Google faces Russian rivals

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Yandex Reuters. The company logo is seen on the headquarters building of Yandex company, in Moscow.

New York-- Yandex, whose share of Russian web searches is more than double that for Google, can extend its dominance over the world’s most-used engine to other countries, according to one of its earliest investors.

“Yandex’s chances are strong where Google is weak,” Alexander Galitsky, a partner at Almaz Capital Partners, a Moscow-based venture capital firm that invested in Yandex in 2008, said in an interview at Bloomberg’s headquarters in New York yesterday.

“Their search engine is very well adjusted linguistically and they have very good, precise maps. Their navigation is one of the best.”

Shares of Yandex traded on the Nasdaq Stock Market have rallied 16 percent this year as the company boosted its share of Russian Internet queries and unseated Microsoft’s Bing to become the world’s fourth-biggest engine by number of searches.

Yandex has had the third-biggest advance in 2013 on the Bloomberg Russia-US Equity Index of the most-traded Russian stocks listed in the US.

The gauge fell 0.2 percent yesterday, while RTS Index futures rose less than 0.1 percent to 158,060.

Yandex, based in The Hague, rolled out yandex.com.tr for Turkey in September 2011.

The site offers local maps with traffic information and street views, free e-mail, news aggregation, image and video search as well as Turkish-English translation services.

The company offers a map application for Apple Inc.’s iPhones and debuted the Wonder app, which enables users to search social media, for the US market last month.

“What you do when you are stuck in a traffic jam in Moscow?” said Galitsky, who designed software for Russian spy satellites before moving into venture capital for technology startups after the collapse of the Soviet Union in 1991.

“You go to Yandex, because their navigation is one of the best. They have a very good chance in those countries where Google is not so active yet, where it’s not dominating.”

Overtaking Bing

The Micex Index added 0.1 percent to 1,517.49 by 3:58 p.m. in Moscow.

Yandex “should be able” to pay a special dividend after accumulating about $1 billion of cash, Sberbank Investment Research analysts said in an e-mailed note today.

Prospects for Russia’s biggest Internet company are best in Turkey, the former Soviet republic of Kazakhstan and also in Asian nations such as Vietnam, Galitsky said.

Yandex is seeking to boost its market share in Turkey to as much as 35 percent by the end of 2017, from 1 percent last year, Mehmet Ali Yalcindag, the chairman of Yandex Turkey, said in September.

Google has 60 percent of the Turkish search market, according to Yalcindag.

In Russia, Yandex’s market share rose to 62 percent in the week to February 10, compared with 26.1 percent for Mountain View, California-based Google, Liveinternet showed yesterday.

Its stake has held above 60 percent every month since March 2012, the data show.

Yandex overtook Bing on global web searches in November and December to become the world’s fourth-biggest engine by number of searches, ComScore Inc. data released last week showed.

‘Find Everything’

Almaz Capital, which data compiled by Bloomberg shows had a 0.33 percent stake in Yandex as of a year ago, plans to retain its investment in Yandex, Galitsky said.

The search engine, whose slogan is “find everything,” will maintain its lead in Russia for at least the next three to four years, he said.

Yandex, which got 90 percent of third-quarter revenue from text-based ads, rose 0.9 percent to $24.93 yesterday in New York.

The Bloomberg Russia-US index slipped 0.2 percent to 104.07.

Almaz Capital invests in companies including Hover, a Los Altos, California-based developer of 3D computer vision and mapping technology as well as 2can, which allows payments to be processed by smartphones.

It also had a stake in Qik, which was acquired by Web-calling provider Skype in 2011.

Revenue Growth

Yandex will probably report on February 19 that revenue in 2012 rose 44 percent to 28.8 billion rubles ($950 million), according to the mean estimate of 13 analysts surveyed by Bloomberg.

“It’s been a year since Yandex entered Turkey and if it decides, based on 2012 results, that its expansion in the country was a success, it may enter other markets already this year,” Alexander Vengranovich, an analyst at Otkritie Financial Corp. in Moscow who rates the stock buy, said by phone yesterday.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, declined 0.3 percent to $30.30 yesterday.

The RTS Volatility Index, which measures expected swings in futures, increased 0.8 percent to 22.45 points.

American depositary receipts of VimpelCom. rose 1.7 percent to $12.55, the highest level since July 2011.

Bank Rossii will hold the refinancing rate at 8.25 percent for a fifth month at today’s meeting in Moscow, according to 21 of 22 economists in a Bloomberg survey.

Russia, the largest emerging nation to raise rates in 2012, is facing growing government pressure to ease monetary policy after economic growth last year slowed to 3.4 percent, the weakest since a 2009 recession.

Futures expiring in March on the ruble show the currency strengthening 0.1 percent to 30.334 per dollar, after the ruble was little changed at 30.165 against the dollar yesterday. - Bloomberg


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