<story><title>Microsoft in talks to buy Discord for more than $10B</title><url>https://www.bloomberg.com/news/articles/2021-03-23/microsoft-said-to-be-in-talks-to-buy-discord-for-more-than-10b</url></story><parent_chain><item><author>xmprt</author><text>That&amp;#x27;s about as profound as saying the value in Coke is the people buying it and not their secret formula and bottling machines.</text></item><item><author>charcircuit</author><text>That&amp;#x27;s his point. The main value is the userbase and not the software itself.</text></item><item><author>tomnipotent</author><text>Complexity of software is not necessarily the only important dimension of determining value.&lt;p&gt;The game industry is larger than both music and movies combined. Discord is behind almost every gaming community I&amp;#x27;ve run into the last five years, from Eve Online to Valheim and Smash Bros. Looking for a Discord community is one of the first things I do when playing a new multiplayer game. Same with hundreds of millions of other gamers. You can&amp;#x27;t program your way into that kind of market adoption.</text></item><item><author>ALittleLight</author><text>Suppose you have seven dev teams of ten, plus a manager, tester, and a pm for each, plus an executive team of 9 people. 100 total people on the team. They each make an average of 200k a year. How many years will it take this team to recreate Discord?&lt;p&gt;If it would take them less than 500 years, then, in some sense, Discord isn&amp;#x27;t 10 billion dollars worth of software.&lt;p&gt;I think the point is that almost all of the value of Discord comes from the network effect of people locked in to using it. On the one hand, that&amp;#x27;s kind of a trivial observation, of course the users are value comes from. But, if you don&amp;#x27;t realize this, it&amp;#x27;s important to know. It means you that if even if you build something identical to Discord you&amp;#x27;re not going to be worth anything like as much - unless you also happen to get users. Or, put another way, you could build something technically worse, but if people adopted it for some reason, you&amp;#x27;d be worth more.</text></item><item><author>torbital</author><text>&amp;gt; but it is also not &amp;gt;$10B of software engineering&lt;p&gt;Really? How did you come to this conclusion?&lt;p&gt;Discord is, without a doubt, 10x better than Slack, Teams, or Zoom combined. They&amp;#x27;ve &lt;i&gt;solved&lt;/i&gt; the problem of a communication in the non-business space. That&amp;#x27;s huge.&lt;p&gt;For comparison, look at Coinbase, who has a 100B valuation. What they&amp;#x27;re doing is relatively trivial. Is that &amp;gt;10x the value of Discord?&lt;p&gt;I don&amp;#x27;t even think Coinbase is overvalued. 10B for Discord is just a steal.</text></item><item><author>ve55</author><text>What&amp;#x27;s interesting about acquisitions like this is that the actual value that is being transacted is the userbase and their data, along with the inability for either of those to easily move elsewhere.&lt;p&gt;No one wants to buy the actual chat application itself, because they could build equivalent technology on their own. But users are locked into platforms so heavily and for such long time periods that they themselves give the platform almost the entirety of its value (not to single out Discord, since we all know this is how &lt;i&gt;a lot&lt;/i&gt; of acquisitions work in practice). [As an additional caveat, I will add that Discord has definitely built something that its users love, and I don&amp;#x27;t want to undermine the absurd amount of UI, feature refinement, and scaling work they&amp;#x27;ve done successfully. It isn&amp;#x27;t negligible, but it is also not &amp;gt;$10B of software engineering.]&lt;p&gt;I&amp;#x27;ve read many discussions where someone says something of the form &amp;quot;I wish I didn&amp;#x27;t have to use X, but my friends and family all use it, so I&amp;#x27;m forced to&amp;quot;, and I think upon consideration of this statement that there is something &lt;i&gt;deeply&lt;/i&gt; wrong with the way network effects and protocols function on our Internet such that this can even be a common scenario. We really do have quite a crisis of non-interoperability that generalizes towards a complete lack of user control, be it software, hardware, data, or anything in between.&lt;p&gt;With that said, if Microsoft &lt;i&gt;does&lt;/i&gt; purchase Discord, it might not be as bad as some foretell. While we can point to something like Skype as a failure, we can also point to something like Github, which has been doing very well post-acquisition, and in my opinion hasn&amp;#x27;t gotten worse at all. It&amp;#x27;s quite possible they wouldn&amp;#x27;t want to profit off of Discord individually, but rather use it as another tool to expand their general ecosystem horizontally. On the other hand, they could also do the exact opposite and start harvesting data and maximizing advertisements en masse, lest my post become too optimistic in tone, since this &lt;i&gt;is&lt;/i&gt; still HN. Lastly, remember that this is still just a rumor that various news outlets have picked up on and is nowhere near guaranteed.&lt;p&gt;For those looking for alternatives due to this, or just because they&amp;#x27;d like to own their own data for once, I think Matrix is likely to be the best general solution in this product space, both with respect to similar app functionality as well as quality constraints (real encryption, decentralization, FOSS, etc).</text></item></parent_chain><comment><author>thaumasiotes</author><text>You say that like that&amp;#x27;s not an interesting observation. On the contrary -- that is a common observation that people frequently make about Coke in particular. It doesn&amp;#x27;t taste good, but people buy it anyway because it&amp;#x27;s Coke.&lt;p&gt;The actual form of the saying is something like &amp;quot;if every Coke factory burned down, Coke would be back in business the next day. If you hit every Coke customer on the head, Coke would be out of business the next day&amp;quot;. (The idea being that if Coke&amp;#x27;s customers all forgot they were Coke customers, Coca-Cola wouldn&amp;#x27;t be able to grow a new customer base on the strength of their product.)</text></comment>
<story><title>Microsoft in talks to buy Discord for more than $10B</title><url>https://www.bloomberg.com/news/articles/2021-03-23/microsoft-said-to-be-in-talks-to-buy-discord-for-more-than-10b</url></story><parent_chain><item><author>xmprt</author><text>That&amp;#x27;s about as profound as saying the value in Coke is the people buying it and not their secret formula and bottling machines.</text></item><item><author>charcircuit</author><text>That&amp;#x27;s his point. The main value is the userbase and not the software itself.</text></item><item><author>tomnipotent</author><text>Complexity of software is not necessarily the only important dimension of determining value.&lt;p&gt;The game industry is larger than both music and movies combined. Discord is behind almost every gaming community I&amp;#x27;ve run into the last five years, from Eve Online to Valheim and Smash Bros. Looking for a Discord community is one of the first things I do when playing a new multiplayer game. Same with hundreds of millions of other gamers. You can&amp;#x27;t program your way into that kind of market adoption.</text></item><item><author>ALittleLight</author><text>Suppose you have seven dev teams of ten, plus a manager, tester, and a pm for each, plus an executive team of 9 people. 100 total people on the team. They each make an average of 200k a year. How many years will it take this team to recreate Discord?&lt;p&gt;If it would take them less than 500 years, then, in some sense, Discord isn&amp;#x27;t 10 billion dollars worth of software.&lt;p&gt;I think the point is that almost all of the value of Discord comes from the network effect of people locked in to using it. On the one hand, that&amp;#x27;s kind of a trivial observation, of course the users are value comes from. But, if you don&amp;#x27;t realize this, it&amp;#x27;s important to know. It means you that if even if you build something identical to Discord you&amp;#x27;re not going to be worth anything like as much - unless you also happen to get users. Or, put another way, you could build something technically worse, but if people adopted it for some reason, you&amp;#x27;d be worth more.</text></item><item><author>torbital</author><text>&amp;gt; but it is also not &amp;gt;$10B of software engineering&lt;p&gt;Really? How did you come to this conclusion?&lt;p&gt;Discord is, without a doubt, 10x better than Slack, Teams, or Zoom combined. They&amp;#x27;ve &lt;i&gt;solved&lt;/i&gt; the problem of a communication in the non-business space. That&amp;#x27;s huge.&lt;p&gt;For comparison, look at Coinbase, who has a 100B valuation. What they&amp;#x27;re doing is relatively trivial. Is that &amp;gt;10x the value of Discord?&lt;p&gt;I don&amp;#x27;t even think Coinbase is overvalued. 10B for Discord is just a steal.</text></item><item><author>ve55</author><text>What&amp;#x27;s interesting about acquisitions like this is that the actual value that is being transacted is the userbase and their data, along with the inability for either of those to easily move elsewhere.&lt;p&gt;No one wants to buy the actual chat application itself, because they could build equivalent technology on their own. But users are locked into platforms so heavily and for such long time periods that they themselves give the platform almost the entirety of its value (not to single out Discord, since we all know this is how &lt;i&gt;a lot&lt;/i&gt; of acquisitions work in practice). [As an additional caveat, I will add that Discord has definitely built something that its users love, and I don&amp;#x27;t want to undermine the absurd amount of UI, feature refinement, and scaling work they&amp;#x27;ve done successfully. It isn&amp;#x27;t negligible, but it is also not &amp;gt;$10B of software engineering.]&lt;p&gt;I&amp;#x27;ve read many discussions where someone says something of the form &amp;quot;I wish I didn&amp;#x27;t have to use X, but my friends and family all use it, so I&amp;#x27;m forced to&amp;quot;, and I think upon consideration of this statement that there is something &lt;i&gt;deeply&lt;/i&gt; wrong with the way network effects and protocols function on our Internet such that this can even be a common scenario. We really do have quite a crisis of non-interoperability that generalizes towards a complete lack of user control, be it software, hardware, data, or anything in between.&lt;p&gt;With that said, if Microsoft &lt;i&gt;does&lt;/i&gt; purchase Discord, it might not be as bad as some foretell. While we can point to something like Skype as a failure, we can also point to something like Github, which has been doing very well post-acquisition, and in my opinion hasn&amp;#x27;t gotten worse at all. It&amp;#x27;s quite possible they wouldn&amp;#x27;t want to profit off of Discord individually, but rather use it as another tool to expand their general ecosystem horizontally. On the other hand, they could also do the exact opposite and start harvesting data and maximizing advertisements en masse, lest my post become too optimistic in tone, since this &lt;i&gt;is&lt;/i&gt; still HN. Lastly, remember that this is still just a rumor that various news outlets have picked up on and is nowhere near guaranteed.&lt;p&gt;For those looking for alternatives due to this, or just because they&amp;#x27;d like to own their own data for once, I think Matrix is likely to be the best general solution in this product space, both with respect to similar app functionality as well as quality constraints (real encryption, decentralization, FOSS, etc).</text></item></parent_chain><comment><author>usrusr</author><text>That&amp;#x27;s called brand and in one way or the other, in postindustrialized societies most people seem to work in that field (e.g. everything that is funded by ads is effectively part of the supply chain).&lt;p&gt;&amp;quot;The value is in the user base&amp;quot; is just a particularly sticky form of brand, nothing else, set least as long as there are no long term contracts involved. It&amp;#x27;s not in knowing their logs, it&amp;#x27;s not in having their authentication hashes, it&amp;#x27;s not even in exclusivity (I believe that most users of anything in the wildly overlapping spectrum from chat to instance messenger to screen sharing conference call are active on quite a lot of offerings)</text></comment>