Bernard Lukey is the director of sales and business development for Russian search engine Yandex in Europe. He joined the company in January 2012 to help establish and run Yandex Europe, the company’s European sales office based in Lucerne, Switzerland. He spoke to CMO.com Europe recently.
CMO.com: How does Yandex sit within the current Russian market?
BL: This year the Russian internet market became the largest in Europe in terms of number of users, passing Germany. Not only that, it is growing faster than most other European markets at about 20% to 25% a year, so the difference between Russia and Germany will keep on increasing, making the market even more attractive.
Beyond this user-base, only roughly a quarter of users make transactions online, which means there’s a lot of headspace for ecommerce companies that want to get into this Russian market.
Yandex is the largest internet enterprise in Russia - out of every two Roubles spent on internet advertising in Russia, one goes to Yandex.
CMO.com: What is the split between search and display?
BL: It varies between 80:20 and 70:30. Display is growing with the introduction of targeting technologies but the main money is still in search.
So Yandex is well-positioned in a fast-growing market, and in terms of what we do in Europe we have a commercial operation to allow international customers - who can be direct customers, ecommerce sites or network agencies - to take advantage of Russian audiences, to roll out their advertising campaigns, either in search or in display. And I see a lot of ecommerce players in Europe who are looking for country diversification, who are localising their websites throughout Europe, and who are looking at having a Russian-language website.
CMO.com: Are there significant ecommerce players in the Russian market already?
BL: There are about 10,000 shops in the Russian ecommerce ecosystem, and most of them can be found on Yandex Market. Yandex introduced this very early to aggregate all the ecommerce offerings in Russia, and it allows Yandex to search products within all these e-shops, to rank products by customer likes, and also to rank e-shops by customer likes. We are also in a position to include Western e-shops which have translated their content, so we’re not just selling search marketing, we’re offering a presence on an aggregation platform.
For ecommerce in Russia, the two problems were payments and logistics. So in logistics, the ecommerce operators looked for private solutions, because not many of their customers were willing to wait for the Russian post to deliver the parcel. In terms of payment systems the Russians, like the Germans, prefer cash on delivery. Before I joined Yandex I was running OZON, the largest e-shop in Russia, and even now about 75% of OZON’s transactions are cash-on-delivery. So you need to be able to operate with cash, and even though the penetration of credit cards is increasing in the country, people don’t trust giving their credit card numbers online. So Yandex built a payment solution early on called Yandex Money. It’s an electronic wallet and it’s now the largest e-payment method after cash in Russia.
CMO.com: Moving back to search, what’s the balance between SEM and SEO in Russia? In the UK there’s been a slow move towards SEO.
BL: That’s because of the sad fact that in the UK you have an absolute monopoly, which is Google, so if you optimise, you know who you have to optimise for. In Russia things are a little different, because there is another player which is dominant. Yandex has more than 62% market share and Google has 25-26%. So if you optimise, for whom do you optimise, because if you optimise for Google it won’t necessarily work for Yandex and vice-versa. That’s the reason why in Russia you have a higher proportion of funds that go into SEM and of technologies making this form of advertising more efficient.
CMO.com: How do you see this market developing in the future?
BL: The market will stay dynamic and open. There will continue to be one dominant player and at least one international and maybe some local competitors. It’s a healthy situation, similar to the one you have in the US where Google has more than 70% market share and Bing with Yahoo has 10%-15%. That’s good in terms of the quality users get, because when there’s competition people focus much more on quality for the end-users, and it keeps the price dynamically driven, which I think is not always the case in Europe.
CMO.com: What does the mobile market in Russia look like?
BL: Russia has the highest number of simcards per capita in Europe, so there is a big market out there. It’s not uncommon for people to have two or three mobile phones.
For Yandex, we now get 10% of our search traffic from mobile. Mobile is going to be a big platform and we have a lot of investment and initiatives in this category right now. Most of our services have been adapted to the mobile through apps or other systems. We have invested in a St Petersburg-based company called SPB Software which has developed Yandex.Shell, a customizable 3D user interface featuring Yandex Search and other services which allows you to personalise your Android phone.
We also started some time ago to target display ad on mobile users, mobile operation systems, phone models and mobile carriers, so our customers can choose whether they want to include mobile in their campaigns.
CMO.com: What are Yandex’s plans outside Russia?
BL: Yandex is established in Russia, Ukraine and Kazakhstan. We launched in Turkey 18 months ago, and we have localised not just the search but most of our other products.
We’ve had an office for six years in the US, because we have customers there, and we opened a similar commercial office in Europe last year to accomodate those companies that want to go after the Russian audience. We’re not currently launching in any other European market, because we want to focus our efforts in Turkey. It’s a very interesting market with extremely high potential, often misunderstood or neglected in the West, so we want to give it absolute priority and focus before thinking about anything else.
Yandex is one of only three search engines in the world that has a world-wide index; it’s Google, Bing and us. Baidu doesn’t. That means the technology we’re working with has a world-wide application, now it’s just a matter of which platforms, which languages, which markets we want to focus on.