Mail.ru Group is in the process of acquiring game streaming startup Playkey. Through this acquisition, the LSE-listed Russian Internet major intends to “develop Playkey solutions within [its cloud gaming service] My.Games Cloud and scale cloud gaming in Russia.”
Last week the group announced the acquisition of a controlling stake in the company — 80.05% according to the Russian company register cited by the media. But Playkey founder and CEO Egor Guriev said Mail.ru Group will buy the remaining shares by the end of this year.
Playkey’s solutions allow game developers to launch any game on popular devices like PC, tablets and smartphones via video streaming. Its technologies are “unique solutions for coding, streaming and decoding images, which enables high speeds of graphics streaming at the highest graphics settings.”
The acquisition comes as MyGames Cloud, launched in public beta in late 2020, already offers a catalog of some 250 games from developers. These include CCP Games, Gaijin, Funcom, Nacon, Paradox Int, Techland, and others, besides My.Games own games.
“Last year we launched My.Games Cloud so people could play the latest and most demanding games with the highest graphics settings using any device. Our audience numbers beat our expectations ten-fold even during the beta,” Mail.ru Group CEO Boris Dobrodeev said in a statement.
From pivot to pandemic
Founded in 2013, Playkey is headquartered in the city of Perm, Russia. In 2017, the startup raised $1.5 million from Darz, a major German data center company, then $2.7 million from the Internet Initiatives Development Fund (IIDF, or FRII in Russian).
“With this funding, we started scaling our business, spending money on ads and acquiring new customers,” said Guriev in an exchange with East-West Digital News.
However, customer acquisition cost was much higher than customer life time value, he conceded. As a result, the company burned around $1 million in little-efficient marketing operations. “We decided to refocus on creating a more valuable and scalable business model. We suspended marketing activities, reduced the team and started working on the product.”
Soon afterwards, Playkey launched pay-as-you-go plans as a substitution to subscription. “In the subscription model, gamers pay the same amount whether they play just 1 hour or 100 hours per month — which in turn lowers conversion rates since prices must be increased to make the business profitable. As a result, people with small usage time won’t subscribe.”
After Playkey stopped selling subscription plans, “50% of our customers were lost, but our ARPU increased by 60%,” says Guriev.
“These were very hard times. But, as a result, we survived.”
Playkey was lucky in 2020, when the pandemic drove people to online gaming. “Our revenue skyrocketed: +200% in March. We became a profitable company in just a few weeks.”
Previously, the startup had created a decentralized server network — which helped increase server slots very fast when Playkey needed to address the sudden demand surge.
The pandemic also “drew the attention of big companies, Mail.ru, Sber and alike, to this kind of business; they decided to focus more on home entertainment,” says Guriev.
In 2017, Playkey organised an ICO which generated the equivalent of more than $10.5 million in cryptocurrency contributions. This was related to a separate activity, Guriev told EWDN, declining to comment on the matter.
