Discord Potentially Looking for Buyers

Discord

Discord. It’s the beloved chat program mainly used by gamers and people who want a solid voice chat program. The problem is, they are trying to make the decision as to whether to go public or get bought out by a large corporation like Microsoft, Amazon, Google for the princely sum of $10 BILLION. To me this seems to be fitting right into the mergers & acquisitions department that seems to be ever-more prevalent in the tech industry. There are a few tech companies looking to buy them out, with various reasons for the acquisition. The question will be, how does that impact the future, as well as what does this continue to mean for the software industry.

The Idea

Discord is floating two ideas. One is for Discord to sell their platform to Microsoft or another buyer for $10 Billion.

The other idea is to create their own IPO which will allow them to gain access to more capital and create a better platform by themselves.

While neither of these ideas are terrible, there is much to be said about the reason behind both of these ideas, and which one might be better for the software industry as a whole.

The Good

I get it. Discord is looking to expand its user base to maintain and grow it's market share. One of the big tech companies could help Discord complete this mission, giving them access to a huge user base. If they merge, they get access to a large user base. They can also reduce their expenses by merging some of their technologies. I guess the best part would be free servers!

On the flip side if they go public, they can keep the company they spent so much time on. They would also be able to raise more capital, and be valued as a separate entity and have the potential to be bigger and better than if they merged with another corporation. They could also have the chance to make their own investments in what they think might be beneficial or the future of their core technology.

The Bad

This will be a little bit of a conglomeration of thoughts. I hope it makes sense.

The Merger: I think it's a bad idea. As we follow a tech company's trend, it is apparent once a company makes its peak on the private market, it makes sense to merge with another company or go public. With a merger, the owner(s) would make the billions they could make, calling it a day and moving to another project. The problem with this is the competitive landscape gets scarcer. If a large technology conglomerate buys these companies up as soon as they hit their peak, there are fewer options for users to fall back on with a similar user base if they decide they don't agree with the purchasers data practices, ethical practices, or market share.

COVID: I think COVID has shown how much people thrive on connectivity, and Discord is one of those platforms that capitalized and rode the wave up. Once it's over they will likely see a reduction in numbers and probably valuation as similar communication companies like Zoom will when things start going back to normal, and people would prefer in person communication.

Microsoft: I still don't get this part. Why is a company like Microsoft interested in this platform? If it's the user base, they used to have one of the biggest voice chat platforms, Skype, and somehow couldn't make it work. What will make this any different? They buy it up, ruin it, add it to their graveyard, and move on, ruining what could have been a solid chat app. I don't know, maybe this one will be different but doubt it. Granted they are one of multiple companies looking to buy them out.

The Future

The future is always an interesting conversation. Companies have to make money, and they have to take their future into consideration. If this is the peak, they might as well sell out, make their money and move on. Or they can go public and ride the upwards wave and become one of the giants. If they fail, then they either have to start over, or ride the float till the software is no longer relevant.

The most interesting part of this conversation is what I have always thought would be the future. There will either be app brokers, or large conglomerates who provide software as a service. I know this isn't apparent now, but I think people will start to recognize this as companies like Microsoft, Apple, Facebook, buy up software to add value to their platforms and get more buy-in to their core services and also provide more value to their stockholders.

The sad part about this will be how much innovation will be killed off because it is cheaper and easier to sell to the highest bidder instead of continuing the innovative race to be the best in the business. It will take many years to realize this, because of the way "value and money" clearly overrides "innovation and competition." While I think the large corporations have their place in the innovative sphere, in some ways, they need to let innovation breathe for a minute before they buy it up and kill it off because it doesn't make the billions they need to grow that quarter (The Innovators Dilemma has some great thoughts on this). In some ways, it would be better to let these large conglomerates focus on their core services, and spend more time working with their indirect competitors with profit sharing or other market practices. They should stop seeing "software" as a general competition to their business and help the industry help them.

The End

Software will continue to become a more crowded marketplace, with investors and large businesses trying to bring value to their stockholders and users. The requirement to be good at everything and have a tighter integration with their software will continue to drive users to the platforms and software companies to sell to the larger conglomerate. While I think the future will be interesting, I do see some positive and negatives, if we aren’t careful. I hope Discord chooses the IPO option because it will continue to drive companies to innovate because of the competition.