Why All The Interest In Russia? Try 10x Online Ad Growth In Next Decade
We’ve definitely noticed increased interest in the Russian internet market, marked notably by Google’s (NSDQ: GOOG) acquisition of a contextual ad firm from Rambler and the planned IPO of Yandex, the Baidu.com of Russia. It’s not hard to figure see what all the fuss is about. A recent report said the Russian online ad sector grew 73 percent last year. Geopolitics aside, the future looks bright too. In a new report, Lehman analyst Viktor Shvets predicts the online ad market there to grow from around $400 million in 2007 to $4 billion by 2017. (If you add other non-Russia Russian speaking states, the total is $5 billion) As a percentage of total ad spend, he predicts it will grow from 4 percent to 13 percent.
Some other highlights from the long report (and chart is below), which delves into such areas as GDP growth and commodity prices after the jump...
—“Google’s acquisition of Begun is likely to significantly alter the advertising channel, allowing Google to enhance monetisation of its already significant (35%) share of the
search market. This will likely challenge the current dominance of Yandex and, although we continue to assume that Yandex will maintain its leading position, we believe that there is now debate as to whether Russia will become a “Google” country.”
—“Although Google does not disclose information about its Russian operations, industry sources estimate that it had approximately 5% revenue share in 2006 and 2007, implying a search monetisation 4-7 times lower than that of Yandex. This appears to be caused by Google’s inability (thus far) to adjust to peculiarities of the Russian payment system (i.e. cash, direct money transfer, etc, rather than cheques) as well as the lack of a direct sales force. This weakness was the key underpinning and rationale for the Begun transaction”
—“Overall rankings for the Russian market have changed significantly over the past year, with two social networking sites, V Kontakte (In Contact – similar to Facebook) and Odnoklassniki (Classmates – similar to Classmates.com), reaching first and fourth places, respectively. Mail.ru – the leading e-mail provider for the Russian market – is second in share. Yandex, the search share market leader, ranks third. After Rambler, Narod.ru (aweb hosting website similar to Geocities and a Yandex property) is seventh, and is followed by YouTube and LiveJournal in eighth and ninth position, respectively.”
Posted In: Advertising, Money, M&A & Venture Capital, Mergers & Acquisitions, Social Media, Companies, Google
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