SearchEngines.ru reports that Yandex has just signed a deal with Bing (Microsoft) to add them to their contexual network. That means Yandex Direct adverts will now be shown on the Bing network in Russia.

Microsoft has not done so well in Russia to date with their MSN brand but Bing has been quietly picking up market share over here. They now hold 1% and are the 5th most popular engine in Runet.

While the proportion of Bing in Russia is not so high, we are very happy that one of the world’s largest companies expressed a desire to monetize in RuNet with the contextual technology of Yandex, stated the Yandex company blog.

This is an important deal but Yandex will be hurting from the loss of their contract with Mail.ru this week to Google. Mail.ru is the 3rd largest engine in Runet with 10%, so this represents a significant amount of advertising real-estate.

However, as my friend Yakov Sadchikov (CEO Quintura) does well to remind us:

Since the Russian contextual advertising market is vauled at $400 million per year, Yandex powering search ads on Bing will translate in several million in additional annual revenues for both Yandex and Microsoft.

According to the Moscow Times, Microsoft will be investing 10 billion rubles ($300m USD) in Russia over the next three years. The announcement was made on Monday by Microsoft CEO Steve Ballmer at a press conference in Moscow.

Aside from expanding the company’s investment into software for students and startups they will also invest in “sectors that are not directly software related”.

It’s unclear how much of this investment, if any, will be spent on promoting their MSN/Live search in Russia. So far Google is the only Western search engine to gain market share in the country, competing with Rambler and market leader Yandex. According to the third-party statistics site, LiveInternet, MSN (0.5%) and Live (0.5%) do not hold much market share in Russia.

Microsoft’s new plans to penetrate the Russian market are not so different from other Western IT companies such as Google, said David Ferguson, an analyst at Renaissance Capital.

“The Russian IT market is still pretty much dominated by local players, and it’s all about trying to strengthen your position in the market,” he said. “The company’s current strategy would likely open ways for the company to both expand its Internet services and defend the market share of its Microsoft Office products during a push for open software here. Both initiatives require the support of the state”.

“There’s massive opportunity in this market, but probably both [software and the Internet] are relatively politically sensitive. You probably have to give to receive, and investments of this kind are probably a way toward building a bridge,” Ferguson said.

** Steve Ballmer by MSDPE one of the artists who make their work under a Creative Commons license at Flickr – thank you!

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