Interview with Mikhail Cyrulnikov: From e-commerce to a digital games distribution platform

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

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

Combining these experiences, I came up with the idea of ​​creating a digital store for video games. The turning point came when an advertiser on Metagames introduced me to digital distribution. I realized this was the perfect opportunity to combine my e-commerce experience with my passion for games, while bypassing the challenges of physical delivery. Both games and e-commerce were emerging fields at the time, with significant growth potential.

Having seen the early success of the 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 risk.

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

Our main competitor at the beginning was Steam, a global platform and virtual monopolist with a huge customer base and game library. We understood that our advantage could lie in a deeper understanding of the CIS markets. Since Steam, as a global platform, did not adapt to local markets in any significant way, we integrated over 30 payment methods and over 5 different currencies specific to these countries. Additionally, we used advertising in region-specific media, such as the VK social network and the Yandex search engine, where Steam was not present. This helped us attract our first customers.

Accountant

One of the successful decisions we made when launching the platform was to start working with gaming communities using a CPA (cost per action) model. This cooperation allowed communities to earn money. At the same time, we paid out rewards only 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 have you adapted your methods to this new field?

I would like to highlight two key differences.

The first is the supply chain. In traditional e-commerce, everything revolves around purchasing and contracts with suppliers. Entering the market is relatively easy, as distributors are usually happy to sign contracts and deliver goods. Over time, as volumes increase, it is possible to negotiate more favorable terms.

Digital distribution, however, is much more complicated, as it requires signing agreements with publishers to distribute games. This creates a “chicken and egg” problem: publishers are reluctant to give distribution rights to small, new stores, but it is difficult for a new store to grow without direct agreements. Fortunately, we launched our store in the early days of digital distribution, when competition was less intense. This allowed us to expand, initially working with local distributors, which eventually led to securing direct agreements with publishers.

The second key difference is the lack of physical delivery. With digital goods, the delivery of the license key is instantaneous—it happens at the moment of purchase. While this initially seemed like a big advantage, it revealed a significant drawback: vulnerability to fraud. Instant delivery allows fraudsters to obtain the license key and resell it immediately, while with physical goods, which take at least a day to deliver, sellers have more time to detect fraudulent transactions and prevent the delivery.

In our first year of operation, we suffered significant losses due to fraud, but over time we developed an anti-fraud system that allowed us to deal with them more effectively.

4. What challenges did you encounter while introducing and developing the platform to the market? How did you overcome these challenges and what lessons did you learn from the experience?

Piracy

The number one challenge was digital content piracy, which is very common in Eastern Europe. Players often downloaded games for free from torrents instead of paying for a licensed copy. Many really 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 a lot of comments about free downloads of these products via torrents. At Gameray, we wanted to make the purchase as easy and convenient as possible – in 2 clicks – which was our advantage over the complicated 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 joint efforts between distribution platforms, publishers and developers, piracy levels in Eastern Europe have dropped significantly.

An important lesson we learned is that if we create a user-friendly service, people will be more 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 perfect for fraudulent schemes involving the cashing out of stolen cards. Fraudsters used stolen credit card information to buy keys from us and then resell them on gray markets. We were faced with a cybersecurity challenge that we were not prepared for, as e-commerce companies focused on physical goods did not face such problems.

Over the years, we have developed our own anti-fraud system, which has been regularly updated and improved. In recent years, we have used artificial intelligence to detect fraud patterns in transactions and have 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 huge scale and resources, we had certain strengths. First, our understanding of the local markets we operated in (CIS countries). We used popular payment methods and currencies not available on Steam, as well as local advertising channels and community collaborations. We also understood that publishers were concerned about Steam’s monopoly, as one platform could dictate terms to publishers. This awareness led us to demand and secure exclusive promotions from publishers, which allowed us to sometimes offer users better prices than Steam.

An important lesson to take away from this is that even if resources and scale seem incomparable, there are often advantages that allow you to compete with much larger competitors.

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

Keyless distribution

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

Subscriptions

Another important trend is the growth of subscriptions. Many users now prefer to play games with monthly subscriptions rather than buying the games separately. Examples of such subscriptions include PlayStation Plus and Xbox Game Pass. Publishers are also launching their own subscription services. For example, Paradox offers monthly subscriptions for its franchises, eliminating the need for users to purchase expansions separately. We recognize this trend and are happy to offer digital subscriptions as well. We plan to start selling PlayStation and Xbox subscriptions by the end of 2024.

Mobile game distribution

Recently approved Digital Markets Act in Europe requires Apple and Google to allow applications to be downloaded from alternative sources, not just from their native stores (App Store and Google Play). This could open up a new market for the digital distribution of mobile games, currently limited by the monopoly of these native stores. We are convinced that in the future, solutions for downloading third-party applications will emerge, bringing benefits to all market participants (both players and publishers), and we will strive to enter this market as soon as it becomes technically feasible.