Yandex, the Russian search giant that filed a registration statement with the SEC for a proposed IPO on NASDAQ last week, warned potential investors in its prospectus that it was as “vulnerable to politically motivated actions” as any other high-profile businesses in Russia.
In the prospectus, Yandex acknowledges the risk of “other parties” perceiving its news service “as reflecting a political viewpoint or agenda, which could subject us to politically motivated actions.”
The creation of a state-controlled “national” search-engine in Russia was also pointed out as another threat.
In March, Russian president Dmitry Medvedev lamented the fact that while Google and Yandex are vast archives for storing everyday user-generated “art,” the organization of this information is a “complete mess” and needs to be “channeled to a more civilized place.” “We have devoted a lot of time to debate about whether Russia needs its own search engine or not. Now work on this project continues,” President Medvedev said.
Yandex also acknowledges risks in the form of a possible hostile takeover by Russian oligarchs. “Well-funded, well-connected financial groups and so-called ‘oligarchs’ have, from time to time, sought to obtain operational control (…) in attractive businesses in Russia by means that have been perceived as relying on economic or political influence or government connections,” the Yandex prospectus says.
Going international
Yandex also indicates that it is actively studying possibilities of “geographic expansion” to countries where it could benefit from a “competitive advantage”. The prospectus does not mention which countries may be concerned. 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.
In addition to the Russian search market, where it stands well ahead of Google with a market share is estimated to be between 55% and 64%, Yandex has noticeable positions in other Russian-language countries, including Ukraine and Kazakhstan.
Yandex’s expansion beyond Russian-speaking countries began in 2008, when the firm opened a laboratory in Palo Alto, CA, “with the objective of fostering innovation in search and advertising technology.” Among the lab’s 14 employees are “senior research scientists and engineers with a wealth of research and development experience from top US search engine companies, such as Yahoo! and Google,” says the company.
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.
In September 2010, Yandex invested in Face.com, a Tel-Aviv based facial recognition technology startup, as well as in Vizi Labs, another Israeli startup focused at research and development of image processing technologies.
Yandex.Factory, an investment program intended for startups launched last month, may also become part of this international strategy, since it is formally open to partners from any country.
