Russian online

By bne IntelliNews April 1, 2010

bne -

Russia's internet is booming with the number of people online doubling every year in the last three years to reach 33m - and it shows no sign of slowing down.

"Russians view the internet differently to people based in the West," says Greg Thain, head of IMS marketing company. "Even poorer families in the remoter parts of Russia quickly invest into a computer hooked up to the internet, as if you live in the middle of nowhere, the easiest way to show your kids the rest of the world is online. It's seen as an investment into children's education."

Russia's telecommunications sector was fully liberalised in 2001 and remains one of its most sophisticated sectors. And the internet is a must if your relatives are scattered around a country that spans 11 time zones. The number of Russians online has gone from 12m in 2007 to 33m at the end of last year and is expected to continue growing at this pace for several more years if it follows the rapid penetration of mobile phones, say analysts. The number of queries on RuNet (as the Russian-language internet is known) was up by half this March year on year to over 1.75bn questions and this figure has tripled in the last two years. Indeed, Russians spend more time online than any other nationality (up to eight hours a week) as well as boasting more bloggers per capita than any other country in the world. Even Russian President Dmitry Medvedev has his own personal blog.

All this is driving the growth of broadband, which has already increased to cover 20% of the population and is expected to reach 60% by 2014, according to Anastasia Obukhova a telecoms analyst with VTB Capital.

Money to be made

As more and more Russians move online, there is also money to be made: online advertising was the only segment of the advertising business that grew last year. The iContext agency estimated the Russian internet context market grew 13% year on year in January to be worth a total of $600m, against a fall of 30% in 2009 in spending for the sector as a whole.

Still, spending on online advertising still has a way to go: companies spend 9% of their marketing budget on internet ads on average against the 15-25% that is normal in the rest of Europe. And Russian internet companies dominate the business, with 80 kopeks out of every ruble going to the leading Russian search engine, with trailing in second place with 10 kopeks out of every ruble. "The internet is only just getting going. We believe that [revenues earned by online companies] are likely to expand six-fold over the next five years," says Obukhova.

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