Yandex, the Russian internet giant, struggles to dodge geopolitics





If you thought Silicon Valley had a problem with politics, consider Russia’s largest internet company.

Nasdaq-listed Yandex, which operates Russia’s largest search engine and ride-hailing service, is caught between its local customers and regulators on the one hand and US technology and finance on the other. The latest flashpoint is the potential sale of its media holdings, 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 dissident voices by criminalizing what it considers false information — such as what President Vladimir Putin calls a special military operation in Ukraine, a war. Yandex’s aggregator, which according to local regulations is only allowed to display licensed content, shows news that is getting closer and closer to the official line.

The messenger has come under fire. One of the victims is former executive director and deputy director of Yandex, 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 news service, as well as Mr Khudaverdyan’s presence 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.

For his endorsement, Mr. Khudaverdyan wrote a Facebook post arguing that although “war is a monstrous thing”, Yandex should keep its head under the parapet and continue to offer technical solutions to the Russian people. The company now appears to be taking a similar stance by “exploring strategic options” for its news aggregator and Zen. It seeks to position itself as an apolitical technology provider – a strategy that runs counter to media assets under an authoritarian regime.

Fast-growing zen is much more valuable than the aggregator and has not yet received criticism. As pressure mounts on Facebook to take more responsibility for the content on their platforms, Yandex seems to see a risk that its social media channel could become an issue as well.

One of the biggest challenges the company faces is a brain drain as its educated workforce sees its apolitical stance as little better than complicity in Putin’s repressive regime. So far, the company has led the way in consumer technology by retaining savvy Russian computer scientists who could easily land a job in the US. Some will leave; the only question is how much.

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This is certainly not the company’s only problem. Imports of critical technology hardware have been paused as vendors wait to see how sanctions play out. Trading in its stock has been suspended, leading to a commitment it cannot soon meet to redeem a $1.25 billion convertible bond. The Russian economy is under heavy pressure, which will affect the company’s growth.

Yandex’s search business is very profitable, as is Google’s, which should provide some financial security while being cut off from western capital. That contrasts with the situation at Ozon, a money-guzzling e-commerce company that listed as Russia’s Amazon.com in a Nasdaq IPO less than 18 months ago. Still, Yandex will have to tighten its belt: Its strategy of plowing search profits into less developed markets like food delivery is no longer viable.

In November, the company reached a peak market value of approximately $31 billion. The stock is now literally uninvestable with a total value of less than $7 billion. Such dramatic falls usually follow corporate scandals, not geopolitical scandals that companies can do little about. Yandex’s refuge in a studied neutrality shows how few good options it has.

write to Stephen Wilmot at stephen.wilmot@wsj.com

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Appeared in the March 28, 2022 print edition as “Russia’s Internet Giant Struggles to Dodge Geopolitics.”




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