A Russian Youtuber, Artishuk recently posted on his channel an interview with Oleg Shlyamovich, the co-founder of PSV Game Studio which is a mobile games development company in Russia. Oleg also owns a mobile advertising agency called Clever Ads Solution.
In this interview, Oleg talked about:
This article brings you the most interesting bits from the two-hour interview.
Who Is Oleg Shlyamovich?
Oleg, the founder of PSV Game Studio, comes from the Ukrainian city of Mykolaiv. In 2014, he founded his own company that develops children's mobile games; in 2015, he moved with his family to Cyprus. Oleg's company creates mobile games based on children's cartoons such as Masha and the Bear, Three Cats, and Hello Kitty.
PSV Game Studio has over 250 mobile apps with over 900 million installs on the AppStore and Google Play. More than 2 million users play games owned by Oleg's company.
In 2019, Oleg founded Clever Ads Solution, a mediation platform to increase the advertising revenue of mobile applications. Today, more than 1 000 mobile applications are being promoted through this platform.
The monthly turnover of Oleg's companies is $300 000.
The importance of this platform is that it helps app owners to earn more from advertising. It has a set of ad networks and an auction mode that allows app owners to give ad placements to the highest bidders.
Shlyamovich could not name the exact figure of how many games PSV Game Studio has today. He said that last week the company bought "a dozen more games," so now there are about 270 of them.
The team buys games from various sources, from other teams and solo developers. The cost at which the company buys games is in the range of 12 - 15x their monthly profit. That is, if a game earns a net of $10 000 per month, it can be valued at $120 000 - $150 000.
The primary monetization channel of all games is advertising. The in-App Purchases option (purchase of virtual goods within the application) is also available, but its income takes up a tiny part compared to advertising.
Is It profitable to Invest in Mobile Games?
Oleg was asked how profitable it is to invest in a mobile game today, and here is what he had to say:
"Suppose you buy a game for $100 000. This means that its monthly income will be within $6 000. You can choose to display ads from us or any other similar service. In addition, you need to find a team that will ASO your application and implements your project functions. All these expenses will cost about $3 000. What will you have left?"
According to the abovementioned investment, the $100 000 will be returned fully in three years. Then from there, it will be pure profits.
Why Move to Cyprus?
Since 2014 Oleg has been living in Cyprus. Below are the reasons why he chose to relocate to the country.
"Cyprus, even for the Jews, is a greater promised land than Israel."
Oleg argued the above statement by the fact that the Cypriot tax on dividends is 0% for the first 17 years. This means that IT entrepreneurs do not need tax optimization during this time.
At the same time, Oleg's companies are registered in Belize (a state in Central America) since he lives in Cyprus on the so-called F-form - this type of visa does not give him the right to work or establish companies. Thus, the entrepreneur lives in Cyprus as an investor, receiving dividends from his Belize company, which, according to local laws, are not taxed.
All employees of Oleg's companies living in Cyprus work as freelancers under contracts with a Belize company.
Even though Oleg has lived in Cyprus for more than eight years, he never received citizenship in Cyprus. To obtain a Cyprus passport, you must live there for seven years with the condition that you have not left the country during the last 365 days before your application. Oleg is a frequent traveler, so the last condition gives him a hard time obtaining Cypriot citizenship.
Launching PSV Game Studio
"I won the money to launch the game development studio from a card game tournament," Oleg says.
The fundraising story of Oleg's company is kind of unusual, but here is a quick backstory:
From 2000 to 2013, Oleg was among the founders of the Ukrainian company, Tekhnomir, which sold office equipment. In 2013, Dell organized a card game tournament for their suppliers, and somehow Oleg took part and won the competition. The prize for first place in the tournament was $10 000, which Oleg eventually put into creating a startup that turned out to be the PSV Game Studio.
Oleg's partner in the new project was his friend Dmitry Vityuk. After a while, another person joined the partnership and formed a company.
The first game that was made in the studio was called "Baby phone," and it was launched with the money that Oleg had won. It turned out to be successful, but the $10 000 spent on its promotion finished quickly, so they decided to attract another investor as a co-founder.
Thanks to additional investments, it was possible to create several new games and increase the studio's income from $15 to $300 per day.
At the start, the staff of PSV Game Studio consisted of 5 programmers.
"We paid them $300 per month + 50% of the profits of the games they developed," Oleg said about the model of cooperation with developers.
Oleg handled the App Store Optimization of his applications on his own. At that time, there was no information about the organic promotion of applications in the stores. Therefore, all ASO was just about having a good title, a good description of the app, as well as translating into the main languages.
The burn rate (the average amount of money a company loses every month) in the first year of its existence was at the level of $1 500. It became profitable when the profit level exceeded $100 per day. This happened due to the purchasing of traffic, which boosted the ASO.
The team had 13 games created by their developers one year after the start. These were games designed for 0 - 2-year-old children.
Split in the Team
For two years since the creation of the team, the programmers have been working at a fixed monthly rate, plus 50% of the profits of their games. In May 2015, Oleg caught one of the programmers who fixed his ad IDs, and he received a certain amount from Google, and he did not report it.
"I announced to the rest of the programmers that we were saying goodbye to this guy. They answered me, "Who am I to decide everything? This is where our cooperation with programmers ended," Oleg said about the conflict within the team.
The partners parted ways with the programmers. They jointly decided that Oleg and his co-founders would keep ten games for themselves, and the guys would take 3 top games.
The split in the team led to the fact that the programmers organized their own studio, which is still successful in this market. Oleg and his partners hired new developers and continued to create new applications.
Game Development Cost
"When we started, the development of each game cost us an average of $1 500," Shlyamovich shared.
Today, the quality of games has changed a lot, which has affected the cost of their development. The last game that PSV Game Studio released cost $130 000.
You can still release a simple game for children under 5 for $3 000 today. However, children love cartoon games more, and a good game should be released in collaboration with the cartoon copyright holder. In this case, the game's development cost increases by at least 10 times.
The company fully owns all PSV Game Studio games. Only one game is shared with another brand, of which the brand owners demanded to own 50% of the rights to the game.
The goal of any business is its exit, Oleg believes. For this reason, full ownership of the company's products will make the exit process easier.
Answering whether there are thoughts about selling the studio today, its co-owner replied that no one has yet offered a price that would suit them.
"The prices offered for PSV Game Studio do not correspond to the level of our ambitions - one zero is missing."
Oleg said the company is valued at tens of millions of dollars, and he wants to sell for hundreds. He was offered to conduct a pre-sale valuation based on EBITDA (an analytical indicator equal to the amount of profit before interest, taxes, depreciation, and accrued depreciation) and multiply the result by 3. Oleg considers this approach to valuation reasonable and correct. However, he does not want to sell the company at a price lower than the EBITDA valuation × 10. He argues that over the past two years, the capital of the game dev studio has doubled, and there are all prerequisites for another twofold growth.
The high valuation of the company is based on the fact that:
At the end of the article, we publish short answers to interesting questions that Oleg was asked, and they go as follows:
Q: What is the structure of the team?
Q: What GEOs are most of the users from?
In first place is India, followed by Brazil and Russia.
Q: What is more important in children's games, MAU (monthly active users) or DAU (daily active users)?
DAU, because the time of "life" of the user in children's games is, on average, three days.
Q: What are the main sources of traffic?
Organic traffic from branding, Google Ads, Mintegral Ads, and several other channels that the speaker cannot talk about because he wants to say them in front of competitors.