Yandex is the most popular website in Russia and gets about a 60 percent share of Russian online search. Originally the search algorithm was designed around language, using full-text search with Russian morphology. Morphology is identification and analysis of language structure in relationship to meaning. Morphology is very different from the link-based algorithm that Larry Page developed at the foundation of the Google platform. So, while Arkady Volozh and Ilya Segalovich (Yandex founders) may have worked successfully with language search algorithms, once linked-based search was invented, everything changed and Yandex adopted link searches into their algorithm.
Since its inception in 1997, Yandex has expanded the platform to include internet-based services such as email, cloud storage, maps, online translation, digital metrics service, mobile apps, photo hosting and much more. Much of this business model is imitation of Google, but some of the Yandex strategies are cutting edge. For example Yandex first started doing parallel searches among different media, like, text, photos, videos, blogs and showing them all on one search results page in 2000. Google didn’t begin doing this until several years later.
Yandex has also expanded from Russia to Ukraine, Belarus, Kazakhstan and Turkey. The search platform earns its revenues primarily from advertisements placed on search results and the company first turned a profit in 2002. In 2011 Yandex launched its IPO on the NASDAQ exchange in New York and was listed as headquartered in the Hague, Netherlands, although its development was always in Russia. It was the biggest IPO in the United States since Google launched its IPO in 2004. Yandex is the world’s fourth largest search engine.
Like all link-based search engines, one of the problems Yandex faces is SEO, which means Search Engine Optimization. Technically savvy online marketers offer their services to business owners to help them get the best online exposure possible. In terms of search engines, like Yandex, that means getting the businesses website on to the top of the first page of any search results returned by Yandex. The technician games the link system to get the business owner’s website technical preference. Since the Yandex crawlers and algorithm are looking for links, the technician adds links to the business owners website pages to fool the search algorithm. That’s what SEO really does.
In light of the amount of SEO occurring in Russia, especially around Moscow, Yandex recently decided to move away from link-based search algorithms for commercial keyword searches in the Moscow area. According to Alexander Sadovsky, who is the Head of Web Search at Yandex, commercial queries represent about 10 percent of Yandex’s search queries. He went on to say, “There is a lot of noise around the links signal particularly for commercial queries and especially in Russia. We see a lot of paid links and even automated paid links where there is no human actually involved. The problem with these links is they’re frequently off-topic and are effectively cheating users.”
But if Yandex isn’t going to use links at the heart of their algorithm, then what will they use to accurately deliver the best content for commercial keywords? Alexander explained, “There is a bigger problem of spam links in Russia than elsewhere because Russia has a lot of programmers who have been turning link building into a new profession.” These are the gray hat and black hat marketing guys, and they are forcing Yandex to rethink searcher’s behaviors and their interaction with the site. For example they are looking at the ease of making a purchase, ease of using the site, and even how many products are offered on the site. Remember Yandex is only removing link value from their algorithm for commercial sites (near Moscow), so the ease of using a commercial site is very likely to give strong indication how to rank a commercial site on a search page.
Politics Step In
But technical innovation is not Yandex’s only new development. In April of this year, 2014, Russian politics reached into the digital world in ways that affect Yandex. Speaking at a conference in St. Petersburg, President, Vladimir Putin said Russia has to control and protect its own information. Putin pointed out that the digital world is dominated by the United States and that Yandex has Americans working in their technology groups. It’s not clear exactly what he was after. On the one hand he may be concerned that, in Yandex, the U.S. has a portal through which it can snoop for digital information that is vital to Russia’s well being. On the other hand, he may be tossing out a more general concern that all Russian digital information is suspect and the Kremlin is concerned about its ability to control Russian and Ukrainian people’s private digital communications. It could be the beginning of a more repressive approach to the internet, and Russia, until now, has been a wide open digital network.
Putin’s remarks in combination with the Political and military actions in Ukraine have combined to undermine Yandex’s financial growth. In 2013 Yandex’s stock was one of the most traded Russian stocks in the U.S. and doubled it value. Thus far in 2014 its value is down close to fifty percent. President Putin is raising questions about what types of companies should be recognized as media outlets, which means that Yandex, because it republishes news, could be required to become a licensed news distributor and forced to deal with strict regulations.
As the most successful Russian digital platform, Yandex’s digital cycle is facing limitation that have nothing to do with its ability to dominate its digital niche. Through both its own innovation and imitation of Google, Yandex has lots of growth potential, which means it’s a vibrant digital platform. But, due to Russian government comments and the confluence of political actions taking place in Ukraine, Yandex is facing unique growth limitations that could affect its long term capacity to maintain control of its niche.