Boyden Executive Search

Russian technology giant Yandex, which recently celebrated its 20-year anniversary, is diversifying and thriving on fertile home soil.

Yandex is Russia’s top search engine, outperforming Google and accounting for more than half the country’s search market (54% as of August 2017) and 61% of online advertising. Its branded websites attract over 60 million visitors a month. And yet, despite being one of the world’s largest internet companies, Yandex has a relatively small global presence. 92% of its revenues come from Russia – which has Europe’s largest internet user base, with about 87 million people.

Yandex gained an early lead online by wisely offering technology geared to local needs. The Yandex search algorithm, for example, was significantly better at processing Russian language requests than those of international competitors. Mapping software providing real-time traffic information was especially appreciated by drivers on jammed Moscow roadways, which Yandex knew well.

Being “locally relevant” continues to be an important part of the company’s strategy. As co-founder Arkady Volozh expressed it, “You either go global in one service which you feel good about, or you focus on one market and do it really well.” Accordingly, Yandex’s growing product and service offerings, from taxis, shopping and payments to education, cater to the particular needs of Russian users. Yandex is currently building out its transportation and e-commerce capabilities to support its services on the ground.

Signs of successful diversification have driven Yandex’s shares up by some 50% in the past year. According to The Economist, “Investors are particularly bullish on its taxi business.” Following a costly price war, in July Yandex agreed to a $3.7 billion merger with Uber, thwarting the latter’s characteristic domination ambitions. The two companies will combine their ride-hailing businesses in the local market under a new, as yet unnamed company. Yandex will take a controlling 59.3% stake, and Tigran Khudaverdyan, Chief Executive of Yandex.Taxi, will serve as Chief Executive.

Yandex is also undertaking a joint venture with state-owned banking and financial services company Sberbank to build its price-comparison platform into a complete e-commerce business. Other initiatives, such as a Russian-language virtual assistant, are lined up to support Yandex’s vision of itself as the hub of Russia’s digital economy.

Amidst all of this success and expansion, Yandex has long had a thorn in its side: political scrutiny. Its mobile-payments and news services, among others, have raised the hackles of state officials, as they operate largely outside state control. The two continue to be at odds. But given the realities of doing business in Russia, Yandex of late has made some concessions, such as showing Crimea as part of Russia on its maps. And while some adjustments were needed to tone down the tech company’s free, open environment for the occasion, President Vladimir Putin paid a friendly visit on September 21 for its 20th anniversary.

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