According to the official webpage, PLAYKEY is the cloud-gaming platform that runs top graphics games on any PC or Mac. Back in July 2017, the startup raised $2,8 million with Russian Internet Initiatives Development Fund (IIDF), according to TechCrunch reported. Then, on 4th of December they gained more than $10,5 million for its further business evolution as a result of ICO. As Egor Gurev said, all the money will be used for P2P model development and expansion to foreign markets.
As Egor told me then, ICO was a great opportunity in 2017 and it would have been really stupid not to take it. He also mentioned a principle difference between venture and crypto investments: in case of venture you are in contact with a fund for a year, it checks everything and makes a weighted decision, when in the world of crypto money are mostly given in a random way. For those who make money on ICOs without any entrepreneurial background and experience in business it is a sweet fruit to take money without any further development of the project.
Egor and I sat over a cup of invigorating coffee and I asked how did his company find a solution to one of the most painful modern gamer problems: sharing computer’s power on PLAYKEY servers.
Egor: In 2008 my partners and I founded a company that sold video games online called Gama-Gama.ru. It was and still is a successful business, but we wanted to found a service that did something besides selling things, because it is a rather unstable. Your competitor can lower the price by 3% and you will probably lose your customers. We thought of a service users would pay for, we found ONLIVE service in USA that made similar things to what we do now. We tried to contact them proposing a joint business idea or a franchise in Russia, but got no answer. That’s why we have taken it upon ourselves to develop our own technology. The understanding of its practical application came to us later, we spent two years just creating the technology. I see it as a great managerial mistake because the first thought should be about how to sell your product/service. It should be landing first, to see the audience reaction and then develop your startup, if it is worth it. But we made it the other way around and only 2015 was when we understood that we can help gamers who have weak computers but want to play modern games. Since that moment we made it a target to solve this problem.
I tried to apply my mathematical skills to count whether it was more profitable for gamers to pay through the PLAYKEY service or buy a new gaming computer. Egor explained to me which paying models does his startup use to satisfy the audience.
Egor: Now our user pays per minute of playing. We tried the subscription model, but it was a big disadvantage. By framing your audience, you create a problem for yourself. For those who play little, for example, an hour per day, it is unprofitable. Those, who play a lot, “kill” your cost price, because they play much more than you earn. In fact, you are left with the layer of audience who pays and plays on a medium level. It means the conversion is very low and your product isn’t that interesting to users. This subscription is profitable only for those who play a lot to the detriment of our business. Commonly people play for 1-hour per day or even less. Our average user plays for 25-30 hours per month, so there is no need for a gamer computer and its constant modernization (they become obsolete really fast). You can compare it to Uber and the actual car purchase: if you drive a lot, obviously, you need your own transport, but if you don’t do it regularly…
A few words were also said about the gaming audience of PLAYKEY. Egor confessed the first vision was very far from reality.
Egor: Our organic traffic was students and scholars. We didn’t like this audience, because it pays badly. No stable income, no plastic card… Then we noticed that 30% of our audience is older and pays better. Upon little investigation, I took it upon myself to text users in VK, saying: “hi, I see you are in our official group/Can I ask you a few questions/why do you use our service/how often, etc”. We found that these people enjoy different sports in different ways, so we targeted our Facebook advertising towards sports fans rather than video game players. They can pay, but they are not intensive players. We spent 4 month on working with this audience to understand that we have to eliminate the subscription. Then we came back to scholars: they play in a completely different way. They have no money to buy games, so they play free ones. Their main problem is that nearly 30% have their family access their computers. So, when they try to start playing, the blocking window appears and they cannot play. If we haven’t looked through our users playing sessions, we would never know about it.
The process of monitoring and following the user during the game is the thing that now our entire company, except for the accounting team obviously, does.
Egor: There are 50 people in our company now and they all work with clients. It was a great effort to make people do that, not just propose their creative ideas, but going through data and formulating hypothesis based on it. 99% just spout ideas and it is a problem. Every creative idea is about what you want to do and about your ambitions, but these things don’t usually correlate with company’s needs. You make it and it has no sense, it doesn’t increase metrics. It is good if you weed ideas out not just create them, it means you save a lot of money for yourself. You realise only those ideas that are cheap but will profitable. It is about faith in success based on numbers. We divided our company on “product teams”: from the moment users enter the system till the moment they pay us money they are curated by different teams. One is responsible for attracting the user, another – for tying a card, third one has to make the user play, fourth one follows the first timers, fifth looks for ways to make them play more. We walked away from the hierarchy, that’s why every team has a developer, the one who tests and someone from tech support… They all better their parameters.
As we started talking about money, I asked about the PLAYKEY cryptocurrency and its implication into the platforms.
Egor: Well, we have a cryptocurrency, but it isn’t a convenient mean of payment. It kills conversion and we won’t force our audience to pay in it until we find a solution to better it and make payments in crypto easy. We promised to make tokens, we did it, but no one uses it as it is inconvenient. Well, all the startups that raised money on ICOs will have to fight a problem of blockchain disturbing business development and creating blockers. If you don’t find an easy way to accept money, you will fail. Therefore you have to make it convenient, but now it isn’t like that.
Egor followed the topic of conversion and convenience by telling me about the ongoing changes in the company. PLAYKEY is now changing its payment aggregator because it lowers the conversion by nearly 5%. It is a technical issue:
Egor: Former t aggregator online payment page is made in a way where you cannot write the expiration date of your card yourself, it has to be chosen from a drop-down box. And it’s quite often that people forget to choose the correct data, leaving the default date. As a result, the transaction doesn’t pass and the user leaves without buying anything.
Coming back to our beloved theme of blockchain and cryptocurrencies, I asked about the general investor portrait. Not giving it a second though Egor said that the the first thing that catches the eye is the desire of fast income.
Egor: They come from different regions – Russia, Europe, China, Korea, Saudi Arabia. From cultural and demographic point these people are absolutely different. Well, they are also tech-savvy. Not professional investors tho, professional ones don’t behave this way.
Egor underlined that implementation of blockchain is on the second place to making the user play, but then he explained all the whys and the hows.
(Moscow data centers of PLAYKEY)
(Cooling system of the data center)
Egor: We want players to play not only on our servers but on the servers of other users. For example, those who have powerful video cards on their computers (mostly miners) , can host the game on their computers and earn tokens. This way the problem of low image quality is solved. It is easier, if you are in Magadan, to play on your neighbour’s computer rather than on the Moscow server. The blockchain is needed to create a smart contract between the miner and the gamer, because it is difficult to control this peer-to-peer network if you have 1000 miners. The one is bored to host a gamer and he cuts off the connection. The game isn’t saved, the gamer is disappointed. This problem can be solved by a smart contract: the miner gets tokens only if they followed all the instructions and conditions of the contract. No arbitrator tech support needed.
I guessed, the reason of choosing Ethereum was quite rational.
Egor: Ethereum is the most popular and up until now it was best technically developed, but if something, switching a blockchain platform isn’t a problem. Ethereum has a lot of money and I hope it will be enough to develop their technology and make it better. Also when you tell the investor you will make ICO on unknown blockchain, it lowers conversion.
Egor Gurjev is confident that every startup should check as much hypotheses as possible for its business improvement for a month/a half-year/a year and only then it is reasonable to talk about any partnership.
Egor: The startup that talks about the next year partnership with somebody is a bad one. If it needs a year for development, and it isn’t verified, it’s a hypothesis that’s far too expensive. Once a week I have startups come up to me asking for partnership but they go away empty-handed, because a startup shouldn’t partner up with another one, or they will die with 90% probability, together – even with 99%. A startup should partner with a big company in order to to die. WAVES may die, Ethereum doubt so.
Egor’s opinion on networking is also an interesting one. He went to a crypto conference in London and decided to fix every person who came up to the PLAYKEY stand to understand if this activity is reasonable and profitable for business.
Egor: I tried to find investors, but there were only 5 from a 100 that came up to us. Aston Villa football club manager came, many marketers and consultants trying to find clients… Even a toaster producer! You know, we had a toaster at our stand with an idea like “PLAYKEY -play cool games even on a toaster”, toaster is an analogy to an old computer. This man , who produces equipment and toasters, came to us and said something along the lines of “tell me, how toaster is connected to blockchain”. I understood that participating in conferences gives almost nothing and if any of those 5 investors buy anything it will be a super conversion. But if one buys $10,000 it won’t change the PKT rate (editorial note: PKT is the PLAYKEY token). It is difficult to attract investors now, the market fall down, nobody buys. Let’s say, at the moment it is a death valley.
I asked if business stability and cryptocurrency rates are connected.
Egor: The tokens price isn’t connected to business stability. For example, the SONM project announced their new platform release on 4th of July. It is cool, the prices should grow! The price of token is negative 7%, so… This things are not related. Some projects are already dead, but their cryptocurrency still has a price. Cryptocurrencies are about speculations, sort of a cat-and-mouse game. A token good in price bargains $500,000 per day, but if its real demand gets ahead of the speculative one, the company will cost a lot of money, a billion! In reality it won’t happen soon as many the project have zero income… Some people play on others psychology and earn money this way. An ordinary person always buys when there is a growth and sells when it is a decline. “I’ll fix the material losses and sleep soundly”, they think.
Egor himself doesn’t invest in tokens, but he holds bitcoins and ether using scalping strategy. He prefers to wait for the right moment.
Egor: The advantage of cryptocurrency upon stocks and bonds is in high volatility and instability. In comparison to the stock and bond market, if you buy the Sberbank stocks and they are down because of the crises, they might grow to their high price only 5 years later. Crypto markets cycle is two month.
By the end of the conversation we we switched to a more philosophical manner.
Egor: Our world is centralized and all the decisions we make are in a centralized way as well as the government wants us to make centralized decisions. Any company director doesn’t want his employees to choose their salary amount. Meaning, the idea of a decentralized world… how can we make it if we don’t want it? We live in the centralized world that we built ourselves, we want to live in this world, not in a decentralized anarchy.
Our lives are too good to change anything and cryptocurrencies are just about the money flow from less mentally resistant people.
What about the future… Energy, space, pharmaceutical industries will grow. The problem is that humanity has already solved all the easy problems. And the impossible ones aren’t that difficult to solve either. I think blockchain will be used in the spheres where it is needed and it will have an appropriate value people will pay for. 99% of projects will die, bitcoin will have a value only if it is fully centralized and recognized by all the countries. One state, one currency… It’s so convenient, but we need regulation and tax control. The world will go mad. Or not? Only time will tell! Anyway, it’s not changing our focus from developing cryptocurrency-based decentralized project. To change the market, to launch game-changing (literally!) product and to show the whole world how far we can go.
On that mysterious note our conversation came to an end and I felt like there was a lot to process and think about: how different can opinions and approaches be. Maybe we all need less words and more action to change this world the way we want to?