beyondbrics

Yandex, Russia’s biggest internet firm, is all over the news these days. Last week it announced plans for an estimated $1bn listing on New York’s Nasdaq exchange. This week, the company’s name is popping up in the Russian media for other, less redeeming, reasons.

The search engine provider has come forward to say it was forced to give the FSB, Russia’s federal security service, personal information about Russians who had used a Yandex payment service to donate to a whistleblowing website.  This raises the question: is Yandex still an attractive company for foreign investors?

Alexei Navalny, the blogger behind the whistleblowing website, says Yandex had previously warned him that it might be forced to comply with any government orders against him.

“When we opened an account with Yandex for supporters’ donations, Yandex immediately warned that this information might be  provided to the special services, but only by an official written request,” Navalny told the Russian-language BBC service on Tuesday.

Despite this, Navalny said he would likely begin using the organisation’s own website to collect donations, as going through Yandex had not given the organisation ”a chance to get away from information disclosure and the inexplicable attention from the special services”, as he had hoped.

While Navalny is just one user of Yandex’s payment site, and his case a bit of an anomaly, the story is attracting attention following the recent release of Yandex’s prospectus. In a detailed risk section, the document warns that Yandex could be powerless against a takeover by oligarchs who have from time to time sought to take control of “attractive businesses in Russia”.

“We may be subject to such efforts in the future and, depending on the political influence of the parties involved, our ability to thwart such efforts may be limited,” the company writes.

According to the prospectus, Yandex could also face competition from a government-sponsored search engine, which is in the process of being created, or may be forced to do a dual New York-Moscow listing, despite the fact that the company is registered abroad in Amsterdam.

It remains to be seen how much bearing these risks will have in the minds of investors, especially US tech funds which are anxious to grow into the faster-growing emerging market tech sphere.

As of March, Yandex was the sixth most-visted search engine in the world in terms of number of processed queries, according to comScore, the research firm, while blogging platform LiveJournal estimates that Yandex has a 65 per cent share of the Russian internet versus the 22 per cent share held by Google.

Navalny’s history with Yandex is unlikely to deter most of the 58.9m users who visited the Yandex website last March. And with the company’s strong grip on the growing Russian internet, it is unlikely to deter potential investors either.

Related reading:
Russia file, beyondbrics
Kremlin Pressures Search Firm, WSJ
Russia’s Yandex Warns Against State Influence, Dow Jones