Google struggles in Russian internet market

Google Russia logoDespite being founded by a Russian, Google is only the eighth largets search engine in Russia:

Leading the pack was Yandex, a privately held Russian search engine that was visited by 64 percent of Internet users; Mail.ru, an e-mail service, came in second at 56 percent, and Rambler was third at 53 percent.

But even in its share of revenue from ads linked to searches, the lucrative Internet business model pioneered by Google, the company lags. Yandex controls 50 percent of the Russian market for such ads, according to analysts at ING, a Dutch bank. Rambler is second, with 41 percent, and all other companies, including Google, fight over the remaining 9 percent.

The article goes on to suggest that the complexity of the Russian language is holding the internet giant back, but I’m not so sure this is the biggest reason.� Wouldn’t this complexity affect the domestic Russian�search engines�as well?� I prefer their explanations about the ability of Russian companies to adapt to the economics of the Russian market, and the difficulties Russians face paying for goods over the internet.

Also tucked away is some good news about the freedom of the internet in Russia, compared to countries like China.� There’s no difficulty in getting hold of news about polonium, for example.

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6 Responses

  1. I think you’ve got this exactly right, it’s another classic Russian boondoggle. There’s no earthly reason why Google should care about the Russian internet; commerce is virtually insignificant there because (a) of widespread corruption and the lack of reliable means of Internet payment and (b) the lack of money ($300 per month average wage) and (c) the lack of Internet access (very expensive for Russians, extremely poor quality phone lines).

  2. Andy says:

    I’m not sure I agree with that. Russia is still a big market in terms of overall size, and there’s a lot of profit to be made there. It’s overall GDP, for example, was twice the size of Belgium’s in 2005 (according to the CIA World Factbook).

    And I can’t really see Google pulling out of Belgium…

  3. Tim Newman says:

    Google is probably a bit late in the game to Russia. All Russians probably knew Yandex, Mail.ru and Rambler before Google came along. And Russia is a perculiar market anyway. I do not have the exact statistics but nearly all Russian blogs use LiveJournal, in contrast with the west which normally uses Blogger, TypePad/Moveable Type, or WordPress.

    As with a lot of things in Russia, reality on the ground tends to defy logical explanations which are taken as given in the west. No reason to think that this is any different.

  4. ANDY: Saying that Russia’s GDP is only twice the size of Belgium’s is an indictment, not a compliment. And it really makes no difference how much GDP Russia has if most of it is because of an accidental rise in the price of oil most of the benefits of which are gobbled up by the Kremlin rather than being put into people’s pockets so they can spend them on the Internet. The average wage in Belgium is ten times higher than it is Russia, and the economy is immeasurably better prepared to deal with Internet commerce. Google can make way, way more money in Belgium than it can in Russia, and there’s no risk of Google executives being sent off to Siberia and having their assets confiscated by the Belgians. If you think the Russian market has “potential” I suggest you speak to a few executives from Royal Dutch Shell; they thought the same thing a few years ago. People have been thinking that about Russia for centuries in fact, and always keep getting disappointed. If you really believed that, you’d be investing in Russia yourself (Yandex, Rambler), wouldn’t you? But you’re not, are you? Nuff said.

  5. Pavel says:

    Hi.I just saw your discussion from Google blog search…so…what can i add.
    I’m from Russia and i only want to give you some statisti?, a little bit –

    According to analytical departments of our 3 main player, in 2006 context advertisement market turnover amounted to $110 million. This represents an increase of almost 2.5 times compared to 2005, when the turnover was $45 million.

    According to the Russian Association of Communication Agencies (RACA), the total volume of media advertising reached $100 million in 2006, growing 1.6 times versus 2005. For the first time in history of the Internet in Russia, the context ad segment outperformed media advertising by both growth rate and volume in absolute terms, and the total size of the market exceeded $200 million

    In 2006, online advertising took 3% of the Russian advertising market, compared to 2% in 2005.

    So, our market is really very fast growing up.

    The second one – Yandex is realy very high quality search engine and thats why now its rather hard even for Google to fight for users against them.
    If you have any questions or ideas – i’ll glad to answer. Best regards, Pavel, russian internet-marketing pro

  6. Pavel says:

    Yes, if my mail’ll be necessary – flashpleer DDOOOOGGGG ya.ru