Helsinki-based Madberry offers a global automated advertising system specially designed for the needs of game companies. The company does not outsource its research and development works; yet it has launched an R&D center in Kyiv (Kiev) in partnership with Ukrainain IT firm Innovecs.
Dmitry Sverdlik, Madberry’s co-founder and CEO, explains the strategy behind this offshore center and speaks frankly about the Ukrainian high tech and business environment.
Please tell us more about your product.
If you are a game company and you’ve just rolled out some new mobile free-to-play game, striving to attract users into that game in order to monetize them through in-game payments, our product is a great tool for that.
This technology predicts the behavior of specific gamers in specific games. We are able to determine precisely the probability that a gamer will be interested in a game advertisement, click on it and download it. We can also predict how long he will spend inside the game, whether he will pay, and how much, whether he will share the game with friends, when he will uninstall it, etc. In fact, we know what a gamer wants even better than he does!
We use this prediction magic during the live advertising campaign, to ensure that advertisement banners or videos are only shown to most responsive audience. This approach allows game companies to acquire super suitable users and minimizes user acquisition budget at the same time. As a result, general game monetization improves by up to three times.
What is your offshoring strategy?
We don’t outsource our engineering; all research and development are accomplished by our own employees. I believe this is absolutely critical for us at our current stage to make sure that our R&D and product teams work very closely, in the common mental space. Also, an in-house R&D team is a critical asset for a tech company, impacting significantly on our market valuation. So we keep it all in-house.
Meanwhile, we benefit from the offshore development model. With our headquarters and core team located in Helsinki, we’ve launched our R&D center in Kyiv and are set to develop it further. I expect that, within the next 8-10 months, we will be hiring about 20 engineers and scientists in Ukraine.
US-Ukrainian outsourcing company Innovecs is involved in this offshore development center model. We rent their office space, since the infrastructure is really good. We’re using their tech scouting team and are really happy with the results.
Innovecs has a wide experience of hosting international tech companies. This cooperation has made the first step in Ukraine much easier for us as an international startup.
What are, in your view, the pluses and minuses of working with Ukraine?
In my previous project we had our headquarters in NYC and R&D in Kiev. Now my headquarter is in Helsinki and R&D in Kyiv again. Based on this extended experience of offshoring engineering in Kiev, I believe it is a very balanced and cost-effective scheme for a tech business.
I believe that modern Ukraine has one of the best value-cost balance among typical offshore locations. If you examine its geographical location, the cost of engineering resources, national educational level, the maturity of its hi-tech ecosystem, and its cultural specifics and taxation terms, you will struggle to find a better place in which to extend your team.
At the same time there are significant pain-points related to Ukraine. I would count three main factors:
- The local engineering mentality. In my view it is not fully compatible with product-oriented thinking, which is a characteristic of the western engineering culture. In large Ukrainian IT outsoucing companies, most engineers get used to a rather quiet working style, a less aggressive one than in many western companies. Ukrainian engineers often try to remain in their ‘comfort zone,’ they avoid going beyond the scope of their competence. Nevertheless, Ukrainians often dive deep into clients’ problem. And when you work with relatively small teams, you can implant proper culture without much difficulty. I don’t see significant cultural differences between my Ukrainian team and those I’ve been working with in Silicon Valley.
- Corruption and the inadmissible behavior of the police and taxation authorities. As a result of this point, many entrepreneurs there feel uncomfortable and unsafe. This may prevent international tech companies from expanding in Ukraine.
- I would put the war in the East in third place. It is a negative factor, but Israel is a good example of how to build a fantastic tech sector in spite of a permanent external threat. I believe that overcoming the first two problems in the list will make Ukraine the perfect place for R&D.
Has the recent economic crisis in the country affected your operations in Ukraine?
I believe the crisis can even be an advantage if you know how to benefit from its opportunities, and how to avoid its threats. Investing when the market is down is a good strategy when you know where is the red line. I suppose I know where it is, and continue to invest in my Ukrainian team.
- This interview is part of the Ukraine High Tech Report, an international study on the Ukrainian IT outsourcing and software R&D industry. To download your free copy of this report, please click here.