Google barred from buying Russian advertising company

In an interesting piece of protectionism, Google’s bid to buy Begun, the advertising arm of Russian search engine company Rambler Media, has been blocked by the Russian competition regulator.

Begun - Russian internet advertising companyRussia is the only European country where Google doesn’t have a dominant position in the online advertising market – it’s been struggling to push its way past both Rambler’s Begun and Yandex Direct.  So the deal, which would have been worth around $140 million, would have massively boosted Google’s share of the online advertising industry in Russia.

Some are speculating as to whether this is a manifestation of government protection of Yandex who, of course, will be thrilled at Google’s defeat – they no longer face the immediate prospect of a super-competitor.

I think there is certainly an aspect of government protection of key Russian firms.  But I also think the move will genuinely improve competition – a three way battle for market share can’t help but lead to innovation.  If all goes well, Russia could become a testbed for all kinds of exciting innovations in contextual advertising, which will benefit Russia in the longer term.

Small Russian publishers will also be rejoicing – apparently, Google is much slower at paying its publishers than its Russian counterparts.

Rambler will understandably be annoyed, though – they’ve lost out on a profit of $50 million, which they had planned to invest in future acquisitions themselves.  That in itself will have a bit of a knock on affect on smaller Russian companies, who may now find it more difficult to take their more innovative projects into the mainstream without the support that investment from a large company like Rambler could have provided.

Yandex’s new office in Silicon Valley

This week’s other Russian internet news of note is Yandex’s decision to open their first office in Silicon Valley. Here are some pretty pictures:

Not quite sure what Yandex plan to do in their shiny new US office. Anyone know?

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4 Responses

  1. Aleks says:

    Where Russia leads, others might follow… as the Reg is not surprised about questioning Google…:

    http://www.theregister.co.uk/2008/10/23/google_begun_deal_nixed/

    …According to Reuters, FAS says that Google failed to provide enough information for it to adequately assess whether the deal would hurt competition.

    And we have to say: That sounds like Google…

    And wonders:

    “…The question is whether US regulators will follow the lead of their Russian counterparts. The Department of Justice is investigating a proposed search ad pact between Google and Yahoo! – the number one and number two search engines stateside – and judging from its latest quarterly earnings call, Google is also withholding information from the DoJ: namely, the company refuses to admit that it controls the prices on its black box of an ad system.

  2. Aleks says:

    Further to the DoJ v. Google+Y!:

    http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9118701&intsrc=hm_list

    Last three paras:

    According to the Journal, Google and Yahoo met yesterday with the DOJ, which apparently wants the companies to sign a consent decree outlining the deal’s terms and subjecting their compliance to a judge’s oversight.

    This condition is particularly unappealing to Google and might lead both companies to cancel the deal as early as next week, reported the Journal, citing anonymous sources.

    A variety of ad industry groups and search-market competitors have voiced objections to the deal, saying it would strengthen Google’s already dominant position in search advertising.

    There are some lawyers, somewhere who are making a lot, a lot of money out of this….

  3. Aleks says:

    Maybe it is in fact the US that is ahead of Russia (again):

    The BeelzeeBeeb:
    http://news.bbc.co.uk/2/hi/business/7711429.stm

    Google abandons deal with Yahoo

    Google has decided to abandon its advertising partnership with Yahoo to avoid having a “protracted legal battle” with regulators….