If you thought Silicon Valley had a problem with politics, consider Russia’s leading internet company.
Nasdaq-listed Yandex, which operates Russia’s largest search engine and ride-hailing service, stands between its local customers and regulators on the one hand and the American technology and financial community on the other. The latest flash point is the potential sale of its media interests, which consist of a news aggregation service similar to Google News and a social platform called Zen.
Since Russia’s invasion of Ukraine, the Kremlin has cracked down on dissenting voices, criminalizing what it considers false information — such as what President Vladimir Putin calls a special military operation in Ukraine a war. The Yandex aggregator, which according to local regulations is only allowed to display licensed content, shows messages that are more and more closely adhering to the official line.
The messenger has come under fire. One victim is former Yandex chief executive and executive vice-chairman Tigran Khudaverdyan, who was recently sanctioned by the European Union despite making a name for himself in the company’s ride-hailing division. The EU cited the intelligence service and Mr Khudaverdyan’s attendance at a Kremlin meeting on the day of the invasion as reasons for including him on the sanctions list. He resigned from his Yandex roles.
Prior to his sanction, Mr. Khudaverdyan wrote a Facebook post arguing that while “war is a monstrous thing,” Yandex must keep its head under the parapet and continue to offer tech solutions to the Russian people. The company now appears to be taking a similar view, “exploring strategic options” for its news aggregator and Zen. It seeks to position itself as an apolitical technology provider – a strategy detrimental to media resources under an authoritarian regime.
The fast-growing Zen is much more valuable than the aggregator and hasn’t come under criticism yet. As pressure mounts on companies like Facebook to take more responsibility for the content on their platforms, Yandex seems to see the risk that its social media channel could also become a problem.
One of the biggest challenges the company faces is a brain drain when its well-trained employees see its apolitical stance as little more than complicity in Putin’s repressive rule. Until now, the company has kept itself at the forefront of consumer technology by employing talented Russian computer scientists who could easily get jobs in the US. Some will go; the only question is how many.
That’s by no means the company’s only problem. Imports of key technology hardware are on hold as vendors wait to see the impact of sanctions. Trading in its shares has been suspended, prompting a commitment it can’t easily meet to repay a $1.25 billion convertible bond. Russia’s economy is under severe pressure, which will affect the company’s growth.
Yandex’s search business is highly profitable, as is Google’s, which should provide some financial security while being cut off from Western capital. That contrasts with the situation at Ozone, a cash-burning e-commerce company that debuted as Russia’s Amazon.com in a Nasdaq IPO less than 18 months ago. Still, Yandex needs to tighten its belt: its strategy of channeling search profits into less developed markets like grocery delivery is no longer viable.
In November, the company reached a peak market value of around $31 billion. Its shares are now literally uninvestable with a total value of under $7 billion. Such dramatic falls tend to follow corporate scandals, not geopolitical scandals, which corporations can do little to resolve. Yandex refuge in a studied neutrality only shows how few good options it has.
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https://www.wsj.com/articles/yandex-russias-internet-giant-struggles-to-dodge-geopolitics-11648389600?mod=rss_markets_main Yandex, Russia’s internet giant, is struggling to dodge geopolitics