Ad Sales on the Eastern Front

Like many foreign invaders before it, Google's advance on Eastern Europe has floundered in the difficult terrain of Russia. Poland fell to Google without much of a fight, as have most European markets. Yet the Russian Internet, with its Cyrillic script and 30 million users, has proved a tougher nut to crack. Although Google has had an office in Moscow since 2005, it only gets about 15 percent of Russian searches—while the homegrown Yandex search engine gets 55 percent, followed by another Russian company, Rambler, with 17 percent. "For everybody who wants to read about Dostoyevsky online, check out a profile of a Russian politician, buy a Russian fur coat or headhunt for a Russian programmer, the best portal to use is still Yandex," says user Max Olevsky, director of Comtek Communications Technology, a Chicago IT company.

What did Yandex do right? Serve local users' needs, says cofounder and CEO Arkady Volozh. That means providing local-specific content like real-time graphics showing Moscow's chronic traffic jams and search technologies better suited for specific tasks, like trawling blog content or newsfeeds. Yandex's encyclopedia, news and dictionary searches combine Web-site searches with news archives and reference.

Yandex, taking a leaf out of Google's book, has cultivated young talent and funded research to keep its technological edge. Last month the firm endowed the Yandex School of Data Analysis, offering free tuition to its first class of 80 master's degree students.

To stay ahead, Yandex needs not just ideas but ever-more-efficient ways to sell ads online. Yandex now accounts for more than 70 percent of all context ads—tailored to search topics—on the Russian Net. That's $72 million in ad sales, up from $30 million in 2005. Google's AdSense, by contrast, accounts for just 1 to 2 percent. Google is lagging because, explains Mikhail Chekanov, an Internet analyst at Rambler, "Google is seen as only good for searching for information." The Russian portals, users say, provide a fuller service of mail, news, search and research tools, all more effective at navigating the Russian Internet than Google's engine.

Volozh takes comfort in not being the only holdout in Google's global expansion. "In China, Japan, North Korea, locals are still beating Google," he says. "Russians always considered Russian ballet and Russian space rockets the best in the world. Hopefully they have now added Yandex to the list."

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