My Gaming Distribution Business Makes $1M/Year

Mikhail Tsyrulnikov

•

Published: June 20th, 2024

save

Mikhail Tsyrulnikov

Founder, Gameray

$85K

revenue/mo

Founders

Employees

Gameray

gameray.co.uk

from London, Великобритания

started December 2013

$85,000

revenue/mo

Founders

Employees

Discover what tools recommends to grow your business!

MailChimp

productivity tool-icon

Trello

crm

Bitrix24

Discover what books Mikhail recommends to grow your business!

Want more updates on Gameray? Check out these stories:

Hello! Who are you and what business did you start?

My name is Mikhail Tsyrulnikov. I live in Tel Aviv and lead the company Gameray. I completed my higher technical education at MIEM HSE in Moscow and received an MBA from Bayes Business School in London.

Since 2013, I have been involved in developing businesses in the field of digital game distribution. Our flagship project, Gameray, is a retail platform where gamers can conveniently and safely purchase PC games from over 100 publishers. Our annual turnover exceeds 3 million euros.

What's your backstory and how did you come up with the idea?

I worked as a project manager at one of the largest online stores in the CIS, and observed how, at that time, physical logistics significantly limited sales. The idea of doing something in the field of e-commerce greatly attracted me, and in 2013, the sector was rapidly growing and held a lot of promise.

Additionally, while still a student, a classmate and I were passionate about video games and launched the project Metagames. It was a game database that aggregated all reviews and, based on them, created an overall rating, helping gamers navigate the vast universe of computer games.

At the intersection of these two projects, I had the idea to create a digital store for computer games. The "aha moment" came when I learned about the existence of digital distribution from one of the advertisers on Metagames. I realized that this was what I had been looking for, as digital game distribution combined my expertise in e-commerce with my passion for computer games, and it allowed me to avoid dealing with physical delivery. Additionally, at that time, both gaming and e-commerce were very promising and rapidly-growing fields.

I saw that the first digital distribution stores that were emerging then were developing successfully, so I had no doubt that I would succeed as well. At that time, I continued working at Eldorado, so I didn't face financial problems or significant risks.

We managed to launch the MVP in 2.5 months. In the first version, it was a simple online store with API integration with a digital key supplier.

Take us through the process of building the first version of your product.

At that time, I had 5 years of experience as a project manager in e-commerce, so I understood the specific steps needed to launch the first version of the platform. I chose Bitrix as the technical platform, which I was well familiar with. To reduce development costs, I decided to hire freelancers. To develop our first version of the project (MVP), I needed two developers, a designer, and a content manager.

I also had a good understanding of the gaming market, thanks to the Metagames project and the fact that one of our advertisers was a digital distribution platform. I arranged to work with them via API so that we would receive a digital key from them in real time when a user made a payment on our site. This eliminated the need for us to hold any inventory.

I estimated the total budget for the launch at $20,000. I managed to find two private investors among my acquaintances who liked the project and were willing to invest this amount.

Describe the process of launching the business.

We managed to launch the MVP in 2.5 months. In the first version, it was a simple online store with API integration with a digital key supplier. Our first visitors came from our gaming project Metagames, which had 500,000 visitors per month. We placed banners advertising Gameray on Metagames and started receiving orders from day one.

However, the banners on Metagames generated only a few orders per day, which was considerably lower than my expectations. Since the early days, it became clear that we needed other channels to attract traffic.

The initial investment in the project was $20,000, which I managed to secure from two private investors, whom I knew. But since sales in the first month were very low, we needed to raise another $10,000 to cover Gameray's operating expenses.

Since launch, what has worked to attract and retain customers?

We overestimated the traffic from our partner project Metagames, so by our second day of operations, we realized that to survive, we needed to find new channels for attracting customers.

Contextual advertising and SEO became the first areas we focused on. The advantage of Google AdWords is that it allows you to get targeted traffic immediately and quickly test hypotheses. Transactional queries like "Buy GTA 5" worked very well for us, and we started creating campaigns for all of our popular products. Informational queries like "GTA 5 release date" turned out to be non-converting for us.

General queries like "Buy PC games" didn’t work either. Hence, we only promoted through SEO those queries that worked well in Google AdWords. This is more labor-intensive work, as results are visible only after a few months. However, in the long run, it is significantly cheaper than Google AdWords, where you have to pay for each click.

PR and Banners

Encouraged by the first orders and still with investor money in our coffins, we initially tried buying publications and banners in leading gaming publications in Eastern Europe. However, despite the high cost, this almost did not generate sales.

It turned out that simply advertising a new gaming platform did not work. Gamers are interested in specific offers for new releases or exclusive promotions. The ROI from such publications was below 10%, and we quickly abandoned this idea.

Partnerships: Websites, Communities, YouTube

Surprisingly, partnerships based on the CPA (cost per action) model turned out to be successful, where we paid the partner 5-10% of the completed order. We contacted communities on social networks like VK, Facebook, and YouTube for popular franchises such as Fallout, Elder Scrolls, FIFA, etc., and arranged to place links to our store during the release periods of new games in these franchises. O

On release days, such links brought hundreds of orders per day. Unlike PR publications, these partnerships were risk-free for us since we only paid for user-completed orders. Major well-known publications won't work with such a model, but we found many communities on social media and YouTube channels willing to collaborate. To this day, CPA partnerships remain one of our main sources of traffic.

E-mail

From the project's launch, we assumed that email marketing should become an important source of traffic for us, as gamers love reading about upcoming games, promotions, and new announcements. By the second month, we started doing monthly newsletters, with conversion rates reaching up to 5%.

The downside of this channel is that it won't bring many sales at the beginning, since it takes time to build a client base. However, over the years, email newsletters have become a key channel for us. We added segments (by game genres and franchises) and were able to make newsletters more personalized and interesting.

How are you doing today and what does the future look like?

Today, we are a profitable business with an annual turnover of around 3 million euros. Our gross margins are approximately 20%. The platform is visited monthly by 50,000 users. We exclusively sell through our platform Gameray and do not operate as sellers on FB or Amazon, as these major marketplaces are primarily designed for physical goods.

Initially, our focus was on Eastern European regions, and our distribution rights were limited to a select number of countries. However, we have now obtained rights for the entire European continent, the UK, and the US, and we are actively working on launching a global platform. Consequently, we plan to significantly expand our customer base and experience exponential growth.

Through starting the business, have you learned anything particularly helpful or advantageous?

It's important to be persistent. The best decision that allowed Gameray to grow exponentially and reach a new level was establishing direct partnerships with game publishers in 2016, three years after our launch.

At some point, I realized that without direct contracts, further growth was impossible, so I started spending a significant portion of my time working with publishers. Initially, there were many rejections, but I attended every possible conference, met with representatives multiple times, and ultimately, we managed to secure our first contracts.

It's necessary to be able to part ways with people. In order to build a strong team, it's important to be able to let go of weak individuals. No leader enjoys doing this, so people often procrastinate and delay making unpleasant decisions.

Apart from worsening efficiency, this also demoralizes strong team members and sometimes even leads to their departure. An important lesson I learned is that if you want to build a strong team, you need to be prepared to make many tough decisions.

Delegating and giving managers freedom. The CEO's focus is one of the most important resources of a company, so it's crucial for them to be focused on truly important matters: strategy, hypothesis testing, and team management. In order to have the opportunity to focus on these aspects, it's very important not to engage in operational management and to delegate it to managers. It took me quite a while to realize this.

Additionally, an important aspect of proper delegation is giving managers the freedom to make decisions and avoiding micromanagement from the CEO. Yes, sometimes, in the moment, this can lead to mistakes, but in the long run, if the team consists of the right people, the effectiveness of decisions will be high.

Choosing a niche for a business is an indicator of its fate. Working on a large market will allow startups to feel confident and maintain the potential for growth and testing related niches

What platform/tools do you use for your business?

Trello is the primary management tool that we use across all processes. It allows us to visually track the status of all tasks, regardless of the process. Although Kanban was invented quite a while ago, I believe that tools based on it are still the most convenient for managers.

Bitrix. From the very beginning, we have been using Bitrix as our main e-commerce platform and are very satisfied with the functionality it provides. It has everything that a modern online store needs.

Mailchimp. Email marketing is one of our main traffic acquisition channels, and Mailchimp, which we have been using since the beginning, is our primary tool for it. We use it for both newsletters and transactional emails.

What have been the most influential books, podcasts, or other resources?

Thinking, Fast and Slow by D. Kahneman. This book describes the mechanisms of decision-making, as well as the main biases that hinder us from making the right choices. Decision-making is the primary task of a leader, and this book helps me do it more consciously.

The Black Swan by N. Taleb. This book is about randomness and the impact of unpredictable events on our lives. The success of a startup is inherently very unpredictable. The book helped me look at risks in life and business in a new way.

Tribal Leadership by D. Logan. The best book on leadership. It describes some primitive aspects about people, which leads them to form tribes. It draws parallels between ancient tribes and modern companies and the role of a leader in them, providing a set of specific tools that help to lead people on a daily basis.

Advice for other entrepreneurs who want to get started or are just starting out?

Choosing Large Markets for Business

Choosing a niche for a business is an indicator of its fate. The gaming market is the largest entertainment market. Working on a large market (even if the company occupies only a small share of the total volume) will allow startups to feel confident and maintain the potential for growth and testing related niches.

However, if a company initially chooses a tiny market, it will not be able to achieve significant indicators, even if it becomes the best in this field. Unfortunately, I often see startups choosing tiny niches in an attempt to become a leader there.

Attending Industry Conferences

For my company, attending gaming conferences has opened the doors to securing our leadership in the market. Communication with developers and publishers who created the products we were selling helped us understand their true needs and create a reliable technical platform.

This, in turn, allowed us to obtain direct contracts and agreements with publishers and obtain the rights to distribute their games. I have been attending annual gaming conferences in Cologne and San Francisco for more than 8 years now and consider it the best investment of my time.

Delegating as Much as Possible

The CEO of a project should strive to devote as much time as possible to strategic tasks and work with the team. To have time for this, it is important to delegate the maximum number of operational tasks to managers.

This sounds quite simple, but, unfortunately, in practice, I often meet CEOs who are bogged down in operational work and do not have the strength and time to think about the strategy and development of the company.