Wednesday, 11 January 2017 05:28

The success story of Yandex, Russian Google’s rival


The Internet search engine is nowadays the most popular website in Russia. More than 25 million people use this resource daily. An annual income of over 200 million Euros makes Yandex the richest Internet company in the country. How did Yandex manage to become so successful and what methods did its inventors use to beat their business rivals?

The story of the search engine began in Moscow in the 1980s. Back then a young mathematician Arkady Volozh worked in a research institute of the Russian Academy of Sciences and did a study on different methods of processing large volumes of information. The Law on Cooperatives enacted in the Soviet Union in 1988 made it possible for people in the country to start their own businesses.

Volozh and his colleagues decided then to earn money by buying computers in Western Europe and selling them in the USSR. The business model of young entrepreneurs had the following structure: they bought seeds of sunflowers in Russia, transported them to Austria, sold them there and purchased new computers.

Although his business was quite successful, Arkady Volozh had a feeling that trade was not really his cup of tea. What fascinated the young man most was programming. Therefore Volozh eventually made up his mind to stop selling computers and founded together with a friend a company named “CompTek” that would write and design computer programs.

Particularly interesting for Volozh and his business partner was invention of new methods of searching for certain data in large amounts of information. The first products of “CompTek” were computer programs for patent classification (these were sold to diverse scientific institutions and patent offices in Russia) and applications for search of goods and services in catalogues of different companies.

In the early 1990s there existed already various computer search engines on the software market. They were all, however, based on grammar rules of English and thus did not take into account peculiarities of other languages.

In English, for example, there are no grammatical cases and declinations for nouns and adjectives: “I am a good student” and “I know a good student” – the noun and the adjective do not change. In Russian, on the contrary, there are six cases and all nouns and adjectives change their form depending on the case. Just like in the German language: “Ich bin ein guter Student” (“I am a good student”) but “Ich kenne einen guten Studenten” (“I know a good student”). A search for the word “Student” in a German text in one of the search engines would have shown you only the first phrase. The second sentence, where the word has another ending, would not have been displayed.

The same problem was with the Russian verbs that have a lot more conjugation forms than the English ones. Aware of that Arkady Volozh and his business partner came up with the idea of creating a new electronic search method suitable for the Russian language. They invented the so-called “morphological search” that could find not only the exact word entered but also all its grammatical forms and derivatives.

To see how the “morphological search” works, the owners of “CompTek” decided to test it on the Bible. The Old and New Testaments contain lots of various words and phrases that occur in different parts of the text. Already in the 12th century there existed a special book that contained references to all terms and expressions from the Holy Scripture – in which chapter and on which page one could find them.

In the 1990s “CompTek” created a special computer program that helped search for every word or phrase in an electronic text of the Bible. For example, if one entered the word “Faith”, the program displayed references to all verses where this word occurred in all its grammatical forms.

The search engine invented by “CompTek” was named “Yandex”, which is a combination of two words: “Ya” (“I” in Russian) and “Index” – i.e. “Index for me” or “My Index” that helps me find everything I want. There was created a newer version of the program that could be installed into different systems and databases, in order search for necessary data in large amounts of information. There existed, for example, a special application “Yandex.CD” that could conduct a search on a compact disc. Lots of different companies and organizations in Russia bought the program from “CompTek” and used it for their needs.

In the mid-1990s “CompTek” turned its attention to the fast growing World Wide Web and created a new version of “Yandex” for search on the Internet. Subsequently “CompTek” tried to sell the browsing program to different telecommunications companies in Russia for 15 thousand USD but everyone rejected the offer because the price was considered too high. The inventors of “Yandex” decided then to make their own website with an Internet search engine and in September 1997 a new domain was launched.

At that time there existed already several other search machines in the Russian part of the Internet but the competitive advantage of “Yandex” over all of them lay in the already mentioned “morphological search” that helped find a lot more references to words and phrases. Furthermore, the browsing system of “Yandex” was partly adapted to the natural language of people and could deal with such complicated inquiries as, for example, “What should one do when a thermometer is broken?” or “Where can I buy a vacuum cleaner?” All these conveniences led to a rapid rise in the popularity of “Yandex” in Russia.

In the year 2000 the trademark “Yandex” left its parent company “CompTek” - a new firm with the name “Yandex” was founded. The value of the newborn company was estimated by experts at15 million USD. The biggest Russian Internet holding “Ru-Net” purchased then one third of all shares of “Yandex” for 5 million 280 thousand dollars. This business deal provided the company with a large sum of money for further development – numerous new services such as “Yandex-Mail”, “Yandex-News” etc. were launched. At this moment “Yandex” also started a brand new marketing campaign with advertising slogans “Yandex finds everything” and “Address all your questions to Yandex”. Since people in Russia saw and heard these slogans daily on TV, Radio and billboards, lots of them started to regard “Yandex” as a unique adviser in the World Wide Web. Phrases like “Let’s ask Yandex!” or “What did Yandex say?” went on to become fixed expressions in the vocabulary of many Russians.

In the first decade of the 21st century “Yandex” became the most visited Russian website on the Internet and with about 60 % market share the largest search engine in the country. Competition with other Internet companies, however, constantly forces “Yandex” to introduce various new services to its customers. In the last few years “Yandex” launched a lot of innovative applications such as “Yandex Postcards” (for making individual greeting cards for friends and family), “Yandex Money” (an electronic payment system for purchasing goods and services on the Internet) and “Yandex Jams” (a special online map for car drivers, that shows all traffic congestions in a selected area).

In spring 2011 “Yandex” raised 1.3 billion USD in an initial public offering on NASDAQ in New York City, which was the biggest U.S. IPO for an Internet company since Google went public in 2004. At the same time the value of the whole company was estimated at over 8 billion USD. Now if we recall, that in the mid-1990s the search engine cost only 15 thousand USD, we can calculate that in 15 years its value increased by more than 500 thousand times.

Author : Vladimir Ustyuzhanin

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