In Russia, Google isn't king. Neither is Uber, Spotify or Amazon. In Russia, Yandex rules. The company commands 54 per cent of all online search in the country and claims 61 per cent of the online advertising market. Shopping service Yandex.Market is used by 19 million people a month and Yandex.Taxi accounts for 60 per cent of all taxi rides in Moscow. Big Silicon Valley companies are struggling there, but Yandex thrives.
So what's its secret? "We call ourselves a trans-local company," says Arkady Volozh, Yandex's Moscow-based co-founder and CEO, who launched the service in 1997 ("A year before Google, so we didn't follow them"). Trans-local is awkward phrasing for a different approach to business: Yandex identifies markets where competitors are weak and builds up its own alternatives. In recent years, it has expanded into Ukraine, Kazakhstan, Belarus and Turkey. But Russia remains its focus, and this closeness had raised questions about Yandex's relationship with the Russian state.
"I don't have friction with the state," says Volozh, 53. "Just like I don't have friction with the weather. What happens if it's raining? I need to build a service to avoid the rain." All the same though, an increasingly authoritarian and isolationist Russia is having an impact on Yandex's business.
In October 2016, something strange started happening around Red Square in Moscow. Anyone playing Pokémon Go or trying to navigate the Russian capital's gridlocked roads using GPS was suddenly teleported to Vnukovo International Airport, 29km away. The Kremlin, according to Yandex, was secretly blocking GPS signals – a big problem for Yandex.Taxi's fleet of drivers. But for Volozh, it wasn't anything out of the ordinary. "They protect themselves from drones or whatever," he shrugs. "I don't know why they're doing it, but they have their own agenda."
At times, that agenda has been directed squarely at Yandex. In April 2014, Russian president Vladimir Putin claimed that the internet was a "CIA project", and insinuated that Yandex was controlled by foreign intelligence. "Oh yes. Our stock dropped by 20 per cent," Volozh says. He explains that Putin's ire was seemingly directed at the international make-up of Yandex's board (which includes American, Swiss and Dutch members). "I don't think we're controlled, I hope we're not," he continues, half-jokingly, before reeling off a list of foreign intelligence agencies he's confident Yandex isn't controlled by.
Yet in Russia's struggling technology sector, Yandex's success is jarring. In May 2011, the company went public in New York, raising $1.3 billion (£1bn), which at the time was the biggest IPO since Google's in 2004. In June 2014, it was listed on the Moscow Exchange and in recent years has opened offices in China, France, Germany, the Netherlands, Switzerland and Turkey. This increasingly international outlook partly protects Yandex against the volatility of the Russian market, Volozh explains, but it's also a realisation that its services can succeed elsewhere. "Yes, the Russian state exists," he says. "It has its own agenda. We build around it."
Volozh was born in 1964 in Atyrau, a small city on the eastern shore of the Caspian Sea in what was then the Kazakh Soviet Socialist Republic. He studied computer science in the latter half of the 80s. "I was trained and educated in the old Soviet Union system, when my career was supposed to be a professor of something, of computer science, and then everything changed in a minute," Volozh says, while perched on a sofa in WeWork's co-working space in London. He arrived after a visit to Paris to launch Yandex's navigation service. He's softly spoken and his sentences are often punctuated by laughter. Does it annoy him when people describe his company as the Google of Russia? "A little bit," he admits. But the comparisons aren't so wide of the mark. Yandex and Google have always been fighting for the same market.
"Fifteen years ago, when Sergey [Brin, Google co-founder] and I were in Moscow, we were friends. Two startups," Volozh recalls. Back then, they worked on search engines - later, their rivalry entered another domain. "In 2007, Sergey was in Moscow. He was playing with a phone," says Volozh. A year later, Android launched, causing difficulties for Yandex. The dominance of Google on Android in Russia is near-absolute: on Android it has a 60 per cent share of the search market. More Russians are ditching desktop for mobile; 60 per cent have a smartphone and that figure is predicted to rise to 86 per cent by 2021 - Yandex's dominance is under threat.
Despite Volozh's protestations, local companies stand to benefit from Russia's increasingly isolationist outlook. In Russia, just as in the EU, regulators are scrutinising the control and power of Android. While the case in Europe drags on, Russia's antitrust regulator has fined Google 438 million rubles (£6m) and ordered it to loosen restrictions on Android device-makers, following a complaint by Yandex. Volozh dismisses claims that this amounts to unfair state support of Russian firms. "This process is outside our control. In an equal situation, we will win our market share honestly," he insists.
Other interventions are more troubling. In November 2016, Russia ordered a temporary block of LinkedIn after it failed to comply with local data-storage laws. In both cases, foreign companies were nixed, to the benefit of local business. "In today's world, when everybody is against everybody and people try to divide, it's hard to be an international company," says Volozh. "But it's not our agenda, or our fault."
At times, the agenda of the Russian state, and its use of technology to realise its goals, has huge effects. In December 2016, US intelligence agencies concluded that Russia interfered in the presidential election to boost Donald Trump's bid. As propaganda and fake news have come to the fore, Volozh admits Russia has had a head start. "Yes, we would know," he says, referring to the power of propaganda in Putin's Russia. "No comment on Brexit and the election," he continues, laughing. "Welcome to the club."
Updated May 15, 2017: Yandex has a 54 per cent share of the online search market in Russia, not 64 per cent.
This article was originally published by WIRED UK
