M subscribers)

Discord also allows for a modicum of control and customization. Servers can be shaped in certain ways (e.g. Banner, Roles, what Members are called) that match the creator’s brand. In a world where creators have generically uniform “profiles” on aggregation sites, communities developed a dire appetite for a space that is uniquely theirs. Something as simple as custom emojis can establish a special lexicon that is a keystone in building the feeling of belonging.

Fun fact: The biggest Discord server currently is Mr. Beast’s, with over 700,000 members.

What’s the competitive landscape around Discord?

Discord sits in the cross-section of Communication and Community products. There are many ways to breakdown these two spaces, for this article I’ve plotted players in each space against two axes.

  • Communication: Public/Private setting, Permanent/Ephemeral conversations

  • Community: Strong/Weak social ties, Interactive/Passive engagement

Depending on how someone uses the product, Discord can be a very different experience. That variable experience is part of the draw, and a reason that Discord is seeing impact beyond gamers despite a steep learning curve for some communities.

In the competitive ecosystem, there are companies with similar mission statements of bringing people together and communicating better. Functionally, there are also companies that share significant product DNA with Discord.

Slack has similar functionality. In fact, several key aspects make Slack “better” for communicating in certain contexts: message threads, 2000+ native integrations, and full security compliance are critical for business use. However, Slack’s comes at a standard cost of $6.67 per user per month. For communities, at 250,000 members, creators would be handed a $1.67M monthly bill with Slack. Meanwhile, Discord offers the same 250,000 members a reliable, FREE1 alternative of the essential text, voice, video chat, screen sharing, and security features that a community needs.

Notably, Circle.so is encroaching on Discord’s status as the de facto community platform of choice when it comes to digital content creators. Circle is ambitiously solving the end-to-end needs of creators from publishing, and audience engagement, to events, and monetization. Circle warrants its own article, but here are their impressive early inning results:

  • Surpassed $1M ARR

  • 40-50% Month over Month growth in DAU and MAU

  • Almost 2000 paying communities

Let’s take a look at how Discord stacks up against the competition in general.

Strengths and Weaknesses as a business

What’s Discord’s unique strategic advantage?

  • Likability: Discord is made by gamers for gamers. It has a deep roots in the gaming ecosystem, and a loyal following there. As it branches out to verticals beyond gaming, it'll need to maintain its street cred with existing users while appealing to a spectrum of new ones (i.e. non-gaming creators).

  • Human instincts: To many, Discord is now home. This is where their people hang out. That feeling of belonging hits right in the heart. Its sleek modern design, and much sought-after partner program screams exclusivity, scarcity, and cultural status, appealing to the genitals as a sure sign of social proof.

  • Network effects: Discord has benefited from strong network effects, and as a result, its users are deeply engaged, and community leaders can justify having Discord as the home of their unique community.

What strategic dimensions should Discord pay attention to?

  • Generational appeal: Much like Tik Tok, it captured the attention of the next wave of consumers. Gen-Z doesn't have much buying power today, they push the boundaries of how humans interact with computers, and their data requires more careful handling… but Gen-Z is maturing fast, how they communicate and spend their time could make the next trillion dollar company.

  • Growth and margins: Discord is growing at an incredible clip in both users and revenue. The CEO (Jason Citron) is steadfast against selling ads or user data, which means the key to achieving business success rests on its ability to scale users and long term revenue prospects. Discord has attempted transactional revenue streams with Discord Store, where users can purchase a select catalog of games. It was killed after a few months. Users didn't come to Discord to find games, they came to hang out with their friends. But Discord seems to be onto something with its subscription product, Nitro.

  • Rundle (Recurring revenue bundle): By denying itself the option of monetizing through ads and user data, it's somewhat painted itself into a corner. However, if it can navigate the tricky path to a valuable and sticky subscription product in Nitro, there may be hope yet. Surprisingly, Discord is still missing proven methods of growing subscription products, such as trial memberships and more aggressive in-app upsells. There are also various services that server owners / creators would pay for, such as advanced server analytics to show how the server is being used and who the most engaged members are.

  • Vertical integration: Discord grew on the backs of gaming communities and creators. As it reaches saturation in the gaming market, it needs to find upstream distribution in new verticals that are seeking a community space. Some examples of vertical integration from other businesses: 1) IKEA went upstream to purchase Romanian forests to secure its raw materials pipeline. 2) Facebook, in fear of missing the next computing platform shift where people spend time, acquired Oculus. Now they brand that as part of Facebook inc., reaching early adopters of VR who prefer to spend time in an immersive environment rather than on web/mobile. 3) Microsoft determines the built-in apps on all Windows machines, giving them a powerful lever to pull for distribution and product partnerships.

Other stumbling blocks and risks

  • Bad content, poor moderation. Discord struggles with problematic usage. The company has invested in a Trust and Safety team, which now accounts for more than 15% of the company, but it hasn’t prevented public mishaps such as what happened with the WallStreetBets server. Creators care deeply about the safety of their community. For many creators, proper moderation tooling is the difference between choosing one platform vs. another. For some, it is the difference between using one platform vs. not forming a community space at all.

  • Skipped in the value chain. As mentioned, Discord does not monetize by selling user data or showing ads. Therefore, for it to make sense as a business, it must be creative and prudent in alternative revenue streams. In addition to Nitro, Discord is seeing some traction with Boosts, and testing paid digital goods with Stickers, but it needs to be more aggressive to live up to its $7B valuation. The market demand for pay gated Discord communities is abundantly clear, and start ups such as LaunchPass are swooping in to take advantage of this while Slack and Discord sleep on the opportunity. This excerpt highlights this dimension of Discord’s missed opportunity:

“Users have long made businesses out of Discords. [Mikeyy] runs a VIP server… where for $13.99 a month, [members get] exclusive trading tips, guides and more. Everything runs through PayPal, and Discord doesn't see a dime. Over the last couple of years, Discord has become a place where lots of streamers, influencers and others chat more directly with their fans — Discord has official integrations with Twitch, Patreon, etc. — but it doesn't get a cut there either.” - Protocol

Bottom line

For many creators and communities, Discord is quickly becoming the Third Place that is frequently talked about but rarely achieved. Whether you’re gaming together, collaborating on a project, or standing up a virtual hangout space for a group of people, Discord can cover it all.

Discord fills an important gap for creators that aggregation sites do not solve for. It allows creators to strengthen the social relationship between members, and maintain relevance without constantly putting out new content. As a result, it’s enjoyed a lot of early success with creators who want to build a deeply engaged community.

As the creator ecosystem heats up, Discord faces competition in upstarts such as Circle, whose sole mission is to focus on solving creator needs. If Discord wants to gain solid footing in the competition for non-gaming communities, it will need to adjust its offering for the needs of new verticals while not alienating existing users.

Discord has come a long way since 2015. The road ahead is full of challenges, but with its community centric approach, Discord appears poised to march toward the aspirational tagline of being “your place to talk” for the the next wave of netizens. Will it be the top creator choice for housing their communities over time? Too early to say, but for now, Discord is leading the way.


Special thanks to Ryan Gum for sharing thoughts.

Thanks for spending time with me. If you enjoyed reading this, make sure to Subscribe, and let’s connect on Twitter.


Slack does have a free tier as well, but it is very limiting in terms of storage, archiving, group video calls, and number of integrations.