Russian Internet Market and Yandex Overview

Yet Another Index? August 2010

• Russian Internet Market • Yandex Overview • Yandex Advertising Engine • Western Business Development Initiatives 2

Russian Internet Market U.S. Internet Population vs. Rest of World Global SEM is critical for most multinationals Global Internet Population Growth 100% 34% 75% 85% Rest of World 50% United States % of total Internet Population 66% 25% 15% 0% 1996 2009 Source: ComScore 3

Russian Internet Market Internet User Growth - Global Growth is driven by Russia in Europe and China in Asia Internet User Growth (2008 vs. 2009) 750 2008 2009 600 +22% 477 450 +20% Millions of 390 Internet Users 325 300 271 +4% 191 184 +28% +79% 150 90 81 70 45 0 Asia Europe North America Latin America Middle East & Africa Source: ComScore 4

Russian Internet Market Internet Users - Global Russia has the 8th largest audience of Internet Users in the world Internet Users (MM) per Country (2009) 400 384 300 228 200 Millions of Internet Users 100 81 68 54 47 43 43 20 6 6 0 China US India Brazil Germany UK France Russia Poland Hungary Czech Sources: FOM (18+ group) for Winter 2009 for Russia, UK, France, Germany, US, Internet World Stats for Jun 2009 for Brazil; Internet World Stats (6+ age group) for Dec 2009 for China; Internet World Stats for Nov 2008 for India, Poland; Internet World Stats for Sep 2009 for Hungary, Czech Republic 5

Russian Internet Market Internet Penetration - Global Russia currently has fairly low penetration compared to other large Internet populations Internet Penetration per Country (2009) 100% 74% 76% 75% 69% 66% 59% 59% 52% 50% % of Population 37% 34% 29% 25% 7% 0% China US India Brazil Germany UK France Russia Poland Hungary Czech Sources: FOM (18+ group) for Winter 2009 for Russia, UK, France, Germany, US, Internet World Stats for Jun 2009 for Brazil; Internet World Stats (6+ age group) for Dec 2009 for China; Internet World Stats for Nov 2008 for India, Poland; Internet World Stats for Sep 2009 for Hungary, Czech Republic 6

Russian Internet Market Internet Users - Europe Russia is the 3rd largest Internet market in Europe Internet Users (MM) per Country (2010) 60 54 47 45 45 43 30 29 30 27 Millions of Internet Users 20 14 15 10 0 Germany UK Russia France Italy Spain Turkey Poland Netherlands Ukraine Sources: as of June 30, 2010. Nielsen Online, ITU, GfK 7

Russian Internet Market Internet Penetration - Europe Russia has low penetration compared to other European markets Internet Penetration per Country (2010) 100% 89% 83% 79% 75% 69% 63% 58% 52% 50% 44% 45% % of Population 34% 25% 0% Germany UK Russia France Italy Spain Turkey Poland Netherlands Ukraine Sources: as of June 30, 2010. Nielsen Online, ITU, GfK 8

Russian Internet Market Russian Internet Penetration Growth Russian market is growing extremely quickly Internet Penetration in Russia (2000-2010) 75% 50% 44% % of 37% Population 27% 25% 21% 19% 15% 12% 10% 4% 7% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: International Telecommunications Union 9

Russian Internet Market Internet Penetration: Moscow vs. Other Regions Internet Users (2009) Central, incl. Moscow Other (31%) Regions 1 (69%) Internet Penetration in Russia (2009) TNS reports that over 85% of 61% internet users in Moscow have 48% broadband access 37% 36% 34% 32% 31% 30% Moscow Central ex-Moscow North-West Far East Ural Siberia Volga South Source: FOM (18+ age group) for Fall 2009; 1. Includes Volga, North-West, South, Siberian, Ural and Far East Source: FOM (18+ age group) for Fall 2009 10

Russian Internet Market Top 10 Runet Sites as of April 2010 Russia, Monthly Reach (000’s) Sources: TNS Web Index Research 11

Russian Internet Market Russian Search Engine Share Search engine traffic market share in Russia, May 2010 Mail.ru Other 7.6% 3.7% Rambler 2.6% Google 22.1% Yandex 64.0% Source: LiveInternet.ru (May 2010) 12

Russian Internet Market Market Share Evolution Russian search traffic market share1 Nov 2009 MatrixNet 64% 58% May 2008 Updated core search and ranking algorithms 2006 Google introduces Russian language morphology-based search capabilities June 2008 26% Google launches outdoor advertising campaign 22% 2001 Google launches March 2006 Russian language Google opens search engine office in Russia 5 8% 5 3% Mar-05 Sept-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Source: LiveInternet.ru (through May 31, 2010) 1. Based on monthly search traffic to Russian websites from Russian IP addresses 13

Russian Internet Market Russian Advertising Market Russian Advertising Market ($MM) $12,000 $11,150 6% $9,200 17% $9,000 5% 17% $6,800 21% $6,450 $6,000 18% 22% 9% 5% $5,100 13% $MM 6% $3,930 18% 24% 16% 4% 18% 27% 7% $3,000 31% 6% 50% 48% 56% 6% 47% 46% 43% $0 2004 2005 2006 2007 2008 2009 TV Radio Print Outdoor Internet Sources: All data other than for online text-based advertising for 2004 - 2006 based on ruble-denominated data from the Association of Communication Agencies of Russia (AKAR). Data on online text-based advertising for 2004 – 2006 are provided by AIB, and include both text-based advertising and a small portion of contextually targeted display advertising. All data are reported inclusive of VAT 14

Russian Internet Market Russian Online Ad Market Online Ad Market Size ($MM) $800 $708 $599 $600 $497 $410 $356 Text-based $400 $274 $237 $200 $130 $107 $298 Display $56 $47 $223 $243 $21 $107 $35 $60 $0 2004 2005 2006 2007 2008 2009 Online Ad Market as a % of Total Advertising Market 10% 9% 8% 6% 5% 5% 3% 2% 3% 1% 0% 2004 2005 2006 2007 2008 2009 Sources: All data other than for online text-based advertising for 2004 - 2006 based on ruble-denominated data from the Association of Communication Agencies of Russia (AKAR). Data on online text-based advertising for 2004 – 2006 are provided by AIB, and include both text-based advertising and a small portion of contextually targeted display advertising. All data are reported inclusive of VAT 15

Yandex Overview To Win in Certain Markets, Local Knowledge is Key China (2000) Proprietary Search South Korea (1999) Search market share 1: Search market share 2: • Baidu – 64% Technology • Naver – 75% • Google – 31% • Google – 3% Search market share 3: • Yandex – 64% • Google – 22% + Taiwan Czech Republic Japan Sources: 1. Analysys International (May 2010) 2. KoreanClick (Dec 2008) 3. LiveInternet.ru (April 2010) 17

Yandex Overview Yandex at a Glance The largest Internet search engine in Russia Russia’s #1  64.0% market share in search1 search engine  Over 10 Bn web pages indexed  Almost 20 years of development Leading Russian  World-class in-house R&D team tech company  Culture rooted in innovation, creativity and the exchange of ideas Leading Internet  10.8 Bn page views per month2 destination in Russia  2.8 Bn search results pages per month3 Track record in  FY 2009 gross revenue - US$ 278M monetization and  Up 14% over 2008 y/y profitability  41% EBITDA margin Sources: 1. LiveInternet.ru (May, 2010) 2. Yandex logs (May 2010) 3. Yandex Logs (April 2010) 18

Yandex Overview Top 10 Search Engines Yandex is 7th largest in the world and the fastest growing 19

Yandex Overview Yandex - Russia’s Search and Information Retrieval Portal The largest and highest rated Internet offerings in Russia News #1-3 Mail #2 Market #1 Traffic jams/ Photo Sharing Weather maps #1 #3 #1 Blog search #1 Money #1 20

Yandex Overview Yandex Mobile Portal is the Most Visited in Russia 18 services optimized for mobile usage; apps available for Android and iPhone 8.5 million unique users per month 150 million pages views per month 200 million search results pages per month Monthly Trend (Users) Advertiser Services 21

Yandex Overview Company History Search technology developed and refined over almost 20 years Founding team Search of starts Incorporation Fact Launch of international developing of Yandex Yandex.ru extraction Yandex documents Yandex search website is Parallel technology in advertising technology launched Search Yandex.News network Yandex.Traffic Yandex.com 1993 1998 2002 2004 2007 2009 1989 1997 2000 2003 2005 2008 2010 Breakeven MatrixNet – Founding team The first Proprietary Purchase of point achieved breakthrough joins CompTek contextual anti-spam Yandex.Money in Q3 search banner is software displayed School of Data technology introduced Analysis Yandex.Music 22

Yandex Overview What makes Yandex different? Local  Live, breathe and completely focus on the Runet  Keen understanding of the needs and culture of Russian users as well as their diversity  Leading local translation and optimization capability Breadth  Reach 92% of all Internet Users in Russia  Access to all demographics; not just the technology elite  Most Russian consumers and businesses rely on Yandex for help in making purchasing decisions Technology  Focused on the complexities and nuances of Russian language search technologies for 20 years  Attract and retain the best and brightest engineers; reflects Russia’s native strength in applied mathematics and data analysis  Innovative and leading edge development (MatrixNet, Yandex.Traffic, etc.) 23

• Russian Internet Market • Yandex Overview • Yandex Advertising Engines • Western Business Development Initiatives 24

Yandex Advert. Engines Contextual Text Ads Yandex.Direct is a Pay-Per-Click keyword-based service for placing ads on Yandex and on partner sites of the Yandex Advertising Network. 25

Yandex Advert. Engines Contextual Text Ad Mechanics  Auction based system based primarily on CTR and Bid  Placement on four types of sites:  Yandex Search  Partner Search (ex. Bing.ru)  Yandex Advertising Network  Catalogue & Market Pages  Four types of targeting available:  Contextual/keyword  Geographic (city level)  Thematic (categories of site types in network)  Behavioral (based on Yandex registration information)  Variety of tools available to help in campaign management  Keyword suggestion, refinement & bid management  Automatic bid management  Budget management 26

Yandex Advert. Engines Ads on the Yandex Network of Partner Websites Broader audience reach for Yandex and its advertisers; enhanced monetization prospects for network partners through targeted contextual and/or search advertising Network Partners Bing, Aport & Nigma Contextual advertising Search advertising Served by Yandex based on the Served by Yandex based on natural content of the third-party website search results and/or the user’s search history 27

Yandex Advert. Engines Yandex Catalogue of Thematic Partner Sites High quality, manually moderated partner sites Minimum daily audience of 30k visitors per site Excludes “made for advertising” sites which can be prolific in Runet 28

Yandex Advert. Engines Yandex.Market Leading comparative shopping service Weekly audience of 2.5M unique users Over 1,500 vetted shops 29

Yandex Advert. Engines Yandex.Direct Tools Bid management, campaign reporting, keyword suggestions, webmaster tools and online help are all available 30

Yandex Advert. Engines Yandex Display Advertising Three types of display advertising are currently offered: Wide Audience  ex. Yandex Home Page  Most visited page on Runet (16M users per week)  Top advertisers in Russia are here (Honda, Nokia, Coke, HP, etc) Affinity  ex. Yandex “What’s on Guide”  Top guide to cultural entertainment in Moscow and St. Petersburg  3M unique visitors per week Contextual  ex. Yandex Search Engine  Broad contextual targetting  Large content sites can also be targetted 31

Yandex Advert. Engines Wide Array of High Volume Display Advertising Locations Mail, News, Travel, Money, Traffic, TV Guide, Market, Gift Cards, Maps, Weather, 404 Page... 32

Bus. Dev. Initiatives Expanding Yandex’s Footprint & Operations Internationally Making it easier for the English-speaking world to do business with Yandex  Actively expanding Yandex’s presence in North America and Western Europe  Developing capability to facilitate all aspects of Agencies and Customers interactions with Yandex  Our initial focus is on:  Improving general understanding of the Russian online ad market  Educating the market about Yandex’s capabilities and history  Helping agencies and customers identify opportunities and facilitate media planning in Russia  Providing easy access to Yandex’s translation and local optimization services  Westernizing payment processing and contracting 34

Preston Carey Business Development preston.carey@yandex.ru +1 857.288.8762 35

Appendix 36

User Services Breadth of User Services and Category Leadership Yandex is one of the best known Internet brands in Russia Core web search service #1 Yandex.Search The leading search engine in Russia Other search and information retrieval services Other services and user-generated content #1 #2 Yandex.Maps & Traffic Maps and traffic monitoring Yandex.Mail Email service #2 Yandex.News Aggregator of news Spamooborona Anti-spam software #1 Yandex.Market Price comparison and shopping engine MoiKrug.ru Online network for professionals #1 Yandex.Blogs Blog search tool Yandex.Fotki Photo hosting and sharing Yandex.Adresa Yellow pages and address finder Narod Website hosting platform Yandex.Auto New and used car search Utilities Yandex.Video Video search and hosting service Yandex.Bar Yandex toolbar utility #1 Yandex.Dictionaries Reference and translation resource Yandex.Server Search tech. for servers and networks Yandex.Catalog Thematic directory of Russian Yandex.Desktop Search Search tech. for personal computers websites Yandex.Online Incoming email notification system Yandex.Afisha Movie and live events guide Yandex.TV TV program guide Online payment system and mobile applications Yandex.Travel Schedules Plane and train schedules Yandex.Money Online payment system #1 #1 Mobile applications Mobile versions of selected Yandex Yandex.Weather Weather forecasts (1,700 cities services worldwide) 37

User Services Yandex.Maps & Traffic #1 The leading maps and traffic service in Russia Key features Monthly users in Russia, June 2008 (000s) • Detailed scalable maps with street names and house numbers • Satellite images of Russia and Europe • Proprietary and exclusive live traffic congestion monitoring system – Acquisition of road traffic monitoring agency Smilink – User-generated input via GPS-enabled devices • Yandex.Adresa – fully integrated with Yandex.Maps, helping users find local business listings and events • Mobile maps recently launched – 120,000 weekly users Information on local businesses Traffic jam viewer Source: Server logs (stat.yandex.ru, stat.mail.ru) 38

User Services Yandex.Mail #2 Webmail service for the tech-savvy Russian users Advanced web mail service Monthly users in Russia, June 2008 (000s) • Proprietary anti-spam technology • Unlimited storage space • “Opt out” option for advertising-free email interface • AJAX interface – Search-as-you-type – Email quick summary feature • Advanced address book ⎯ Transliteration Latin/Russian alphabets Source: TNS ‘Spamooborona’ anti-spam technology Monthly users in Moscow, June 2008 (000s) • Proprietary, popular anti-spam software – Used in Yandex.Mail as well as other web mail and corporate email systems • Filters approximately 95% of email as spam • Performs analyses of thousands of email properties to ensure highly efficient and precise filtering • Standalone server solution • Mass mail clustering • Self-learning system automatically collects spam characteristics Source: TNS 39

User Services Yandex.News #2 News aggregation service Key features of Yandex.News Monthly users in Russia, June 2008 (000s) • Innovative aggregation features ̶ News clustering by event ̶ Multi-document summary of an event ̶ Geo-tagging and categorization of events ̶ Name and fact extraction ̶ Linked to biography and quotation database ̶ Searchable news stories within minutes of publication on the web by original source • No editorial intervention − Technology-driven, politically agnostic Source: TNS − No preferred sources − No proprietary content Monthly users in Moscow, June 2008 (000s) − News aggregators popular in Russia for the diversity of views they provide access to • Over 2,000 “content-for-traffic” agreements with copyright owners − 30,000 automated entries per day − No copyright infringement Source: TNS 40

User Services Yandex.News (continued) Innovative functionalities: fully automated news clustering, summaries and facts extraction Real-time breaking news displayed at the Top news top stories Personalities in the news and link to their “press portraits” Original story and full list of related entries, images and videos Top stories in the same news category 41

User Services Yandex.Market #1 The leading comparison shopping service Value proposition Monthly users in Russia, June 2008 (000s) • Price comparison and consumer reviews for shops and thousands of products throughout Russia • Advanced recommendation engine – Database of thousands of product models and features – Product description compiled by Yandex • Prioritizes display of offerings from shops in close proximity to users, increasing relevance to shoppers and advertisers • Cross-shop basket • Public wish lists Source: TNS Key features Monthly users in Moscow, June 2008 (000s) • Over 1,500 pay-per-click merchants – Automatic product categorization and identification – Online retailers need to register to get their products and prices referenced; no unsolicited “price grabbing” – Strict merchant quality control • Does not compete with online store fronts – Yandex does not keep inventory • User reviews of merchants and products Source: TNS 42

User Services Yandex.Market (continued) Sample product page Pricing evolution List of shops Summary Publish in wishlist Product description Submit reviews Related products Product accessories Detailed product specifications 43

User Services Yandex.Dictionaries #1 The leading reference and translation online resource Value Proposition Monthly users in Moscow, January 2008 (000s) • Comprehensive reference and multi-language translation tool for Russian users • Access to online encyclopedias and more than 60 dictionaries – Yandex sponsors digitization of encyclopedia and other offline resources under exclusive agreements • Integrated within Yandex.Search to power parallel results Source: TNS Access to a rich and ever-expanding database of dictionaries and encyclopedia Search Languages available for translation List of dictionaries and Recently added encyclopedia dictionaries and encyclopedia Total number of dictionaries 44

User Services Yandex.Fotki #3 Photo hosting Key features My favorite • Photo sharing website photographers Search • Unlimited storage space • Easy mass upload tools (built in browser) Easy photo Easy photo print • Launched in 2007 and is already #3 photo hosting service in Russia download • Accessibility on mobile devices / easy file transfer • Social network features Monthly users in Russia, June 2008 (000s) Photo contest Real-time top photos of the day Most popular Links to Recently categories related downloaded photos services Source: TNS; although not measured by TNS, we believe that PhotoFile is #2 45

User Services Yandex.Blogs #1 The leading blog search engine in Russia Search Advanced blog search and hosting service • Collects important information daily out of the Russian blogosphere • The largest and most comprehensive blog search engine in Russia • Providing instant access to more than 4.5 million blogs as of June 30, 2008 • Key attractions for our users include daily rankings on Yandex.Blogs of the most popular postings and topics • Ability to filter spam Most Most popular discussed blogs entries of the day 46

User Services New User Services – Recently Launched Numerous opportunities to add complementary services and drive further growth in user base Auto search Train and plane schedules Video search and hosting Disk (file sharing) 47

User Services Yandex.Money Leading online payment solution with a broad base of users and merchants Active users (000s) Selected online merchant partners Russian International 9% : 12 CAGR 07 04- Total payments volume ($MM) % 132 R: CAG 07 04- 48

Advertiser Services Ads on Yandex’s Owned & Operated Websites Access to the large user base of Yandex’s search and other services Yandex.Direct Highest ranking ads Yandex.Direct Paid search ads ranked by cost per click, CTR, and relevance Organic search results Produced by Yandex search Yandex.Market algorithms Relevant offers from Yandex comparison shopping system Banner Contextual graphical ads 49

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Russian Internet Market and Yandex Overview

by Preston Carey on Jun 17, 2010

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