Russian web firms set for growth

22 June 2011

MOSCOW: Online services providers in Russia are attracting interest from overseas due to their enormous potential for future growth.

Reuters reports that investors are being attracted by the relative underdevelopment of the digital sector in Russia, where web penetration rates are as low as 20% in some regions.

Yandex, a search engine, and, an email service and entertainment portal, have both had highly successful stock market flotations in recent months. Both are prioritising their rapidly-growing home market over international expansion.

The Russian government could also boost domestic online firms over the long term through its planned establishment of a Silicon Valley-style business cluster in Skolkovo, outside of Moscow.

"We have around 50-60m users, but we have a big opportunity to double that over the next few years," ceo Dmitry Grishin said. "There are around 300m Russian speakers."

Also speaking to the news agency, Yandex ceo Arkady Volozh commented: "In the last decade [Russia has] built a software industry and a new internal internet market that is big enough to support local commerce."

Yandex accounts for roughly two-thirds of the Russian search market - a similar share to that taken by Google in the US.

A Boston Consulting Group/Google report released last month suggests that online adspend could grow by up to 30% a year in Russia until 2015.

Google Russia chief Vladimir Dolgov said at the time that network infrastructure was improving, and that overall web penetration could reach 80% in four years' time.

Currently, penetration stands at around 50% in Moscow and St Petersburg, falling to 20% in rural areas.

Data sourced from Reuters/Moscow Times/Warc; additional content by Warc staff