The closure of Western social media networks like Facebook, Instagram and Twitter by Russia in retaliation for Western sanctions, following the invasion of Ukraine, creates new business opportunities for Russian media and communications companies like Yandex.
Russia's biggest email account provider VK is reportedly considering reviving the ICQ chat program, developed in Israel in the 1990s and eventually finding Russian owners in 2010, in order to provide social network services.
On the face of it, Yandex, the 'Russian Google' should be benefitting from the vacuum in the market. But due to its international status, with one foot in Russia and the other foot in the West, Yandex is in a more complex situation. One area of hope for Yandex is to expand its activities in Israel, which include the Yango taxi service, Deli food delivery services, Wind electric scooters and autonomous car trials.
Last week the EU imposed personal sanctions on Yandex deputy CEO Tigran Khudaveryan, which included prohibition on travel and business activities with European companies. This is because of his responsibility for Yandex's new products, which the EU alleges conceals information from the Russian public by manipulating search results. Yandex's new search engine, not only promotes links to media channels supported by the government but also issues warnings about foreign news sites, which are tagged as "foreign agencies."
But the sanctions probably would not have been imposed on him, were he not present at a meeting of oligarchs convened by the Kremlin on the day of the invasion of Ukraine, in which the anticipated sanctions were discussed. Khudaveryan stepped down as Yandex deputy CEO last Tuesday. During the first week of the war, trading was halted in Yandex on Nasdaq, along with the other Russian companies listed on Wall Street. Yandex immediately afterwards published a statement that the sanctions could strangle its long-term operations, whether through a lack of computer equipment, or in terms of bond recycling.
US food delivery app GrubHub also said that it was halting cooperation with Yandex's fleet of robots, which serves it for food deliveries to students on college campuses in Ohio and Florida.
"Unlike other Russian tech companies, Yandex has historically tried to tread a fine line," a former Yandex employee told "Globes." "It knows that if it doesn't do what the Russian government asks it to, then the company or its managers can expect to be punished. On the other hand, the company has sought to reduce its dependency on the government, by keeping its activities separate from the government's Sberbank, which in the past had tried to acquire control of the company, and dispersing its activities outside of Russia. But as the main search engine in Russia, Yandex sits on a huge amount of information that is important to the Russian government and in order to look after it, makes sure that there won't be foreign organizations involved in what is happening in the company."
Consequently, it is no surprise that Yandex is now conducting talks to sell its media division, which includes its news portal, Yandex News, according to a report on tech news site "TechCrunch." One of the leading candidates to buy it is none other than VK, the "Russian Facebook," which is more tightly controlled by the Russian government and managed by Vladimir Kirienko, the son of a senior Kremlin figure.
Yandex has always seen itself as an international company. The company operates in former Soviet republics like Kazakhstan, Uzbekistan, Azerbaijan, Georgia, Armenia and Estonia, and Yandex also operates in Israel and Turkey. Until 2017, it also operated in Ukraine, until the local security services ordered its offices closed, alleging that Yandex was illegally aiding the collection of data and statistics for the Russian security services. Despite Yandex's denials, all its operations in Ukraine were halted, by order of former president Petro Poroshenko.
Yandex's center in Israel is mainly operational and responsible for the sales operations of the Yango taxi service, the Deli food delivery service, the trial operations of the Yandex autonomous cars, and as from the end of last year, the operations of the Wind electric-scooter leasing service, which also serves the Deli food delivery service in Tel Aviv. One of the reasons for founding a center in Israel is that Yandex cofounder and CEO Arkady Volozh lives in Israel for part of the year.
Israel is also expected to serve as a haven for some of the company's young Russian employees, many of whom are fleeing the country, which is bogged down in war, suffering from sanctions and restricting freedom of expression. The company is planning to bring several dozen Jewish employees to Israel, in order to set up a development center for some of the company's technologies, such as cloud computing, and autonomous cars. To date these activities were undertaken almost solely in Russia.
"Everyone who knew Tigran shook his head," said a former Yandex employee. Tigran Khudaveryan was the living spirit behind, among other things, Yandex's taxi service and its launch in Russia to compete with Gett. He is also considered the one who brought the taxi service to Israel.
But Yandex employees in Israel are used to shocks. Yuval Keinan recently left the company after just five months as Yandex Israel CEOת due to a dispute with management, unrelated to the war. Two years ago a senior Yandex Israel manager was summoned to a hearing and left his jobת after less than two years in the post.
Former employees say that Yandex is an unusual company on the Israeli tech landscape. A former employee said, "The feeling is that you are working for an international company but its Russian DNA is everywhere. Most of the employees are new immigrants. You work a great deal with people in Russia and some of them don't even speak English. Sometimes employees would come to Israel with a translator who translated what they had to say.
Yandex has high prestige in the tech sector despite the sanctions. Its autonomous food delivery fleet, which was not developed in Israel, is considered one of the world's best. Yango Deli has become the leading food delivery brand in Israel, among other things because of its pioneering reputation and it has prevailed over its rival Gett and even the new competition from Wolt.
In the taxi sector, Gett has a strong position in the Israeli market but estimates are that after the cancelation of its SPAC merger and its יןעי number of Russian investors, with sanctions imposed on some of them, the company will find itself in a difficult financial position. Yandex, which is also in a problematic financial position, with revenue in rubles which are rapidly being devalued, is trying to expand activities outside of Russia and is expected to intensify its competition with Gett, or alternatively merge its activities together, as it did in Russia with Uber, prior to the current war.
Published by Globes, Israel business news - en.globes.co.il - on March 21, 2022.
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