Like Google, Yandex’s business model is based principally on contextual advertising. In 2010, contextual ads accounted for 88% of the company’s revenues. Revenues from contextual advertising grew 45% year-over-year. According to the Russian Association of Communication Agencies (RACA), during the first nine months of 2010, the overall Russian ad market increased by 14%, while the online advertising market showed a 37% growth. In 2010, the number of advertisers on Yandex increased by over 40% year-over-year and totaled more than 180,000.
“The highlight of 2010, as we see it, is that by constantly improving our product quality we managed to increase our share in the search market,” says Arkady Volozh, CEO. “The considerable revenue increase we report this year reflects two important trends — a post-crisis revival of the small and medium-sized businesses and a shift in advertising expenditures from other channels towards online advertising”.
Despite increased competition from Google, who holds 23% market share, Yandex has increased their control by 5.2% to 64.1%. With their Ukrainian market share going up 6.2 pp (to 27%) and its market share in Kazakhstan increasing 4.6 pp (to 24.4%). According to comScore, from November 2009 to November 2010, Yandex’s monthly audience has grown by 64%, peaking at over 54 million in November 2010.
Yandex has weathered the current economic climate well. Unlike many Russian companies they have not downsized but did maintain a hiring freeze for 2010. Opening their doors now will place them in a good position to pick up talent from companies still struggling to maintain or raise salaries. As recruitment is a key factor in Runet, given the relatively shallow talent pool, this will give them a key advantage going into 2011.