The internet is the present-day equivalent of oil
Before founding Yell.ru, Mathias Eklöf and Joakim Grönvall were engaged in major media projects, and acquired experience in internet business at both national and all-European levels. Two years ago, they had the idea of a reference web portal for Russia.
The idea was to develop the “Yellow Pages” project and to give consumers more detailed information. Speaking of this, Mathias and Joakim jokingly recall that they are not the first Swedes to open their own business in Russia. A century ago, their fellow-countryman Alfred Nobel was engaged in the oil business here, which was a very good prospect for foreigners at the time. Today, the enterprising Swedes say, it is just as attractive for foreign entrepreneurs to set up on the internet in Russia. because the World Wide Web is the present-day equivalent of oil!
Yell.ru is an interactive version of the well-known “Yellow Pages” reference book, which appeared in Russia in 1998. The portal provides information about companies online, and consumer responses make searching still more rapid and efficient. Yell.ru is visited by millions of people every month, who leave thousands of responses about all sorts of companies.
Mathias and Joakim particularly recommend the internet to foreigners thinking of doing business in Russia. Firstly, there are still niches available here. And secondly it is one of the few fields not requiring a Russian partner to help “open doors”.
On the net, the doors open themselves, as long as you observe the rules of the game (more about them a little further on). Not for nothing are the major internet companies in Moscow headed by foreigners. For example, Ozon is managed by a Frenchwoman, Lamoda by Germans and Avito by young lads also from Sweden. Incidentally, Avito started as an internal project of Yell. And today, operating independently, it has 35,000,000 visitors a month.
The division of roles in Yell is quite simple. Joakim, as a rule, works with the product, and Mathias is responsible for the commercial side and business development. In general, they solve any problems as they occur, not infrequently holding brainstorming sessions. Fellow workers taken on in Moscow participate in them too, on an equal footing with the owners of the company. The level of education of these workers is quite high. The Swedes say that there are many good technicians and programmers in Russia. However, it is not easy to find well qualified managers with experience of implementing internet projects. Furthermore, they want the sort of people for whom Yell would be their life’s work. The company now employs 25 staff, but this number will have to increase, because the amount of work is growing all the time.
A historical bonus
Mathias and Joakim realised when they arrived in Moscow that things are different here. But they were not afraid of the difficulties.
– The more difficult it is to open and run a business, the less competition there will be. Furthermore, it’s more difficult for let’s say, Americans, if they come to Moscow, both in living here and in running a business. We have a better understanding of the specifics of the Russian soul. We are a Northern country too…
For example, in Russia it is very important to build up a system of mutual trust. After all, in many respects internet business is built on trust.
– We recommend specific companies to consumers. Therefore absolute trust is a matter of principle for us. Ours is a site of real responses, not invented ones. It is our strict policy only to publish the responses of actual consumers. We have built in powerful filters to sort out any “prepaid” responses. Our colleagues also filter the information.
The Swedes say that their company’s long-term development programme excludes any attempts to “come to an understanding” with the businesses listed. If the visitors lose trust in the site, the business is lost too. It is always more profitable in the long run to conduct business honestly.
Yelena Zhukovskaya, managing partner of the successful communications firm Comagency:
Dealing with reactions
– It is no secret that today more than half the users of the internet prefer to make purchases using recommendations and advice which they find on the web. Most customers, particularly e-commerce users, are inclined to trust information which they find not on the official site of the supplier company, but from what they see as the independent reactions of other users on various online platforms – forums, social networks, blogs, and even commentaries and descriptions of similar goods and services on other sites.
It is this which is making Russian companies pay more and more attention to this channel of communication with customers, and digital and communications agencies are ever more frequently including “Reactions on the Internet” in the list of their service, as a tool for forming a company’s reputation. This particular PR tool has a number of features which need to be taken into account to avoid probable communication risks. Dealing with internet reactions, like any work connected with the external communications of the company, must be done systematically. It is of course desirable that it should be done by specialists. Several things have to be worked out: a detailed content plan, responses in the event of “inconvenient questions”, procedure for actions in crisis situations, etc. According to statistics, one in four internet responses is negative, because the dissatisfied are generally more inclined to express an opinion than the satisfied.In dealing with reactions, companies must also take into account that the groundless composing and placing of favourable reactions sometimes produces an even more negative result than the presence of individual negative reports. Nor is it worth resorting to technical methods of removing a negative comment. If undesirable comments have appeared, I would recommend two ways of dealing with them: firstly, take such reactions on board and try to use them to correct your future operations; and secondly, in responding to any reactions, but particularly to negative ones, you must be able to admit your mistakes. In any case, a response by the company to a customer’s reaction must be made – this shows that the company pays attention to its clients’ opinion, that it is live, emotional, open to dialogue and always ready to grow and develop. This is the sort of company that has the right to success in conditions of fierce competition.
There is also another factor which Mathias and Joakim take into account. The same sort of business in America would be more aimed at the huge home market. Manufacturing there does not have such a great need to develop exports, to search for consumers abroad. But in countries like Sweden, a business can only survive by adapting to the international scene and going into the external market.
– And then there’s the theory that Kievan Rus was also founded by Swedes. Although the history of that is still in dispute, it’s yet another bonus for us…
The fact that labour costs in Moscow are somewhat lower than in Western Europe can also be considered some kind of bonus for foreign businessmen. Yet to lease an office in the centre of the Russian capital is a lot more expensive than, for example, in Stockholm. Taken as a whole, about the same amount is required to develop an internet project of this kind in Russia and in Sweden.
– When developing a business in Moscow, there are numerous other details to be taken into account. I have in mind primarily various bureaucratic procedures. But all the same, I was pleasantly surprised. I had expected a great deal more of it.
At the same time, Mathias admits that in other fields of business there is undoubtedly much greater bureaucracy. And if he, like Nobel, were dealing in oil, he would hardly be able to maintain such optimism.
About Mathias Eklöf
Master of the Stockholm School of Economics. Worked in the Swedish Embassy in Helsinki, in radio and also in the company Intrac (Stockholm). The president of Yell.ru learned about information technology from “Man of the Year 2001” in IT, Christer Fåhraeus. In 2005, Mathias Eklöf founded Abbantina Gaming Group, in which he held the position of managing director. In 2010, Abbantina Gaming Group’s main project, Betfriends.com, was sold to Betsson, a leading European company in the gaming industry. In 2012 Mathias Eklöf started a platform for the purchase of cars, Bibito.com, which became part of the Yell.ru portal.
The Swedes have fully adapted their internet project to the realities of Russian life. In the process of developing Yell, its traffic has risen by 200 per cent in two years. Whereas initially the site had 400,000 visitors a month, today there are more than 2,000,000 of them. And whereas previously the proportion of returnees (clients who came back again to seek information on Yell) was only 12%, it is now 35%. And the tendency for this figure to rise is being maintained.
All kinds of information are searched for on the site. It is mostly connected with shopping. Recently there have been many questions concerning obtaining education in Moscow and other Russian cities, and places in kindergartens. Both Muscovites and foreigners are becoming more and more interested in finding out where to get quality medical assistance. This theme has risen to second place in number of requests, after shops.
Yevgeny Gavrilin, managing director of Boomstarter:
– Why do people go on the internet? Mainly to read news, communicate with each other and use search engines. Since 2007, the social networks “Vkontakte”, Facebook and “Odnoklassniki” have replaced all other resources and given a huge boost to the development of Runet. In 2009, due to the low startup cost, a vast number of coupon services, integrating online with offline, burst forth on Runet. And again, Russians experienced a surge of interest in the World Wide Web. The Russian market typically lags about two years behind the Western one. So I see nothing wrong in cloning ideas, allowing for the local specifics. Remember which Russian internet businesses are the most successful: Yandex, Groupon, Ozon, clones of Google, Biglion, Amazon, etc. This has naturally attracted many investors. In turn, the most active growth is occurring in the internet commerce market: electronic payments and cellphone advertising. The crowdfunding market is picking up. I think you can safely bet on this market for another five years.
The problem with the Russian digital sphere is the lack of personnel. It is very hard to find really good specialists – they are all most likely to be working for themselves. And the market for hiring such a workforce is very small, so you have to turn to the West for help. But in a few years, this problem will be solved; even now, professionals to meet the market format are being trained in Russian colleges.
– We are the social mirror of present-day Russian society, reflecting the actual trends in its development. If something changes in society, it is instantly apparent on Yell. If, let us say, the legal basis for school education were to change now, the theme would already have arisen on the site.
Yell divides its users into two main categories. Firstly, the end consumers (category B2C). Secondly, business people wanting to find consumers for themselves (category B2B). The most active visitors are young men and women aged 24-35. In the B2B category, they are heads and managers of companies. With the aid of Yell, they seek out consumers and position themselves in the market. Or, for example, if they intend to open a restaurant and are looking for kitchen equipment and furniture, Yell.ru can handle these questions too. But we are mainly working for the end consumer here.
It is a matter of principle to Yell not to take money from consumers. The business model is based on prime placements and contextual advertising, like the business model of the big search engines, with the aim of attracting clients for any company.
– The consumer who goes to Yell knows what information he wants. For example, someone decides to buy an Audi, and he is using us to look for car showrooms where cars of that make are sold. It is profitable for companies to place advertising with Yell because it takes them closer to consumers.
It is profitable for companies to place advertising with Yell because it takes them closer to consumers.
The site founders also cite this statistic: 80% of those wanting to buy a car start by seeking information on the internet. Then they go to Yell and see where they can actually make the purchase. And only then do they visit the showroom. So Yell is the connecting link between online and offline.
An unknown land will become known
Mathias and Joakim recently opened an English-language version of Yell intended specially for foreigners, both those permanently living and working in Moscow, and tourists. There is quite a lot of interest in it. The number of visitors is constantly growing, there are already tens of thousands of them. And this means, again, that trust in Yell is increasing – among other things, because for many of those heading for Russia with various ends in mind (including opening a business), this country is Terra Incognita.
Anastasia Simakina, analyst of the Tadviser Centre:
The development of the internet and access to it are supported by the Russian government, because this is a key element of an innovative economy. The RF Ministry of Communications plans to connect five million homes to the internet every year by landline at a speed of 100Mbits/sec. It stands to reason that the development of e-commerce depends directly on high-speed internet access. However, if you look at the biggest companies on Runet, you will see that they are all private. This applies equally to Yandex, the Mail.ru group of companies, Payonline, ChronoPay, Assist, and OOO “Internet resheniya” (Ozon). It is these companies which are pushing the technology of e-commerce forward. As for the regulation of the industry by law, this is now a very urgent matter. The RF law base in this field is very new; it is still being formed. The big players in the market try to influence the laws being adopted, lobbying for their own interests. The key RF law in this field is the Federal law “On electronic commerce”. The concept of internet commerce is a very broad one. It includes selling on the net (e-trade), electronic money (e-cash), electronic marketing (e-marketing), electronic banking (e-banking) and even electronic insurance services (e-insurance). Each of these fields has its own law-based standards, complete and effective to varying extents. Some slow down the development of the industry, some help it to develop.
The American company Verisign calculates that at the end of 2012, there were over 252 million domains worldwide. About two million are registered every month – 66,600 a day. Of course not all of them grow into websites, but all the same, it is an eloquent figure. In the Cyrillic-alphabet domain zone .рф, started in 2009, users acquired about 786,000 names in 2012, i.e. more than 2,000 domain names were registered every day. The three-millionth domain in the .ru zone was registered in 2010. As for the cost of entering the e-commerce market, minimal investments are needed for an internet store. The cost, including the technical solution and initial promotion, averages about $10,000 plus the cost of the goods in the store. But to start up an e-cash system, for example, requires the investment of millions of dollars.
– We want to help foreigners to open up Russia for themselves! Because they don’t have enough information about this country. They need to be told about a lot of things.
Many Russians, particularly in Moscow and St. Petersburg, do not trust either advertising or official sources, preferring to seek the information they need on the internet. Yell.ru, on one hand, helps consumers find the necessary information about a company, and on the other, makes it easier for companies to get in contact with their potential consumers. Some companies buy advertising and promotion services on Yell.ru, helping to expand contact with potential consumers. On the basis of the parameters used on the New York stock exchange, Yell’s potential price on the Russian market is already approaching $300,000,000.
About Joakim Grönvall
Joakim Grönvall, the managing director of Yell.ru, began his career in 2002 in the position of web-developer and database engineer in Jerntorget Sverige AB. In 2006, he became co-founder and manager of Bilddagboken AB. He created the blog platform Bilddagboken.se with 1,400,000 individual visitors a week. The company was sold to Wyatt Media Group at the beginning of 2008. In 2010 he took up the post of business development manager in Wyatt Media Group, where he worked with the biggest social networks in Sweden, such as Bilddagboken, Blog.se and Bloglovin.com.
– The internet market in Russia is very diversified and fiercely competitive. Yandex, Google, Facebook and ‘VKontakte’ are all on it. Furthermore, each major city has its own social networks. But we are not afraid of competition. That’s why we started up our business in Moscow.
The Swedes think they were right to start their business in the Russian capital rather than anywhere else. Moscow today is a dynamically developing megalopolis, where much is changing before your eyes. New metro stations are opening, roads are being built and leisure zones are being developed. And in the field of internet project development, they say that Moscow is a real Klondyke with its own form of “gold fever”. Of course it is not easy to achieve success, but when you’ve done so here, it’s easier to bring in the Russian regions as well, which the Yell portal has begun doing this year, e.g. in Ekaterinburg. But even so, Moscow takes up almost 50% of Yell’s total traffic. And the number of Muscovites using Yell’s services continues to grow.
We are not afraid of competition. That’s why we started up our business in Moscow.
In two years, the Swedes have made themselves completely at home in the Russian capital. They are comfortable here. At first, knowing no Russian except “hleb” (bread) and “kolbasa” (sausage), they lived on those alone. But now, after expanding their vocabulary, they have tried much of what Moscow has to offer. And they find it to their taste.