Navigating Discord's Shift: Brand Safety, Revenue Diversification, & User Concerns

The recent news surrounding Discord has been a rollercoaster, with various developments ranging from layoffs to privacy breaches. Now, amidst these ongoing changes and with sights set on an IPO, Discord is diversifying its revenue streams beyond its Nitro subscription service by introducing advertising on its platform. This move is significant, especially considering Discord's long-standing anti-ad stance. However, it's not without its risks, particularly concerning potential backlash from users who have grown accustomed to an ad-free experience.

Financially speaking, the move makes sense. Subscription fatigue is on the rise, with just about every industry launching a subscription offering of some form in the last few years. Unlike some other industries, however, subscription-based offerings for social media platforms, such as Discord Nitro, Meta Verified, or X Premium, primarily offer features geared towards a small subset of power users. As a result, subscriptions are a way to diversify revenue for these platforms but they’re unlikely to surpass advertising as a primary revenue driver in the foreseeable future. As a platform that has subsisted almost exclusively on subscriptions until this point, introducing ads is a logical step for Discord as it seeks to grow its business. Its users, on the other hand, may feel differently.

Discord's recent update to its forced arbitration clause in its Terms of Service for US residents adds another layer of complexity. This clause requires US users to waive their right to a jury trial, including any class action suits. While these TOS changes and reneging on its longtime anti-ad stance both make business sense and bring Discord in line with the rest of the industry, they risk alienating users in doing so, especially if disputes arise regarding privacy breaches or other issues.

Despite these challenges, Discord's foray into advertising presents opportunities for both advertisers and users. The introduction of tailored "Quests" within gaming content demonstrates Discord's commitment to enhancing user experience while monetizing its platform. Additionally, the option for users to turn off promoted Quests showcases Discord's efforts to balance revenue generation with user preferences.

As Discord's advertising business expands, maintaining brand safety becomes increasingly crucial. The platform's diverse offerings, including voice chats and community-moderated forums, present unique challenges for ensuring brand suitability and safety. Discord must develop robust controls and measurement tools to mitigate risks associated with brand-unsafe content and behavior.

Ultimately, Discord's decision to introduce advertising marks a significant shift in its business model. While it may face challenges along the way, particularly concerning user acceptance and brand safety, Discord has the opportunity to carve out a lucrative space in the advertising market. As the platform continues to evolve, marketers and agencies should closely monitor new advertising formats and surfaces, prioritizing brand and user safety protections.