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Microsoft CEO searches Creator Hub again after TikTok bid fails

(Bloomberg) – Microsoft Corp.’s recent acquisition targets have baffled some analysts and investors, aware of the company’s incomplete track record in consumer businesses and social media. What’s the appeal, they wonder, with digital properties like TikTok, Pinterest Inc. or now Discord Inc., a chat app popular with gamers? The answer in Satya Nadella’s mind is clear. “Creation, creation, creation – the next 10 years are as much about creation as it is about consumption and about the community around them, so it’s not just about creation,” Nadella said in an interview last month. “If the last 10 years have been about consumption – we buy more, we rummage more, we watch more – there is a creation behind each of them. But I see that this phenomenon is much more democratic. “For Nadella, the next decade of growth in cloud computing and internet usage will not be determined by the people who watch and buy, but rather by those who generate and share their own content in diverse, thriving environments. Although he did not specifically refer to the acquisition strategy, his previous purchases and current wish list indicate that Nadella is keen to control some of the means of production. In the context of Nadella’s philosophy about the next phase of cloud innovation, Microsoft is speaking to Discord and its other potential goals lately don’t seem outside of the band. When you look back on his first big deals when he took over the software giant in 2014, there is a clear passage – from the worlds and servers to building gaming communities on Minecraft, to the professional social network and corporate think posts of LinkedIn through to the open source projects hosted and collaborated on the software code sharing platform GitHub. In the interview, Nadella cited GitHub and LinkedIn as prime examples of the content creation communities he expects to be more prominent in the future of the cloud. Launched in 2015, Discord has attracted more than 100 million users a month with a free service that offers voice, video, and text communications, along with player-friendly features, including the ability for users to broadcast the name of the game they are playing. The app became popular a few years ago and rose alongside multiplayer hits like Fortnite by Epic Games Inc. It’s long been a draw for celebrity gamers and social media influencers. Discord’s valuation rose to $ 7 billion last year, and those familiar with the conversations said Microsoft was discussing a deal worth more than $ 10 billion. Microsoft and Discord declined to comment. Social media is now the virtual way to start a small business or become an entrepreneur from anywhere in the world. Social networks also recognize the value of their greatest creators and their key role in the financial success of the parent company. Companies from Snap Inc. to TikTok to Facebook Inc.’s Instagram are investing money in promoting their stars and helping them make more money. For Microsoft, owning more creative communities is an opportunity to have more cloud software and tools to sell to the platform and its users. In particular, Discord can also bolster Microsoft’s Xbox business, where the software maker is more focused on attracting players to subscriptions like Game Pass that they can use across consoles, PCs, and mobile devices to access a library of songs. And as more young people grow up with operating systems, email, chat apps, and productivity software from companies like Apple and Google, owning a community popular for this age group could introduce them to Microsoft in a way that their elders did in the world Past Windows and Office did. Still, adding Discord would take a step beyond the programming and office worker community that Microsoft has been playing in for decades. Discord may be a better match than buying Minecraft, given Microsoft’s 20 years in console gaming and an even longer tenure in PC gaming. There is evidence that Nadella is looking to take this step – he was willing to spend tens of billions of dollars last year to buy TikTok’s U.S. assets from ByteDance Ltd. to acquire, the viral video sharing app that is also heavily used by teenagers, well outside of Microsoft’s core software demographics. The company also reached out to social media platform Pinterest about a purchase. ByteDance selected a competing TikTok offering from Oracle Corp. led group, and conversations with Pinterest, which has a market value of more than $ 44 billion, did not result in a deal. “Microsoft would really buy Discord Strategic move – it shows that Microsoft understands the power of the community in the context of the pandemic,” said Christophe Jammet, managing director at Gather, an innovation consultancy. “While Discord has always been a die-hard black sheep in the field of team / productivity communication, it is ubiquitous as a community platform for gamers and countless subcultures.” Nadella’s focus on bringing new developer communities into the Microsoft group harbors two regulatory risks, antitrust law and content moderation. With U.S. and EU regulators scrutinizing the power and influence of big tech, none of the big companies can reasonably expect deals, especially acquisitions of big content platforms, to be closed without in-depth scrutiny. At least Microsoft has some experience. albeit less on the content moderation side. Microsoft has had to keep offensive speech and harassment away from platforms like Xbox Live and the Mixer game streaming service, which was canceled last year, but hasn’t really been tested at the speed and volume of a major real-time social platform where it’s safe to use types of language and Programming could get Microsoft in hot water legally or with regulators. Mixer’s lackluster user numbers were part of the reason for the shutdown. Discord has already had to grapple with the content issues that major services like Facebook, Google’s YouTube, and Twitter Inc. are counting on. Discord had to take action to ban Nazi content afterwards White supremacists used the service to plan the 2017 Charlottesville, Virginia uprising that killed a counter-protester. Earlier this year, it banned WallStreetBets, the investment group best known for running stock rallies for GameStop Corp. and AMC Entertainment Holdings Inc. for hate speech. Discord restored the group after insisting on improving moderation practices. If Microsoft manages to buy the service, Nadella’s community strategy would get a big boost. For this to work, Microsoft must take on the daunting task of building the communities it wants and closing those that don’t. More articles like this can be found at bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP