stories

‘Our games are at the top of the Russian charts, but almost nobody knows us as a brand’ Two Russian brothers started a video game company and got onto Bloomberg's billionaire list. Here’s their first long interview.

Source: Meduza

In April, Bloomberg added Igor and Dmitry Bukhman to its list of U.S. dollar billionaires. The brothers, born in the northwest Russian city of Vologda, founded a video game company out of their hometown in 2004. Now, Playrix, which employs more than 1,000 employees and entertains about 30 million users every day with popular games like Homescapes and Township. The Bukhmans made their first games out of their Vologda apartment and almost immediately started raking in a profit. Now, Igor is 37 years old, Dmitry is 34, and each is said to have a net worth of $1.4 billion. We spoke with the Bukhmans about how they started making more money off their games, why they no longer live permanently in Russia, and what’s going on in the country’s domestic video game market today.

“We were raised to think that only losers don’t graduate from college”

Do you remember the first game you played yourself?

Igor: When I was a kid, computers were a really unusual thing, and we only got to touch them in fifth or sixth grade, in the mid-1990s. We really started playing around the same age: I was 12 or 13, and Dima was three years younger. We played Dandy, Mario, Battle City, the same things everybody did.

Dmitry: We grew up like normal kids in Vologda whose families didn’t have much money. Our dad was a veterinarian — he taught and worked at a meat processing plant. Mom spent practically her whole life in a ball bearing factory. We lived very modestly, and we went to a totally ordinary school. The computer was our first hobby. Our grandpa gave it to us, and that was a huge event. In 1996 and 1997, we were sitting by our Pentium 100, figuring out the operating system, trying to program stuff, and playing, of course. But not any more than other kids — we’re not gamers who have built our whole lives around video games.

When did you decide that you could make games yourself?

I: [In 2000] I started studying applied math at Vologda University. There was a progressive teacher there who had already been selling his own games on the Internet. We decided that we really wanted to try it too. I finished my first year, Dima finished ninth grade, and we set ourselves up on the Internet for the first time — an unlimited nighttime plan. We weren’t thinking of starting a business. We just wanted to write some code and put it on the Web.

We didn’t have any genius ideas, so we decided to make a game. Back then, Internet games were usually sold in a model where you could play for a certain number of minutes for free, and then you had to pay to continue playing. It took us about a month of working at night and catching up on sleep during the day to write our first game. It was very simple, kind of like Xonix: you used your keyboard to control the cursor and clear the background out of a picture while avoiding ‘enemies,’ which were just dots on the screen.

In the first month, four people bought our game, and we made $60. I even remember the first person who paid for it. We were sitting in Vologda, and we got an email saying that someone had bought the game in America. It seemed like an unbelievable thing.

We worked on improving our first game for a pretty long time. We brought our monthly income up to $100. Our parents made about $200 each back then. So it was a tangible sum — it was real money for us.

Did the profits push you to make a second game right away? When did you start working on it?

I: It was about half a year after the first one. We went to school and worked on it in parallel for four or five months, added some graphics — for that, we had to find an artist in Vologda. In the first month, the game made $200. That was a breakthrough: we had two games going at the same time that were bringing in money. At some point, we were able to afford a second computer and put it in the same room. Our productivity doubled immediately because we could work at the same time instead of taking turns. But we still kept working out of the same room.

When did you decide to turn all this into a business?

I: In 2004, three years after we released the first game, our income reached around $10,000 per month, and a good salary in Vologda was $300 back then.

D: At first, our parents couldn’t believe we were making money on the Internet. Back then, no one understood anything about the Internet. And even though we were making more money according to the standards of the time, we kept living the same way. We didn’t buy anything fancy.

I: I don’t even know now what we did with the money. We probably saved it. The only thing I remember is that before I graduated from college, also in 2004, I bought a car. But not a decent one, a used Lada 21099. Even made enough to buy it in less than a month. We needed time to reorient ourselves, to figure out what to do with the money and how to live with it. Before then, we didn’t live in a business framework at all. We didn’t even know people in Vologda who were in business.

D: On top of that, I was in college for three years after we founded the company. Now I don’t even know why I did that, but we were raised to think that only losers don’t graduate from college. I didn’t even know there were people who don’t finish school by choice.

“In Russia, problems sometimes pop up where there shouldn’t be any”

Why did you stay in Vologda instead of going to Moscow to found Playrix? Are you just real patriots for your hometown?

D: I wouldn’t say we’re patriots, but I can’t say the opposite either. We just stayed there because that’s where we were born and raised. You know, we never even thought we would ever leave Vologda. For us, living in Vologda was the norm. And I don’t think moving to Moscow is some kind of necessity in general. We had examples of really strong guys who moved to Moscow and then came back to Vologda.

I: Plus, there were always a ton of smart guys around in Vologda. So at first, we started hiring people we knew from school. If we had moved out and started all over again in Moscow, we might have had a harder time breaking in.

D: In Vologda, we started growing fast. At first, we had four people including ourselves. We rented a few rooms in a book storage building where there were rats running around for a couple of months before we got them out. We worked there for a couple of years, and then we got to be 10 – 15 people, and two or three years later, we had almost 100. At first, we moved from office to office, but then we decided to build our own.

Was the entire video game market growing that fast back then?

I: When we had just started working, there was practically no set market and no business model. Whatever luck you had, that’s how much you made. When we founded Playrix, casual downloadable games were on the rise. They don’t take much time, and anyone can start playing them. Big websites started popping up where you could sell them.

There was also a growing target audience: women 35 years old and up. And we were working for that audience, figuring out which genres people liked, what worked and what didn’t. We tried to make everything as high-quality as possible even though that took a lot of time. We spent more than a year on the first game and even longer on the second. We worked in that market until around 2009 and made about 30 games. All of them were financially successful. Some of them were among the most profitable in the whole market. On the whole, our company was in first or second place in terms of revenue.

How much did your company make back then?

I: About $5 or $6 million per year. But there was a problem: no matter how cool a game you made, you would hit a ceiling in terms of the size of your audience, and that meant a revenue ceiling too. We realized that we couldn’t grow to be 10 times bigger in that market. There was no incentive to do something new. Now, we work in the mobile games market, and the revenue ceiling there exists only in theory.

You started making millions of dollars, but you stayed in Vologda. You even built a new office there. Why?

I: At the time, we thought building would be more profitable than renting or buying, but then it became clear that it was a bad idea. But in Russia, problems sometimes pop up where there shouldn’t be any.

Did someone demand bribes from you?

I: Worse. We bought the land for the office for three or four million rubles (around $50,000 or $60,000), and we started building after a little more than a year. We built the foundation, and then it turned out that the person who sold the land to us didn’t actually own it. It belonged to the city government and to us because he somehow made it so that the government registered all the documents for the land to us.

In the end, we bought the land again because otherwise, we would have had to just take down everything we had built. The person who sold the land to us disappeared. We learned a lesson from that story — we would never deal with construction again.

How many of you were there at the time?

I: 140 or 150 people. That whole time, we kept growing actively. The breakthrough was when Township came out on mobile platforms — it came out on iOS in 2012 and Android in 2013. It was a success right away, and it’s been growing for five years. Right now, it has the largest audience it’s ever had — around six million users a day. It’s grown by more than 10 times in the course of its history in that respect.

D: In its genre category, which is farming and city construction games, it’s number one in the entire mobile market today. It’s always hard to figure out the reasons behind this kind of success, but it’s probably just a good product. And we’ve been improving it for five years, adding new options and so on. There are around 60 people who work on it full time.

“Russia gives us 2.8 percent of our returns, and the U.S. gives us 40 percent”

When games like this come out, how do players find out about them? A ton of these games come out every day.

I: Nowadays, all of that is directly related to traffic purchases [online advertising]. If a game is successful, it’s absolutely necessary to buy traffic for it so that you make more than you lose. It’s a universal approach, and that’s how we work too. You can’t survive on the market nowadays if you don’t know how to sell your product. The competition is fiece.

How and where do you promote your games?

D: Mostly through Facebook and Google. If you’re scrolling through your feed on social media, you see an ad for our games, and you click on it and download it, of course, we’re paying the platform for that. We pay per user, and then we look and see whether we make more or less on average than the user brought in for us while they were playing.

The thing is that people play our games for a really long time. Some of them have been playing Township for all five years. At the same time, 90 percent of our players don’t pay us anything at all because you can easily play the game for free. But if you want to add in some extra options, then you have to buy the game’s internal currency. A player might spend $5 or $10 a month but over the course of two years, that’s not such a small amount.

Bloomberg wrote that you’re both dollar billionaires and that the company’s annual revenue is 1.2 billion dollars. Are those numbers accurate?

I: We’re a private company, and we don’t talk about money any more than we have to. We can say that there’s a respectable company, App Annie, that put together an analytical report at the end of 2018, and we got ninth place among all the companies that work on mobile platforms.

D: If you compare us to other IT companies in the Commonwealth of Independent States, then we’d be one of the largest, and definitely the largest among all the game companies. But very few people in Russia know about us. People know and love our games, they’re at the top of the Russian charts, but almost nobody knows us as a brand. That’s in part because Russia is a very small market for us: it gives us 2.8 percent of our returns. Our biggest market is the U.S., and then China and Japan. In contrast with Russia, the U.S. brings in 40 percent of our returns.

What’s the total audience for your games currently?

D: Around 30 million people per day, but we’re growing fast. Our most successful game, Homescapes, has around 12 million per day. 90 percent of that audience doesn’t pay, but if you look at the average check in the U.S. from paying players, it’s about $32 per month.

“There was this sense that they could just come and write us up”

Why aren’t you headquartered in Vologda anymore?

D: When we released Township, we had one office, and we moved out of it into our ill-fated building in Vologda. We knew we wanted to keep growing fast, and we started looking at various options — moving to another city, opening and office there, and so on. But putting together a great team in a single city is pretty difficult because talented people do live in different places. So we started offering people remote work.

We worked like that for quite a long time — with a single office and a ton of remote employees. But a lot of them did want to work out of an office. So we started opening offices where we already had a lot of employees — in Moscow, in Petersburg, and so on. That way, people could choose whether to work out of the office in their city or work from home. It was important to us for people to be able to work wherever it’s convenient for them.

Now, our company has 1,100 employees and 15 offices all over the Commonwealth of Independent States and in Ireland. We’re planning to open another big office soon that’s not in the CIS.

I: Because we have this arrangement, we call ourselves a distributed company. That means we don’t just have employees in different offices or working remotely — we have teams made up of employees who live in different cities. It’s not like we make Township in Petersburg and Homescapes in Vologda or anything like that. All of our teams are distributed. And, according to our data, we’re the largest company in the world right now that does things this way.

Why did you pick Dublin for your new headquarters?

I: We were thinking about how to structure our business right from a legal standpoint, and we decided that Irish jurisprudence is optimal for us. The pluses are that there’s good corporate law and a low corporate tax — 12.5 percent. You can find lower ones, but the places aren’t as trustworthy and prestigious as Ireland. We’re not the first ones to come here. The European offices for Facebook and Google are here too. Dublin is a hub for tech companies.

Do you not think of yourselves as a Russian company anymore?

I: We think of ourselves as an international company headquartered in Ireland that has offices in the CIS. Our entire management team is in Dublin, and the company is lead here. At the same time, of course, our roots are in Vologda. Most of the company still speaks Russian.

Did you think about keeping your headquarters in Russia?

I: Of course.

Why didn’t you?

I: Well, what have we got to hide? Unfortunately, Russia raises concerns for potential investors in terms of defending their rights. They think anything can happen in Russia.

Have you moved out of Russia yourselves?

D: We lived in Vologda for a long time, but about five years ago, we moved out to live in Ireland. We were curious about what it would be like to live abroad. We’re still abroad, but we were reconsidering where we want to live very recently, and we were thinking seriously about Russia.

Why did you move away?

D: I already said that we were curious about living abroad. Plus, the climate’s bad, you know, smaller details like that.

I: You know, the whole story with the office also affected this. There was this sense that they could just come and write us up for something. We were doing everything legally, and they responded to us as if we were scamming them. Maybe we would have stayed if it weren’t for that situation. And we did have this dream of going to live in Europe in an English-speaking country. It seemed like things were better there. We saw everything through rose-colored glasses back then. Now, we understand that everything’s not that simple.

About that — do you follow what’s going on in Russia overall?

D: Of course. We visit regularly, we follow everything, we read Meduza three times a day.

And how does it all look from the outside?

I: If you’re talking about politics, we’ve never dealt with that, and we don’t now. And there haven’t been any large-scale changes in that respect anyway.

“We make games, we pay taxes”

And what about events that affect your industry, like the ban on Telegram?

D: Back then, we said that it wouldn’t affect us. If it affected us, we would solve the problem. We don’t think anything in particular on that count. We make games, we pay taxes. Officially, we work in the same Russia, and everything’s okay for us.

I: It’s probably inappropriate to express a personal opinion here. And, to be honest, we don’t see ourselves as experts in this respect. All in all, it looks pretty funny. But, of course, if things move toward closing down the Internet or closing borders, we’re against that. In any case, when we moved out, we were feeling more pessimistic than we are now in terms of what’s going on in the country.

Why? Have things gotten better in Russia?

I: In some cities, like in Moscow — yes. But the main thing is probably that we realized we feel closest to Russian-speaking people, and we understand them better. Even though I thought when I left that I’m very different mentally and that I’d be more comfortable somewhere in the West. In short, it’s an émigré thing. In any case, in the future, when we start thinking again about where we want to live, we’ll definitely think about Russia, 100 percent.

And in your industry, what’s happening in the video game market in Russia right now?

D: It’s obvious that a lot of companies have appeared lately in Russia that have been successful in the mobile market. We see that they’re growing and that the region is getting stronger. Generally, it’s the mobile market that has to be followed now. If you take the entire game industry, its revenue is more than $100 billion per year. The mobile market is more than half of that, and it’s growing.

Did you think about making games for classic platforms? Making your own Witcher?

D: No, we like working in the mobile market, which is very large and growing fast. More and more people are playing on mobile devices, and there are hardcore games showing up on those platforms too. We don’t play much ourselves nowadays — there’s no time — but when we play, we do it on mobile platforms. But that doesn’t mean that PC doesn’t interest us at all. We’re thinking right now about reaching out into different platforms. It’s possible that we’ll buy a studio that will work for PC.

When will your next game come out?

D: Last year, we didn’t put out a single new game. We were developing new games, but the process dragged on a bit because we only release games when they’re completely ready and we think we’ve made a hit. We don’t put a limit on our budgets that mandates we release a game when we pass a certain amount. We spend various amounts on individual games from the early development stages up to the release date — usually 5 million dollars. It’s hard to calculate, even, because we don’t stop working on our projects [after they come out].

This year, we’re planning to release three or four new games. If you take into account the fact that we’ve released only four new games since 2013, that’s a lot. We’ve released five games in total, but one of them failed. We started making it a long time ago, and when we finished, the market had changed. It might have made a little money, but we closed it down. So no one can guarantee anything even though more and more people play games. That goes for Russia too. But in terms of the size of the audience, of course, it will never reach the levels you get in the U.S. or China.