Yandex assets: A dominating player far beyond the search market
Although Yandex is best known internationally for its search engine, its other services — some of which are very far from search — are used everyday by millions of Russian-speaking Internet users. This is why the company deserves to be named an integrated Internet group rather than a search service.
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Not only is Yandex the absolute leader in search, it is also far ahead in online map services (Yandex Maps and Yandex Traffic), news aggregation (Yandex News), webpage creation services (Yandex People) as well as e-commerce search (Yandex Market). Its catalog of streamed music (Yandex Music) is a market leader, as well.
Furthermore, its Yandex Direct offer controls at least two thirds of the contextual advertising market.
Though not the leader, Yandex has strong positions in image hosting and video portals as well as in auto and job classifieds. It is a serious competitor with Mail.ru for webmail services. In the field of e-money, Yandex Money is almost on equal footing with WebMoney, and their combined presence represents about 90% of the market.
Among Yandex’s weakest points are social networks. Of course MoiKrug (“My circle”), a professional network, Yandex People, which includes a range of multimedia sharing applications, and Yandex Answers, which offers more than 23 million answers from 168,000 sources, are well established on the market and more than account for Yandex presence in these segments – they are leaders, or strong challengers, in their respective fields. Yandex is far behind, however, Vkontakte, Odnoklassniki and MoiMir, the social networking giants of the Russian web. All of these are controlled directly or indirectly by Mail.ru Group, the great rival of Yandex.
Moreover, these giants could threaten Yandex’s positions in various ways. “Such sites provide users with a wide range of information and services similar to those we offer, including search, real-time news and location-based information and updates,” Yandex says in its IPO prospectus.
“These sites derive a substantial portion of their revenues from online advertising and are experimenting with innovative ways of monetizing user traffic. In light of their large audiences and the significant amount of information they can access and analyze regarding their users’ needs, interests and habits, we believe that they may be able to offer highly targeted advertising that could create increased competition for us. The popularity of such sites may also reflect a growing shift in the way in which people find information, get answers and buy products, which may create additional competition to attract users.”
Online games are another noticeable weak point. To date, Yandex has no significant offer in this rapidly growing segment.
Yandex abroad: A modest presence
Yandex’s interests abroad have been modest to date. Its domination on the search market is limited to Russia: Its market shares average 25%, 29%, and 39%, respectively, on the Kazakh, Ukrainian, and Belorussian markets.
In 2010, Yandex launched an English-language version, earning praise for the accuracy of its results, according to US business magazine Fast Company. Last February, the magazine ranked Yandex among its 2010 list of the world’s 50 most innovative companies.
Still, Yandex is ranked just 6th among search engines worldwide.
To date, Yandex has invested in only two foreign startups: Face.com, a Tel-Aviv based facial recognition technology startup, as well as in Vizi Labs, another Israeli startup focused on research and development of image processing technologies. Both investment deals took place in September, 2010. The Russian firm acquired only minority stakes.
In its IPO prospectus, the company recognizes it has “limited experience with operations outside Russia.” In the first quarter of 2011, only 3% of its revenues came from advertisers outside Russia.
The prospectus speaks about “geographic expansion” to countries where it could benefit from a “competitive advantage,” but remains very vague on which countries are targeted and the approach the company will take to expansion.
According to internal corporate documents partially leaked in late March by Roem.ru, a site covering Russian Internet issues, the Turkish, Polish and Romanian markets are among possible Yandex targets.
Another source said to Russian business daily Vedomosti that Yandex considers countries experiencing Internet growth and where Google’s market share is weak, stagnating or decreasing.