Clare Nuttall in Astana -
Increasingly widespread broadband and mobile internet access have resulted in a critical mass of users in Kazakhstan, making it possible for entrepreneurs to launch profitable online businesses.
After several years building up Kazakhstan's first online financial services aggregator, prodengi.kz, the company's founder and CEO Alexei Sidorov is now expecting to double the size of his business by the end of 2013, launching several new ventures.
Sidorov and his wife Elmira Kadyrbayeva launched the prodengi site in late 2008, at a time when internet use in Kazakhstan was still relatively low. As a result, the country's online sector lagged behind developed economies, but in the five years since then both internet and banking services penetration have steadily grown.
After several years in the banking sector, Sidorov was looking for opportunities to launch his own business, but didn't want to go down the typical route for Kazakhstani entrepreneurs of trading or import-export. "Starting an online business meant that I would not face the choice of either building a distribution network or being limited to one or two locations," he says. "I also knew that Kazakhstan would definitely follow the path of other emerging markets where internet penetration grows and people use the internet more and more."
When the website, which allows users to compare banking and financial services products, launched, the business model had already been proven in other economies by companies such as the UK's MoneySupermarket.com. Take-up has increased steadily, with prodengi now receiving between 8,000 and 10,000 unique visitors a day - due to a combination of both higher internet penetration and brand awareness.
"Comparing information about financial products is a common issue. Many people in this country have pretty poor financial literacy and always have problems finding information about banking products and comparing between banks," says Sidorov. "What we need is for people to understand basics of how to use the internet, have fairly stable and preferably high bandwidth internet connection. Every year, penetration increases. Today, it is almost 50%, which represents a critical mass - enough people are using the internet for online businesses to be viable."
In search of a business model
Monetising the site was also an issue. prodengi initially focused on selling advertising, but swiftly ran up against managers at financial services companies who took a quantity-over-quality approach, preferring blanket coverage and being unwilling to pay more for targeted advertising.
prodengi later started offering online lead-generation services, where the banks paid only after people or companies completed their online forms. "Over the last two years we have made lead generation our primary source of revenues, and make more money from this than from advertising," Sidorov says.
Competition remains relatively low; although a handful of local companies have launched in Kazakhstan, none of them have the same brand recognition as prodengi. Russia's Yandex Uslugi has entered the Kazakh market, but given Kazakhstan's relatively small population, it has so far been overlooked by other major international players.
Sidorov is now looking at other areas to expand into, including moving away from just financial services to other comparison services such as coupons, which have recently become popular in Kazakhstan. "We have a long-term plan to convert the prodengi brand to something more, so people associate us with other ways of saving time and money," he says.
In addition to building up prodengi, Sidorov is planning to launch two new internet startups in the near future, and has used his experience with financial services companies to launch Clickabilia, an online marketing consultancy. His workforce is set to double in size from the 12 people currently working for prodengi and Clickabilia, to between 20 and 25 across several ventures by the end of 2013. "Online businesses are growing very fast and I think now is the right time to build startups and develop new products," he says. "I want to ride this wave of growth, not rest on my laurels, with just one or two companies."
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