FOCUS: Russia’s Yandex offers phone makers, telcos to earn on ads with preinstalled soft

By Yekaterina Yezhova

MOSCOW, Oct 24 (PRIME) -- Russian Internet giant Yandex has launched a global partnership program for Android smartphone manufacturers and telecom operators, which covers 15 countries. Analysts said the initiative could strengthen the company’s weakening grip on the search market, but its financial impact is still unclear.

“Our initiative targets the smartphone manufacturers that want to receive not only one-time revenue from the sale of the device, but income for the whole lifetime of the handset. Today such producers preinstall lots of various applications, which occupy memory and which users can find pointless. Customers fairly complain of bloatware that has to be rid of,” Artem Fokin, vice president for international business development at Yandex, told PRIME.

“What we offer is an advertising model with a revenue sharing mechanism that hinges on personally tailored user experience and is more efficient in result. Thanks to our proprietary machine learning and artificial intelligence technologies, which we have been using in our search services and advertising products for quite some time, we are able to provide user experience based on personal interests of each individual user. We believe these technologies will be playing a growing role in smartphone engineering in future.”

Investment company Aton said Yandex’s program sounds interesting, “but it is difficult to say how successful it will be in the long run, how many new users will be added, and how it will influence the company’s financials.”

Brokerage BCS said in a research note that the initiative’s impact on the company’s figures will depend on how many manufacturers will join the program, what part of their products will be involved, and what demand for the products will be.

“We have no doubt, however, that the event will improve investor attitude to the company’s stocks. Because the new program is directly aimed at eliminating Yandex’s key strategic weakness, which is a shrinking share of search in Russia due to the dominating position of Google’s Android on smartphones in the country, some 85%, and in the world,” BCS said.

Below are dynamics of the country’s search market split through July–October, as seen by analysis service SeoRate:

Search engine/Market share, %	July	August	September	October, proj
Yandex	56.84	56.39	56.08	55.85
Google	36.92	37.39	37.88	38.32
Mail.Ru	5.48	5.46	5.33	5.18
Rambler	0.44	0.44	0.43	0.39
Bing	0.32	0.31	0.29	0.27

Popularity of search engines is calculated as a share of search traffic generated by the system in the Runet, the Russian-speaking segment of the Internet. The volume of the search system traffic is weighed by LiveInternet’s data.

Yandex’s global partnership program currently covers 15 countries. The partners include local mobile operator MTS, as well as Fly, LAVA, Multilaser, Posh Mobile, Wileyfox and ZTE, making Yandex products available in Europe, India, Latin America and Africa.

A spokesperson for Chinese telecom equipment maker ZTE said the partnership will not include smartphones destined for the Russian market.

Yandex teams up not only with smartphone manufacturers, but also with mobile operators, distributing their devices, and software producers. “We’ve already received applications from smartphone producers and mobile operators with whom we’ve done no business before,” Fokin at Yandex said.

Partners will preinstall Yandex.Browser and Yandex Launcher. The revenue sharing model allows partners to earn additional income from application recommendations within Yandex Launcher and from advertisements on Yandex.Zen, a personalized content recommendation feed.

“Yandex.Zen is shaped on the basis of user preferences. It integrates advertisements, revenue from which we share. Besides, Yandex Launcher recommends applications. Advertising revenue from recommended apps is also shared with the device maker,” Fokin said.

“Low margin is device manufacturers’ chronic problem. Evidently, in the future producers will earn not only from hardware, but mostly from software. Yandex’s offer is advantageous for those manufacturers that lack expertise in artificial intelligence.”

Revenue sharing ratio depends on conditions of each individual agreement, with partners getting a sizeable chunk.

“In Russia, we attract advertisers, with monetization being done through our adverting service Yandex.Direct: Zen shows ads served through Yandex.Direct in a native format. Outside of Russia, we cooperate with advertising networks, leaving room for engagement with other advertisers, but at present our focus is primarily on improving the quality of our products and growing our audience,” he said.

“For producers, it’s a way of monetizing products even after the sale and a strong market differentiator. For users, we offer an intuitive interface and useful products. For us, it’s access to new markets and engaging audience outside of Russia.”

(62.4499 rubles – U.S. $1)

End