Mikhail Tsyrulnikov is a seasoned gametech entrepreneur with over 16 years of experience in the gaming and e-commerce industries, and the founder and CEO of Gameray. Before Gameray, Tsyrulnikov was responsible for spearheading the development and successful launch of an updated e-commerce platform for one of the largest electronic retailers in Eastern Europe. This initiative resulted in a notable 10% surge in conversion rates. Following this achievement, Tsyrulnikov embarked on a new company, founding a prominent digital games distribution platform in the CIS area. The platform swiftly garnered partnerships with renowned publishers such as Rockstar, 2K, Sega, Capcom, among others, and amassed a substantial revenue surpassing $13.5 million.

1. How has your experience in e-commerce influenced the creation of a digital games platform? What skills and knowledge from e-commerce have been most valuable?

As a project manager at one of the largest online stores in the CIS, I observed firsthand how physical logistics often constrained sales. This experience sparked my interest in the potential of e-commerce, which, back in 2013, was experiencing rapid growth and seemed full of promise.

During my student years, my classmate and I, both avid video game enthusiasts, launched Metagames—a project designed to aggregate game reviews and generate overall ratings. This resource helped gamers navigate the vast world of computer games.

Combining these experiences, I had the idea to create a digital store for computer games. The pivotal moment came when an advertiser on Metagames introduced me to digital distribution. I realized this was the perfect opportunity to merge my e-commerce expertise with my passion for gaming, all while sidestepping the challenges of physical delivery. Both gaming and e-commerce were burgeoning fields at that time, demonstrating considerable growth potential.

Seeing the early success of emerging digital distribution stores, I was confident in my potential for success. At that point, I was still employed at Eldorado, which provided me with financial stability and minimized my risks.

2. What key steps and strategies did you implement to transform your idea into a successful platform? Can you provide examples of decisions that were crucial to this success?

Our main competitor at the start was Steam, a global platform and virtual monopoly with an enormous customer base and game library. We realized that our advantage could lie in having a deeper understanding of the CIS markets. Since Steam, as a global platform, had not adapted to local markets in any significant way, we integrated over 30 payment methods and more than 5 different currencies specific to these countries. Additionally, we used advertising in region-specific media, such as the social network VK and the search engine Yandex, where Steam had no presence. This helped us attract our first customers.

CPA

One successful decision we made when launching the platform was partnering with gaming communities using the CPA (cost per action) model. This collaboration allowed the communities to earn money. At the same time, we only paid rewards for completed transactions. As a result, we were able to build awareness without a large advertising budget.

3. What are the main differences between e-commerce and digital game distribution, and how did you adapt your methods to this new field?

I would highlight two key differences.

The first is the supply chain. In traditional e-commerce, everything revolves around procurement and agreements with vendors. Entering the market is relatively easy since distributors are usually eager to sign contracts and supply goods. Over time, as volume grows, it's possible to negotiate more favorable terms.

However, digital distribution is significantly more complicated because it requires signing contracts with publishers to distribute games. This creates a chicken-and-egg problem: publishers are reluctant to grant distribution rights to a small, new store, but it's difficult for a new store to grow without direct contracts. Fortunately, we launched our store in the early days of digital distribution, when competition was less intense. This allowed us to grow by initially working with local distributors, which eventually led to securing direct contracts with publishers.

The second key difference is the absence of physical delivery. With digital goods, the delivery of a license key is instant—it happens at the moment of purchase. Initially, this seemed like a major advantage, but it revealed a significant downside: vulnerability to fraud. Instant delivery allows fraudsters to obtain a license key and resell it immediately, whereas with physical goods, which take at least a day to deliver, sellers have more time to detect fraudulent transactions and prevent delivery.

In our first year, we experienced considerable losses due to fraud, but over time, we developed an anti-fraud system to manage it more effectively.

4. What challenges did you encounter during the launch and development of the platform in the market? How did you overcome these challenges, and what lessons did you learn from the experience?

Piracy

Challenge number one was the piracy of digital content, which is very prevalent in Eastern Europe. Players often downloaded games for free from torrents instead of paying for a licensed copy. Many genuinely didn’t understand why they should pay for games when they could play for free.

When we posted on social media or collaborated on YouTube, there were always numerous comments about obtaining these products for free on torrents. At Gameray, we aimed to make purchasing as simple and convenient as possible—in 2 clicks—making this our advantage over the complex process of downloading games from torrents. Publishers and developers also helped by adding online and social features to games that only worked in licensed versions. Ultimately, after 10 years of collaborative efforts between distribution platforms, publishers, and developers, piracy levels in Eastern Europe significantly decreased.

An important lesson we learned is that if you create a user-friendly service, people will be quite willing to purchase licensed content.

Fraud

As mentioned above, a completely unexpected challenge for us was credit card fraud. It turned out that digital keys were well-suited for fraudulent schemes involving cashing out stolen cards. Fraudsters used stolen credit card data to buy keys from us and then resell them on gray marketplaces. We faced a cybersecurity challenge we were unprepared for, as e-commerce companies focused on physical goods didn’t encounter such problems.

Over the years, we developed our own anti-fraud system, which has been regularly updated and improved. In recent years, we have used AI to detect fraud patterns in transactions and successfully identified 97% of fraudulent transactions.

Competition with Steam

Another significant challenge was developing a strategy to compete with giants like Steam. We quickly realized that despite their massive scale and resources, we had certain strengths. First, our understanding of local markets where we operated (CIS countries). We used popular payment methods and currencies not available on Steam, as well as local advertising channels and collaborations with communities. We also recognized that publishers were concerned about Steam's monopoly, as a single platform could dictate terms to publishers. This realization led us to request and secure exclusive promotions from publishers, allowing us to, at times, offer users better prices than Steam.

An important lesson here is that even when resources and scale seem incomparable, you can often find advantages to counter competitors that are much larger than you.

5. How do you envision the future of digital game distribution? What trends or changes do you anticipate, and how does your platform plan to adapt to them?

Keyless Distribution

Keyless distribution is a future trend that will transform the technical aspects of digital distribution. Instead of using a license code, which is typical now, the game will be added directly to the user’s library on their platform via an API. This method offers several advantages. It prevents key leaks to other regions or gray marketplaces, as direct library additions cannot be resold like license codes. Additionally, it significantly reduces the likelihood of fraud because there is no code for fraudsters to resell. Keyless distribution is also more user-friendly, removing the extra step of code activation and allowing the game to appear in a user’s library within seconds of purchase. At Gameray, we are actively developing such solutions and have already tested keyless distribution within the Epic Games Store.

Subscriptions

Another major trend is the rise of subscriptions. Many users now prefer to play games included in monthly subscriptions rather than purchasing games individually. Examples of such subscriptions include PlayStation Plus and Xbox Game Pass. Publishers are also launching their own subscription services. For instance, Paradox offers monthly subscriptions for their franchises, eliminating the need for users to buy expansions separately. We acknowledge this trend and are pleased to offer digital subscriptions as well. We plan to start selling PlayStation and Xbox subscriptions by the end of 2024.

Mobile Game Distribution

The recently approved Digital Markets Act in Europe requires Apple and Google to permit app downloads from alternative sources, not just from their native stores (App Store and Google Play). This could open up a new market for digital distribution of mobile games, currently restricted by the monopoly of these native stores. We are confident that third-party app download solutions will emerge in the future, benefiting all market participants (both gamers and publishers), and we will aim to enter this market as soon as it becomes technically feasible.