Arkady Borkovsky - Yandex Labs - Stanford Engineering - Jan 30 2012

What is Yandex and Yandex Labs SearchArkady BorkovskyChief Technology Officer (CTO)January 2012Stanford EngineeringEuropean Entrepreneurship & Innovation (ME421)January 30 2012

Introduction Yandex at a glance #1 Search #1 Internet Leader Destination 61% search market share in Russia1 44 million unique visitors per month2 44% of Russian users’ homepages3 Leading Online Largest Russian Advertising Platform Internet Business 180,000+ advertisers (2010) $161.9 million Revenues (Q3 2011) (65% Y/Y Growth Rate) 58% online ad market share (2010) $73.3 million Adj. EBITDA (Q3 2011)4 (54% Y/Y Growth Rate) 1 Source: Liveinternet, December 2011 2 Source: comScore, November 2011 3 Source: TNS 4 Adjusted EBITDA is EBITDA before share-based compensation, See Appendix for a reconciliation to US GAAP 2

Key Investment HighlightsLocal Champions Can Win in Search Yandex Baidu Naver (launched 1997) (launched 2001) (launched 1999) Yandex 61%1 Baidu NHN 66%3 3 80%2 Russia South China Korea 26% 10% 13% Google 15% 5% 24% Others Others Others Google Google 1. As of December 2011, Liveinternet.ru 2. As of December 2011, CNZZ.com 3. As of May 2011, comScore 3

Google Sites 125.2 Baidu.com Inc. 12.7 Yahoo! Sites 11.0 Key Investment Highlights Microsoft Sites 5.2 Source: comScore, November 2011 Yandex Sites 3.6 NHN Corporation 3.1 eBay 3.0 FACEBOOK.COM 2.5 Alibaba.com Corporation 2.1 Ask Network 1.5 World Search Properties (B Searches/month) Yandex Sites 43.9 Mail.ru Group 43.7 Google Sites 36.8 Vkontakte 36.0 BitTorrent Network 23.7 Wikimedia Foundation Sites 21.6 Ucoz Web Services 20.4 RosBusinessConsulting 19.6 Microsoft Sites 18.2 Yandex position compared to the world’s internet properties Rambler Media 16.7 Top 10 Web Properties in Russia (MM Users)4

Key Investment Highlights Leader of Russian search …. Russian Search Traffic Market Share, % 70% 60% 61% 50% November 2009 Launch of MatrixNet 40% January 2006 • Google opens office in Russia January 2010 30% • Google introduces Russian Mail.ru stops using Yandex language morphology for search 26% 20% 10% 8% 1% 0% Oct-04 Jan-05 Oct-05 Jan-06 Oct-06 Jan-07 Oct-07 Jan-08 Oct-08 Jan-09 Oct-09 Jan-10 Oct-10 Jan-11 Oct-11 Jan-12 Apr-12 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Jul-09 Jul-05 Jul-06 Jul-07 Jul-08 Jul-10 Jul-11 Source: LiveInternet.ru (through December, 2011) Search traffic reflects Russian users to Russian websites 5

Key Investment Highlights Internet penetration still low, but catching up fast…800 120%700 Internet Penetration in Russia (%) Internet Users vs. Penetration 100%600 80% 82% 78% 80%500 485 69% 66% 62% 58%400 60% 46%300 272 120% 37% 40% 36% 100%200 80% 72% 66% 60% 53% 100 20% 40%100 76 40% 65 53 51 45 8% 22 20% 7 6 - 0% 0% Moscow Rest of Russia Saint-Petersburg Cities, 1M+ population Germany Hungary US UK France India China Russia Poland Brazil Czech Source: FOM (Public Opinion Foundation) release, June 2011. Data for the countries other than Russia is provided by InternetWorldStats.com as of June 2011. 6

The gateway to the Russian internetRussia’s Most Popular Homepage – 44% of All Russian Users* News Mail Traffic Jams / Maps Comparison Shopping Weather Auto Jobs TV listings Music Yandex.Money Analytics tool * TNS, Russian audience aged 12-54 7

Key Investment HighlightsYandex in Palo Alto -- What • Opened Sept 2008 • About 20 people • mostly senior researchers / developers, mostly from Yahoo & Google • Working on search quality • Ranking, content selection • Focusing on English language search • Social applications 8

Key Investment HighlightsYandex in Palo Alto -- Why • Leverage skills and industry experience of the Silicon Valley • From a Yandex Labs job posting: • … made a significant contribution to a major web search engine • Technology acquisition • Exposure to a different development culture • Yandex future is in expanding to more markets 9

Key Investment HighlightsYandex in Palo Alto -- Challenges • Hiring • Negative: • Working at a satellite office • Less plug-in into Silicon Valley life • Positive: • The only place to compete with Google in Search • Language • Cultural differences • Russians just look like Caucasian  • Mixing business and personal • Costs: • Is worth it 10

Key Investment HighlightsYandex in Palo Alto -- Language • Not as big an issue as expected • All the correspondence is English • Intranet is automatically translated: • Search Results Page => SERP • SERP => СЕРП • Серп => sickle • A challenge for Russian speakers in the audience: • Malicious Pinocchio • Grigorievs Light 11

Arkady Borkovsky - Yandex Labs - Stanford Engineering - Jan 30 2012

by Burton Lee on Jan 31, 2012

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