December 17, 2006New York Times
Sergey Brin, one of the founders of Google, was born in Moscow in 1973, and the first words out of his mouth were Russian. Yet neither Russian nor the Russian market has come easily to Google.
Created in Silicon Valley by Mr. Brin and Larry Page, Google has adapted its search engine to dozens of languages, selling billions of dollars in advertising around the world. But in Russia, Google is behind the curve, trailing local Internet companies in executing searches and collecting rubles on the ads linked to those searches.
Mr. Brin left Russia with his family in 1979, and Google set up its Russian site three years ago and opened its first sales office there only one year ago, giving its rivals a long head start. But the company’s development has also been slowed by cultural and language issues, company executives — and rivals — say.
“Google promised they would destroy everything, but look at where they are,” said Irina Gofman, chief executive of Rambler Media, one of Google’s Internet portal and search service rivals in Russia. “They are not that big.”
In many Western European countries, Google is the most popular Web site and by far the most popular search service; in Russia, though, it barely breaks into the top 10. According to comScore Networks, which tracks Internet traffic, 28 percent of Russian Internet users on home or office computers visited Google sites in October, making Google the eighth-biggest Internet brand.
Leading the pack was Yandex, a privately held Russian search engine that was visited by 64 percent of Internet users; Mail.ru, an e-mail service, came in second at 56 percent, and Rambler was third at 53 percent.
But even in its share of revenue from ads linked to searches, the lucrative Internet business model pioneered by Google, the company lags. Yandex controls 50 percent of the Russian market for such ads, according to analysts at ING, a Dutch bank. Rambler is second with 41 percent and all other companies, including Google, fight over the remaining 9 percent.
Russia is not the only country in which Google has faced difficulties. In China, Google was allowed in only after agreeing to self-censor its search results. Russia, in contrast, allows Google and local search companies to operate without political interference; for instance, a search on www.google.ru for polonium — the radioactive substance used to kill the former Russian spy Alexander V. Litvinenko in Britain last month — returned 11.1 million results.
The company’s difficulties in Russia probably have more to do with the complexities of the language than with politics.
“Our understanding of Russian was not as good as we wanted it to be,” said Kannan Pashupathy, head of international engineering at Google. Google revamped its Russian site last week, Mr. Pashupathy said, improving its ability to deal with Russian, a complex language in which nouns may be one of three genders and be declined in up to six cases.
The company has enhanced its service in other ways. It added a local version of Google News, which gathers headlines and article summaries from news organizations’ Web sites, and last week made its e-mail service openly available to Russian Internet users. In an effort to deepen its understanding of Russia’s market, Google recently opened a second office there, in St. Petersburg.
Despite its eighth-place standing among Internet brands in Russia, Google has made important inroads in recent years. Figures from Comcon, a Russian research firm, show the percentage of Internet users who visit it has doubled since the end of 2003, when Google offered only a rudimentary site.
“Of course they can fix the problems,” said Andy Atkins-Krüger, managing director at Web Certain Europe, a firm in York, England, that specializes in organizing search-based marketing campaigns in multiple languages. “But Yandex and Rambler aren’t going to stand still.”
As the Russian Internet market grows, there may be enough revenue for several big competitors to share, analysts say. The ING analysts expect the number of Russian Internet users to more than double over the next decade, to 47 million. Internet ad spending is expected to rise to nearly $1 billion in 2012, from $110 million last year.
Another way for Google to grow in Russia would be to acquire a local competitor. But the company has made no direct approaches to the market leader, Yandex, according to its chief executive, Arkady Volozh.
“Of course, everyone talks to everyone,” Mr. Volozh said. Referring to Google, he added, “So far they have preferred to compete rather than acquire.”
Ms. Gofman at Rambler Media said local companies’ understanding of the Russian market extended beyond the language. They have developed ways to receive payment for Internet ads using traditional accounts at brick-and-mortar banks, for example, which helps compensate for the fact that relatively few small businesses have credit cards or online payment capabilities, she said.
Mr. Volozh credited Russian expertise in computer programming and engineering with helping to keep a rival from Silicon Valley at bay.
“With real estate, it’s location, location, location,” he said. “On the Internet, it’s technology, technology, technology. We have this homegrown technology that in many cases is better than theirs.”
