FOCUS: Mobile traffic, new technologies propel Runet’s popularity in 2016

By Yekaterina Yezhova

MOSCOW, Dec 26 (PRIME) -- The audience of the Russian-speaking Internet, known as the Runet, could gain up to 16% in 2016 and will continue rising. Market analysts and companies said fast penetration of mobile devices and applications has become the main reason behind the Internet market growth, also propped up by new technologies.

“By various estimates, the Runet could increase 11–16% to 90–94 million users by the end of 2016. Its daily audience is at 68–70% of all users. The high audience growth rates in 2016 roots in skyrocketing mobile Internet use in the country and a wide expansion of mobile applications,” Natalya Milchakova, deputy director of Alpari research department, told PRIME.

“Growth drivers are the evolution of mobile Internet, whose market could rocket 25% this year, as well as the development of cloud computing technologies – an increase of the e-commerce share in the country’s gross domestic product to 2%, including the mobile Internet economy’s share to 0.5–0.6%; global digital transformation; and massive penetration of Internet in all spheres of life, evolution of the country’s e-commerce and online education.”

Anna Artamonova, vice president, head of e-mail and portal business unit at Internet giant Mail.Ru Group, said, quoting StatCounter, that mobile traffic globally exceeded the traffic from desktops in November.

“In such a way, ‘mobile first,’ that had been predicted by everyone for so long, officially arrived. Mobile traffic is one of the key growth drivers of the international Internet market and the Runet, as its integral part. In April we announced that Mail.Ru Group had become a mobile company as the main traffic in most of our projects goes from mobile devices,” she said.

A soaring number of artificial intelligence and neural network projects undertaken by everybody – from technological giants to small teams – constitute an undoubtable trend in 2016, demonstrated by famous Prisma and Mail.Ru Group’s Artisto and Vinci apps that edit videos and photos.

“Neural networks and big data can be used in various industries. Today neural networks recognize images, sounds and speech, as well as systematize information. The next step is reproduction, when artificial intellect starts to communicate with the external world actively and tackles various difficult tasks,” Artamonova told PRIME.

“One more noticeable trend is burgeoning development of virtual and augmented reality, which is among the most powerful growth drivers, primarily, for the game industry and educational and creativity projects.

“Visual modes of communications are also a trend. Live broadcasting was kicked off by Facebook and Mail.Ru Group’s social networks Odnoklassniki and VKontakte, along with various options to edit the content.”

The passing year has been rich in political interventions and controversial issues, including the adoption of the much-criticized data retention laws, blocking of the U.S. professional social network LinkedIn and endless crisscross suits between Google and the antimonopoly service. The bulk of these matters are still unresolved.

“The main problem is the absence of a compromise between interests of Internet providers and regulators. It’s still unclear what body should be put in charge to ensure control, for example, over storage of data of social network users in the country: the communications service or someone else,” Milchakova of Alpari said.

“There are problems of a lack of advanced data processing centers to store big data. The market of Internet services is getting more and more monopolized by big players, such as mobile operators, which are expanding their presence on the broadband market. In future, a small Internet provider would find it almost impossible to enter the market, and antimonopoly authorities should intervene here.

“We think the Runet’s audience could grow 8–12% in 2017 depending on how the country tackles the crisis, and it will add 7–8% per year on average until 2020,” Milchakova said.

Stock pulse

Quote curves of the country’s two Internet behemoths, Yandex and Mail.Ru Group, varied over the year with the former showing an upbeat performance and the second diving deep.

“We think Yandex’s common shares and ADRs grew over the year thanks to quite strong financial results, the progress of the mobile applications (taxi hailing service) Yandex.Taxi and (entertaining portal) Yandex.Afisha, a lack of serious competition from the part of other local search engines and the case against Google,” Milchakova said.

Yandex’s shares closed at 1,246 rubles on the Moscow Exchange on December 22, gaining 8.6% since the beginning of 2016, and its ADRs rocketed 32.9% to U.S. $20.50 on the NASDAQ floor.

“The receipts gained more than common shares, because foreign investors do not invest much in Russian stocks because of the sanctions and prefer to buy ADRs on international floors,” Milchakova said.

Mail.Ru Group’s GDRs on the London Stock Exchange plummeted 21% over the year to $17.82 on December 22.

“We’d explain the plunge by a slowdown on the market of mobile games, where Mail.Ru Group is active. Although, it does not mean that the company is stagnating, it simply takes time during the economic turbulence avoiding risky projects,” Milchakova said.

Artamonova said Mail.Ru Group will continue to develop mobile services both on domestic and international markets and said it was active in mergers and acquisitions this year.

“In August, we bought a stake in educational platform GeekBrains. In October, we acquired mobile game developer Pixonic, one of the world’s strongest teams. Our recent purchase is Delivery Club, leader on the country’s market of ready-made food delivery,” Artamonova said.

Analysts told PRIME in November that the Delivery Club deal could be too expensive for Mail.Ru Group, which reported poor July–September figures, but could bring fruit in two–three years.

(60.8528 rubles – U.S. $1)

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