The growth of internet in Russia

With a growth of 14% in 2011, Russia now counts 53m internet connections, Europe’s largest ahead of Germany and lots of room for further expansion. Yet a (still) modest 18% of this population shop online and Russian advertisers only spend 9% of their ad budgets on the internet.

Marking its difference with the rest of Europe is the fact that the Russian internet scene is commanded by domestic operators. According to LiveInternet (research), Google’s share doesn’t exceed a quarter of the market, 60% of which is being dominated by Yandex. is by far Russia’s biggest portal, e-mail service and gaming platform. It also owns Odnoklassniki, the second largest social network and 40% of VKontakte, the biggest. Facebook comes fourth. Ozon, which sells goods and travel, calls itself both Russia’s Amazon and Expedia.

As such, the Russia internet scene looks more like China’s where Baidu, another local operator,also fully dominates the market (of 514m) and Tencent plays a role similar to (of which it owns 7.8%). When the Chinese buy online they turn to Dangdang, 360buy or Alibaba’s market places rather than Amazon or eBay. In an important way however, Russia is different in that neither Facebook, nor Twitter or YouTube are banned. Foreigners are relatively free to enter Russia, although hardly enjoying an edge. Fritz Demopoulos, American co-founder of Qunar, a Chinese travel site sold to Baidu last year and an investor in Ostrovok, a Russian online travel business, doubts that “foreign management know how is all that relevant”. One reason is language, geography is another:Yandex is particularly proud of its maps and traffic data.

Russia’s online idiosyncrasies – like China’s – go well beyond the script and the map. Online buyers expect to buy from a human being. Call centres publish phone numbers on their home pages. China’s Ctrip customers for example make half of their bookings by phone. Russians moreover like to pay in cash and be sure that goods turn up and that they like them before handing over their money. A major part of goods bought from Ozon or Ostrovok is paid for on delivery and the same is true for Chinese on line shoppers. Hence the importance of logistics with the key operators acting for third parties too.

(Source: The Economist)