Bravo, Yandex!

Yandex, the leading Russian search engine, said on Wednesday that a golden share in its Dutch parent company Yandex N.V. had been sold to Sberbank, Russia's state-owned bank. The share gives only one right: to veto the consolidation of more than 25 percent of Yandex's shares. It will not let the bankers to have a seat on the company's board.

Sberbank as a ‘state, public company that does not have direct interests in the Internet or the media’ acquired the share for 1 euro. It cannot be sold without the consent from Yandex’s board.

Yandex is the leading search engine in the Runet. Though it is far behind Google globally and financially, it is well ahead locally. While Yandex’s market share is about 56 per cent, Google - with only 22 per cent of search engine generated traffic - does not come any close.

The Kremlin has often expressed its concern about foreign funds that own the company and may want to sell it sooner or later. Dmitry Medvedev said in April that the state must control foreign investments into internet companies. ‘Foreign investors will come in search engines, big social networks. This is, of course, inevitable. On the other hand, and don’t take my words as too conservative, we must keep an eye on the process. This is a matter of security.’

In the fall of 2008 the Federal Antimonopoly Service did not allow Google to buy 'Begun' (pronounced 'begoon'), a context advertising system. Despite the formal reasons given for the refusal, the message was clear and Google didn't make a second attempt.

It might appear that Yandex surrendered to the state’s pressure. However, the battle is not between Yandex and the state but between Yandex and Google, and it is not over.

The Russian company intended to place shares on NASDAQ last fall but the world economic crisis postponed, not cancelled, the plans. For the IPO purposes a shareholding structure such that none of stockholders can control the company is not bad at all.

By selling the golden share to Sberbank, the company has managed to convert the Kremlin’s ‘concerns’ into an asset. The price paid is not high at all.



September 24, 2009





Sergey Brin, as far as I remember, is Russian. So it is funny to see that one of very few places where Google is losing is Russia.