Why Do Russian Brands Dominate the Domestic Online Market?

The Russian online market continues to be dominated by homegrown brands that use local knowledge and language understanding to outsmart their foreign counterparts.

Here are the three most popular internet brands and the reasons behind their success:

Yandex

Yandex is the biggest online search engine in Russia and is one of only three global search engines alongside Google and Bing. It currently holds a 62% market share in comparison to its closest rival Google with just 26.5%. With 250 million searches processed a day and 54 million monthly visitors, Yandex is more popular than any Russian TV channel. This popularity was shown through the company’s $1238 million turnover in 2013. Most of Yandex’s profits come from contextual advertising as it is the biggest internet ad platform in Russia with a 51% market share. In other words, more than half of online advertising in Russia goes into the pockets of Yandex.

Perhaps the biggest reason for Yandex’s popularity is the search engine’s unique understanding of the semantics and pragmatics of the Russian language. Additionally, although it is estimated that 81% of the population speak Russian, there are over 100 minority languages that are most prominent in regional areas which Yandex is able to detect.

Mail.ru

Mail.ru is the second most successful online company in Russia and has recently entered the U.S. market. As the largest mail service provider in Russia, Mail.ru is much more popular than its western counterpart, Yahoo. Worldwide, the site has more than 100 million individual users and this number is set to grow substantially with the expansion of Mail.ru into the U.S. market.

In 2013, the group’s revenue reached $860.5 million with advertisements and applications providing the most income. Mail.ru Group also own Odnoklassniki, the second most popular social network in Russia, and host a number of different services including games and instant messaging networks. The vast range of services offered by the company makes it one of the leading internet brands in Russia.

VKontakte

Russian social media users are the most active in the world and spend on average 12.8 hours per month on social media, twice the worldwide average. With 82% of internet users holding a social media account, the potential audience is huge. Like Yandex and Mail.ru, VKontakte generates most of its profit through advertising, and in 2013 it boasted an annual revenue of $215 million.

VKontakte is the most popular social media website in Russia with an estimated 60 million daily users. In comparison, their western counterpart, Facebook, has a mere 10 million unique Russian users. VKontakte is more popular than Facebook for two reasons. The first is the lack of piracy laws allowing users to watch new, pirated, films online and listen to music. The second is the ability to filter searches by age, gender, and relationship status.

The Russian Advantage

The main reason Russian domestic companies have dominated thus far is the targeted local knowledge and the reluctance of western brands to enter the market. Sites such as VKontakte were also available in Russian long before their rivals and users became comfortable with sites offered in their native language. Additionally, the Russian online market is unique and differs considerably from western markets, which makes entering the market difficult for western brands. Fully understanding the market is essential and Russians believe that domestic brands have a better understanding of their wants and needs.

Overall, homegrown Russian companies have used their local knowledge and understanding to gain an advantage over western rivals. As the market has grown, the number of western brands looking to capitalize on the huge potential of the Russian online market has increased. However, if they are to gain in popularity, they need to learn from those who know the Russian audience best—their Russian rivals.