Discord expands online marketplace as it tries to justify $15 billion valuation

The Discord app is seen on an iPhone in this photo illustration in Warsaw, Poland on April 3, 2021.

Jaap Arriens | NurPhoto | Getty Images

Two years ago, during the height of tech market froth, Discord was valued at $15 billion, more than doubling in a matter of months.

The following year, tech stocks suffered their steepest slump since the 2008 financial crisis, leading high-valued private companies to slash their valuations alongside capital raises. But Discord has stood pat, avoiding a return to the capital markets, even as public funds have reduced the value of their shares.

Discord, which ranked 18th on this year’s CNBC’s Disruptor 50 list, is now pushing into a new business as it seeks to justify that lofty valuation. The company, which provides a popular messaging service used by gamers, said Thursday that its marketplace of virtual goods and digital customization tools will soon be available to all users, not just subscribers.

The company recently debuted its in-app store, which it calls Shop, pitching it as a way for subscribers to its premium Nitro offering to decorate their accounts and digital avatars with virtual items like hats or colorful animations.

“Right now, non-Nitro subscribers have basically never had any type of avatar customization,” Peter Sellis, a senior vice president of product at Discord, told CNBC. “We will be opening it to non-Nitro users, who are obviously a much larger cohort of users, via the shop.”

Nitro memberships cost either $2.99 or $9.99 a month, depending on certain features, and account for the bulk of the company’s revenue.

Unlike social media companies Meta, Snap and Pinterest, Discord has shunned the digital advertising model. Instead, it’s courted subscribers who are willing to pay for special features like the ability to share large files and stream high-definition video.

Within the new marketplace, Halloween-themed avatar decorations, including a black cat resting on a gravestone, will be available to users for $8, Sellis said. Nitro members will get a 30% discount.

Discord isn’t going as far with digital commerce as gaming site Roblox, which recently began allowing users to create and sell their own custom décor and outfits and to share in the revenue.

“For all of the Nitro stuff that we’re selling, right now it’s all first party, all created by us,” Sellis said, adding that digital goods have become increasingly popular among gamers.

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Discord prices its digital goods at a level that resembles “premium skins on other games,” because of the value that some consumers believe they represent, Sellis said.

“It appears with you everywhere you are, in every chat, every day,” Sellis said of the decorations. “It has a lot of impressions, to use ad terminology, so you see it a lot across the service, so it actually has quite a lot of value from that perspective.”

Sellis said there are likely a lot of Discord users who don’t want to pay for memberships, “but wouldn’t mind paying a one-time cost to show up a little bit more special within Discord.”

Discord also said it would begin offering a way for eligible developers in the U.K. and Europe to share in company revenue by building apps on top of the platform and letting users subscribe to them. The service, which is already available in the U.S., allows developers to keep 70% of the subscription sale.

In addition to new revenue opportunities, Discord is emphasizing its focus on user safety. The company said it’s debuting a warning system intended to inform users if they’re violating certain content moderation rules.

A new teen safety assist tool will also become a default setting for younger Discord users, blurring certain media deemed inappropriate for children when they chat and send direct messages to friends. Additionally, the safety tool will scan DMs to “detect if a safety alert should be sent to the teen,” the company said.

“The safety alert will encourage the recipient to double check if they want to reply, and will provide links to block the user or view more safety tips to safeguard themselves if needed,” Discord said.

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