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Russia & Runet

Russia & Runet

What’s changing now in the Russian digital landscape? A talk with EWDN

24 Apr 2014

East West Digital News

 

What is the current situation of the Internet in Russia?

After the Kiev riots and the East Ukraine crisis, relevant facts are happening in the Russian digital sphere, making big news all over the world. Pavel Durov has been forced to leave the position of CEO at Vkontakte, the main social network in Russia, which he founded in 2006. Here’s how Durov commented the fact on VK:

 

Pavel Durov

 

Durov – who is also the founder of IM app Telegram – publicly stated that “Judging by the news, I was fired today as CEO of Vkontakte”, adding “today VKontakte goes under the complete control of Igor Sechin and Alisher Usmanov.”  Yet the strongest statement is the following:I’m glad that we lasted seven and a half years. Probably, in the Russian context this was inevitable”.

Also, a law recently passed, forcing all bloggers with over three thousand followers to use real names and fall under the mass media regulation, in order to better control information. This post by Global Voices Online sums up the situation: Bad news and worse news for Russian Internet users.

 

How will all of this affect brands that are using the Internet to reach the Russian market?  

We had a talk with, Adrien Henni, Chief Editor and co-founder of East-West Digital News (@EWDN). After 10 years of experience in the Internet and mobile businesses in France, he moved to Russia; after taking part in leading Russian Internet projects, he founded East West Digital News, and international resource on Russian digital industries. He also advises a variety of startups, funds and other organizations.

Here’s what he told us.

 

– Hi Adrien, first of all an introduction: what’s your background, and why did you decide to focus on the Russian digital scenario?

We launched East-West Digital News three years ago to address the needs of a growing number of international players – from VCs to startups to more established IT industry players – for reliable information about Russia’s booming market. At that time, the international coverage of this industry was very poor due to the lack of focus of the mainstream western media, such as TechCrunch or Financial Times, in this very specific segment and area. As for Russian resources, most are in Russian language, which makes them inaccessible to foreigners; a few ones offer information in English but quality leaves to be desired.

Personally I came to Russia for the first time in the late 1980s as I was learning Russian language at school. Since 2009 I have lived almost permanently in Moscow. I first worked for a western fund name Direct Group (later: Fastlane Ventures) before co-founding East-West Digital News. Prior to my “Russian life” I was a consultant in France. I launched my own startup project in France – my native country – in the early 2000s.

 

– What’s East West Digital News, and what kind of services do you provide?

East-West Digital News has asserted itself as the first international (English-language) resource on Russian digital industries. We offer a daily news flow on the ewdn.com web site and publish in-depth industry reports.

We organise events as well: we’ll have one about e-commerce in Russia on June 6th, in Moscow. Also, we provide some international players with consulting services concerning the Russian market.

 

– What are the most important things to know while approaching online business in Russia? What are the most relevant social media and e-commerce platforms today?

Some foreigners underestimate the specifics of the local market. Sure, some international concepts may be simply deployed or cloned in Russia rather successfully, such as Linkedin or Google. But in many cases this is not enough – and Google itself failed to assert itself as the market leader. It still lags far behind Yandex, the local champion which started here even before Larry Page and Sergey Brin started their research in California.

The failure is even more obvious for Facebook, whose position on the Russian language social media market scene has been very modest so far. Local champions are Vkontakte (VK) as well as Odnoklassniki and Moi Mir. The latter are lesser know in the West, but it deserves attention as well.

In the field of e-commerce, the local scene is dominated by local players like Ozon.ru, Ulmart.ru, Exist.ru, Lamoda and some others – even though some of them like Ozon and Lamoda have been backed by international funds and managed by westerners.

The only clear success of purely western companies on the domestic market are the Otto Group as well as La Redoute and Yves Rocher to a lesser extent. Zara has just launched their local online sales.

On the other hand, the cross-border sales market is thriving with marketplaces eBay and Alibaba selling hundreds of millions of USD to Russian consumers – and perhaps even more than $1B for each this year. Some big western companies like ASOS and Netaporter sell a lot to Russia, too.

You will find plenty of details in our e-commerce study.

 

Zara Russia

 

– In your opinion, is the current political situation having an impact on e-commerce trends in Russia?

The recent international tensions have already had an impact on the payment industries (with the position of Visa and Mastercard put in question in the middle term). It has also affected investment flows, with the fall of the stock price of Russian tech companies like Yandex and Qiwi listed in western exchanges.

Nothing good either is expected in the venture capital market which slowed down last year – even before the crisis – after years of rapid growth. However, so far no significant impact has been noticed in the field of e-commerce, excepted perhaps the fact that it is becoming more difficult for Russian players to raise funds from western VCs.

 

– Over the last months the Vkontakte ownership has changed a lot. Do you think this will impact the popularity of the social network among Russian users in the long term? Do you think this will help Facebook to succeed in the country?

Facebook, which is lagging in the 4th position far behind VK, Odnoklassniki and Moi Mir, is preparing a big initiative, an executive told me recently. The future will tell if they can change the game in Russia. They will not be helped by the political context since the networks are regarded by the Russian authorities as an important field to monitor and control, at least indirectly.

However, Facebook could potentially be helped by the current internal crisis at VK, which is virtually torn apart by shareholder disputes, and the dismissal of its talented founder Pavel Durov.

 

– Last question: what you envision to be the biggest trends in 2014 in the Runet?

The audience will still grow by perhaps 10% to reach up to 70% of the adult population in monthly terms in late 2014 or 2015.
Domestic e-commerce is likely to grow by 30% like the previous years, but new customs tax rules might hamper the development of cross-border sales from Western retailers.

Pressure from the authorities to control content may continue to increase – but Russia is still much more liberal in this respect than, say, China or Iran.

– Thanks Adrien!

Guido Ghedin

Guido Ghedin

After his University years between Italy and California, today he deals with Market Research and Digital Scenario Analysis at Young Digitals. You can follow him on Twitter: @guido_ghedin.

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