Microsoft Corp. is in advanced talks to acquire messaging platform Discord Inc. for $10 billion or more, according to people familiar with the matter, as the software giant seeks to deepen its consumer offerings.
Microsoft and Discord are in exclusive talks and could complete a deal next month, assuming the negotiations don’t fall apart, the people said.
Originally favored by gamers, San Francisco-based Discord offers voice, text, and video chatting. The platform’s popularity has surged since the pandemic took hold as people stay home and connect online—as has that of other chat services, like Facebook Inc.’s WhatsApp and Signal Messenger LLC. Discord has been considering an IPO.
Microsoft, which has a market value of more than $1.7 trillion, has been on the hunt for an acquisition that would help it reach more consumers. Last summer, it held talks to buy the popular video-sharing app TikTok amid a high-profile geopolitical standoff prompted by the Trump administration, before abandoning the effort.
VentureBeat reported this week that Discord was exploring a sale and had entered exclusive discussions with an unnamed suitor.
Buying the six-year-old startup could help Microsoft boost both its videogame business, which includes the successful Xbox game platform, and its social-networking footprint.
Its efforts to gain scale in social media have been halting. In addition to the unsuccessful TikTok talks last year, Microsoft gave up on Mixer, its videogame live-streaming service that struggled to compete with the likes of Amazon.com Inc.’s Twitch, Alphabet Inc.’s YouTube, and Facebook Gaming.
Should a deal come together, it would be Redmond, Wash.-based Microsoft’s largest acquisition since its $26.6 billion purchase of LinkedIn Corp. in 2016. The technology giant has made a series of acquisitions in recent years, including its $7.5 billion purchase of software-development platform GitHub Inc. in 2018 and its $7.5 billion purchase of videogame company ZeniMax Media Inc., which closed earlier this year.
Discord got its start in 2015 as a platform that made it easy for videogame enthusiasts to chat while playing online games together. It now has about 140 million monthly users, and while many newcomers have formed communities dedicated to a range of topics unrelated to games, it remains a hot spot for gamers looking to connect with one another online. Users say it offers higher-quality audio than other chat services, including even that of Microsoft’s Xbox and Skype, which Microsoft also owns.
Discord’s growth jumped in the past year, with its valuation doubling to $7 billion after a December funding round. It generated $130 million in revenue in 2020, up from nearly $45 million in 2019, though it still isn’t profitable, The Wall Street Journal has reported. In a move that laid the groundwork for a potential IPO, Discord last week hired its first finance chief, Tomasz Marcinkowski, a former Pinterest Inc. executive.News Source: The Wall Street Journal