Yandex: beating Google at their own game
Further to my recent article on Emerging Markets, one company which seems to be beating Google at its own game is the Russian search engine, Yandex. Capitalised at US$24 billion, many believe Yandex is the best run, most innovative platform companies in the Emerging Markets universe.
Yandex holds around 60 per cent market share in the Russian (population of 144 million people) desktop and mobile search marketplace. It also operates in neighbouring countries including Belarus, Kazakhstan, Turkey and Uzbekistan (combined population of 115 million people).
Yandex is building a broad eco-system where it can potentially operate a suite of services equivalent to Google, Door Dash, Waymo, Uber, Netflix, Spotify, Alibaba and Ant Financial.
For context, the market capitalisation of Google: US$1.41 trillion; Door Dash: US$65 billion; Uber: $108 billion; Netflix: US$239 billion; Spotify: US$69 billion and Alibaba US$716 billion, aggregates to US$2.6 trillion, over 100 times Yandex.
From a platform perspective, there is some overlap in the digital infrastructure and algorithms required to excel in these industries. By harnessing all these capabilities, Yandex should be able to enhance and expand visibility across its platforms and it will be interesting to see how material the synergies between these services are over the medium-term. The large amount of data acquired through multiple touchpoints ultimately feeds back to Yandex’s core advertising business.
Yandex look set to become the lowest cost producer in each of the individual markets, implying a material competitive advantage. Through multiple consumer touchpoints and low cost of acquisition, the return on investment for advertisers should underwrite gains in market share.
Imagine an Eastern European Google, potentially servicing 260 million people, and in addition offers of market-leading mobility, entertainment, shopping fulfilment and digital finance, all on-line.
After reporting gross merchandise volume of 127 per cent year-on-year in the December 2020 Quarter, Chief Financial Officer, Greg Abovsky, said last week that Yandex was targeted at spending US$400-US$500 million on initiatives which includes Yandex.Market, grocery delivery Yandex.Lavka and the grocery portion of its food services, Yandex.Eats.
Yandex appears to offer many years of double-digit growth for its core search operation and the company is expected to continue taking market share in the Russian and neighbouring advertising markets. While it might not look cheap in the traditional sense at US$24 billion or 8X 2020 revenue, Yandex has an exceptionally long runway of growth opportunities.
Please click here to read my previous article on Emerging Markets:
IS THERE STRONG GROWTH AHEAD FOR EMERGING MARKETS?
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Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
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