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The company has yet to confirm a pending deal, but recent comments from executives help shed light on why exactly Microsoft might want to acquire a chat platform created for gamers – and what was behind its failed bid to acquire TikTok and reported one-time interest in snapping up Pinterest.
In short: It’s all about getting in on content creators and communities.
During Microsoft’s recent Ignite conference, CEO Satya Nadella laid out the company’s priorities for the next several years, reiterating points like an increased need for public trust in technology and an “explosion” of data — but also using the time to call for tools that can make for “empowered creators and communities everywhere.”
Nadella called for the “democratization of creation,” which means expanding skills, tools, platforms, connections, and collaboration across communities so “everyone can create, whether it’s building a virtual world, students working on an assignment with short-form videos, knowledge workers creating formulas and spreadsheets for developers, writing code, or domain experts using local tools to build applications,” he said.
In so doing, Nadella publicly articulated for the first time a thesis for why Microsoft, which has seen a resurgence in recent years amid a focus on cloud computing and developer technology, would want to get into the consumer social networking market after years of largely shying away.
Phil Spencer — Microsoft’s gaming chief, and the exec who would likely wind up with ultimate oversight over Discord should the acquisition go through — reiterated Nadella’s commitment to this strategy in comments to employees at an all-hands meeting in March. Microsoft did not respond to a request for comment.
“Satya has really gotten onboard with content creators as an important part of Microsoft’s platform future, and game creators are an important category of content creators,” Spencer said at the time according to audio of the meeting reviewed by Insider, though he didn’t directly address Discord.
Acquiring Discord gives Microsoft access to an engaged online community. “After looking at Pinterest and TikTok, Microsoft seems pretty clearly to be interested in properties that have large and active user communities,” Morningstar analyst Dan Romanoff said.
Microsoft has made acquisitions in the social space before, most recently with GitHub and LinkedIn. Discord would be a consumer-focused acquisition, following recent megadeals like its $7.5 billion deal to buy games publisher ZeniMax, the parent company of Bethesda Softworks.
It’s also worth noting that some of Microsoft’s recent moves into the creator space have faltered: Microsoft Mixer, a rival to Amazon’s dominant Twitch game streaming service, was shut down last year after failing to attract a vibrant ecosystem, despite big-money exclusivity deals with Tyler “Ninja” Blevins and other top creators.
Regardless, Discord could fit right in to Microsoft’s gaming business, and eventually power chat on its Xbox consoles. It could also, in the longer-run, bolster other products, like its increasingly important Teams communications app. And, unlike, Mixer, Discord comes with a huge, engaged fan base all its own.
Indeed, Creative Strategies analyst Carolina Milanesi told Insider a Discord acquisition share some similarities with TikTok including access to a younger, very engaged audience and a medium, in this case chat, that Microsoft can use for its Teams collaboration software. Generally speaking, Discord is well-liked among gamers and other online communities; Microsoft could bring some of that know-how over to making Teams more appealing.
“Chat feels like the part of collaboration that nobody has really cracked yet, even Slack, as far as making it engaging, free flow and yet organized, balancing internal and external contacts and synchronous and asynchronous communication,” Milanesi said. Slack, recently acquired by Salesforce for $27.7 billion, is widely considered Microsoft’s chief rival in the chat space.
Adding to Teams is important as the company tries to elevate the collaboration app beyond competitors like Slack and Zoom. Jared Spataro, corporate vice president of the Microsoft 365 suite of business applications including Teams, said during the recent town hall that the strategy behind Teams is to make it the only app that combines “meet, chat, call, collaborate in a single app.”
“Strategically, we’re always looking as a company for what I call ‘platform inflection points,” Spataro said, according to audio of the meeting reviewed by Insider. “For example, I used to carry a flip phone, an MP3 player, and a camera all in my pocket and then there was an inflection point where all those things came together into the smartphone. We see a very similar opportunity right now.”
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