THE Russian mathematician was 24 years old when he first saw a personal
computer, one of only a dozen in the whole Soviet Union. That was in 1984.
A little over two decades later, Arkady Volozh is the chief executive and one
of the founders of Yandex, Russia’s most popular internet search engine, a
company now valued at £2.5 billion. Widely described as Russia’s answer to
Google, Yandex was launched only eight years ago but is now visited by 8m
people a day. More impressive still, Yandex and Volozh are credited with
humbling Google, by denting its global domination.
Russia is one of only four countries where the American search giant fares
considerably worse than local services – alongside China, where the internet
is controlled by the government, South Korea and the Czech Republic. To
“Google it” may be the common way of searching in much of the world but in
Russia Yandex holds 55% of the market compared with Google’s 21%.
It is an advantage Google can ill afford to ignore. As Russia’s economy
prospers and its middle class grows, the country is expected to become
Europe’s largest internet-user market in the next five years – 60m people by
2013.
Thirteen years ago, when the Russian internet first took off, its entire
traffic was small enough to fit on an ordinary flash memory card. Today, by
contrast, 33m Russians, as many people as in Britain and already more than
in France, use the web.
As a result Yandex is booming. In 2000, when the company was valued at only
£7m, its yearly revenue was about £200,000. In 2007 it reached £85m, and
industry analysts believe that this figure will probably double this year.
This autumn Yandex is planning to float on the Nasdaq exchange. A group of
western investment funds that in 2000 gave the company some £2.5m is
expected to sell about £700m worth of shares.
“These are very exciting times,” said Volozh as he prepared to move the
company, which employs 1,200 people, to a vast new office in central Moscow.
“Russia has the potential to become the largest internet-user market in
Europe. It’s a huge market with fantastic growth. Every day more and more
people in Russia are discovering the internet.
“We have better technology and understanding of the market. I take the
competition seriously and every day check the latest figures to see where it
is, but I think we will stay far ahead. What was enough for Google to
conquer other markets isn’t enough in Russia.
“In two years since Google opened an office in Russia we haven’t lost a single
specialist to our competitors because Yandex is one of the best companies to
work for in Russia.”
Broadband penetration in Russia, currently at 10%, is forecast to triple in
the next two years. Google, which in an attempt to fight back last month
bought Begun, a contextual advertising company for £70m, expects the market
for search-relat-ed ads in Russia to rise from £100m last year to £500m by
2010.
Yandex, the world’s second most popular nonEnglish search engine after China’s
Baidu, is to open an office in Silicon Valley, headed by one of Yahoo’s
former senior vice-presidents. Its New York flotation promises to be the
largest yet in Russian technology.
Volozh, 44, who has a degree in applied mathematics, worked as a specialist at
a Soviet state pipeline institute when the so-called “kooperativ” (small
private businesses) were legalised in 1987. Destined to work for the state
for the rest of his life, the young mathematician was unexpectedly ordered
to start dabbling in business.
“Ironically, my first business experience was thanks to the Communist party,”
said Volozh. “When the law about kooperativ was passed, our boss at the
institute came to us and said: you guys are mathematicians, you start a
business. We began trading computers and I was made technical director. I
was only 24. [We were paid in hardware instead of cash and] I earned two
personal computers in one year, a huge sum in those days – enough to buy my
first flat, a two-bedroom Moscow apartment.”
By 1990 Volozh had co-founded a company that became one of the largest
distributors of computer technology in Russia. At a time when most insiders
believed the future of the industry to be mainly in selling hardware, Volozh
had great faith in the talent and know-how of Russian specialists. With a
group of five computer programmers working out of a cramped flat, he helped
set up a search engine for patents.
The experiment led to Yandex (short for yet another indexer), an engine aimed
at improving Russian-language searching, which is complicated because of its
grammar.
Initial scepticism soon gave way to a giddy rise. Two years after its launch,
Yandex took over Rambler, then Russia’s most popular search engine, and
broke even a year later. It organised its own free wi-fi network with
hotspots all over Russia long before Google got into that game in America
and, far from being only a search engine, developed a series of special
features.
Its mail service, said Volozh, is protected by unique antispam technology
created by its software engineers; it has its own blog search, homegrown
electronic-payment system, a social-networking site for business people as
well as a real-time traffic-monitoring system, a feature Volozh proudly
demonstrated on his mobile phone.
“Our technology is better suited for the Russian market,” he said. “We have
brilliant mathematicians and programmers. We are very strong on data
analysis and have developed better technology, which is cutting-edge in
Russia. We are constantly inventing new programs to stay ahead.”
Yandex’s management style is also very unusual for a Russian company – 120 key
specialists have stock options in the business, a first in Russia.
Employees, who walk around the office in T-shirts, determine their own
timetable, have access to a free canteen and are allowed to play pool and
table tennis at work.
In a country where the rich typically flaunt their money, live in lavish
mansions, travel by private jet and are shadowed by bodyguards, Volozh – who
industry analysts say could soon become a dollar billionaire – is an
unlikely business tycoon. He owns neither a yacht nor a plane, drives a
Volvo and insists that money has not changed his life.
Even more remarkable for Russia, where business and politics are often
intermingled and where connections can be more important than know-how,
Volozh never cultivated friends in high places.
Some say that may have to change now that Yandex has been valued at £2.5
billion and has become one of Russia’s best-known brands.
Interest in the company is growing. Alisher Usmanov, the metals bil-lionaire
and Arsenal football club shareholder who has invested heavily of late in
the Russian internet, was recently reported to be keen on buying a quarter
of the company. For now at least, Volozh does not seem to be considering a
sale.
“I’m very proud of the fact that we have created something so successful out
of nothing, but above all a great brand that sends a positive signal about
Russia and that says something about the great talent there is here,” he
said.
“People abroad don’t realise that there are many positive things happening in
Russia. Yandex is one of them. It’s the country’s best high-tech company. As
for what the future holds – more growth, in Russia and abroad. There are
huge opportunities for us in former Soviet countries and beyond.”
regarding: "its entire traffic was small enough to fit on an ordinary flash memory card" Does he mean entire traffic per second, minute, day? Citing the number in kbps or even MB per day would help people learn sizes. The weatherman doesn't say, "Today will be as cold as a Guinness."
Charvak Karpe, Boston, USA
Yandexers do not work for Google because it was forbidden in their contract to work for Google.
It was explictly forbidden to work for Google after they leave Yandex few years ago, But now this option is removed from new contracts since it is illegal in Russia to apply such restrictions.
Serge, SF, USA
I think a more appropriate title would be "Russians Resist Google's World Domination". It'd be a different story if Yandex had launched a competitive search engine for the American market and it had captured a significant market share. This doesn't seem likely, though....
Peter, Toronto , Canada