Russia’s largest generation company enjoys an unprecedented point of dominance among one of its Western counterparts. Think of Google similarly combined with Amazon, Spotify and Uber and approaching the expanding empire that is Yandex, a single mega-enterprise with its hands on everything. from search to e-commerce and driverless cars.
But being the jewel of Russian Silicon Valley has its drawbacks. The country’s government considers the Internet to be a disputed territory amid tensions on the ground with the United States and other Western interests. its enormous treasure trove of knowledge about Russian citizens. Foreign investors, on the other hand, are more interested in how this knowledge can be transformed into expansion and profits.
For the September/October factor of MIT Technology Review, Moscow-based journalist Evan Gershkovich explains how Yandex’s ability to walk on a cable between the Kremlin and Wall Street could serve as a style for Big Tech. joins our editor-in-chief, Gideon Lichfield, to talk about how, in a world where debates about the regulation of big technologies are intensifying, this is not just a Russian story.
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Gideon Lichfield: Imagine a world where Google, Amazon, Spotify and Uber are a single company. Everything from morning news, music and shopping to the taxi back at night, all delivered and controlled through a mega-company. Well, head to Russia and you’ll find that the global is a reality.
Bloomberg News presenter: If you think LinkedIn was fashionable, wait until you receive a load from Yandex. The Russian search engine company raised $1. 3 billion in an IPO in the US. But it’s not the first time On the NASDAQ. And at $25, the inventory is twice as high. based on the value of the revenue source like Google.
Bloomberg News Presenter: What is Yandex’s attraction?Why are investors so excited about this?
Bloomberg News reporter: It’s pretty simple, it’s just growth, growth, growth.
Gideon Lichfield: Yandex is the jewel of Russian Silicon Valley, it has its hands on everything from studios to autonomous vehicles, it has even gained one more touch of the coronavirus pandemic. Revenue from the company’s delivery programs is up to 42% at this time. quarter of this year.
But this good fortune comes at a price. Russia has long noticed that the Internet is a battleground in developing its tensions with the West.
And some of Russia’s tough agents think Yandex is under too much foreign influence. They need Russia to have maximum authority over the enormous amounts of knowledge that generation corporations have over Russian citizens.
This means that Yandex is periodically caught between the demands of the Kremlin and foreign investors who hold the most of their shares, but as we will see today, in a world where debates about how big technologies are intensifying, this is not just history. Russia.
Today I speak to Evan Gershkovich, a reporter for the Moscow Times, who wrote an article in our most recent factor, the factor of techno-nationalism, about Yandex’s balance and how it can be perceived as a kind of style for generation corporations. in the rest of the world.
I am Gideon Lichfield, editor of MIT Technology Review and I am Deep Tech.
So Evan, when he lived in Moscow 15 years ago, other people were already Yandex Search, Yandex Maps and Yandex Translate, but it turns out he’s gotten a lot bigger since then. Can you give us a concept of its importance?
Evan Gershkovich: Yandex began to grow in the same way that Google has done over the years, moving from an undeniable search engine to installing a service provided by Array. . . or a company that provided a variety of other Arrays. And now, when you live in Moscow, 15 years later, many are connected to this company, from ordering food to sharing the car, to discovering the videos you’re going to watch.
And this year, the coronavirus crisis, when Moscow was under lockdown, Yandex has actually become this kind of multi-purpose company because other people depended on their taxi service and others were also using their food delivery facilities to make sure they didn’t. move to the supermarket so much. . So it’s actually become that kind of dominant presence in our lives here.
Gideon Lichfield: How is Yandex so absolutely dominant, in a way that even Google isn’t in the West?How do you beat the competition?
Evan Gershkovich: What the corporate will tell you when you make this query is that it is due to this diversification. About 10 years ago, around 2012, 2013, the corporate began to diversify far beyond studies and maps, as you mentioned. If you look, you know, at its movie advisory service, or if you look at its online page where you can buy cars or Navigator, everyone has a competitor in Russia, so they don’t dominate absolutely every single industry, but they are. almost every single place and so, you know, whatever you’re looking to do online in Russia, Yandex seems like a very believable tool you’d use.
Gideon Lichfield: There is this phenomenon in China, where the government has done everything imaginable to help local giants defeat foreign competition, and one of the wonderful things that there is, of course, is that local corporations are willing to cooperate with surveillance and censorship. in a way that Google isn’t, for example. But in Russia, Yandex didn’t really have that kind of assistance, did he?He just grew up alone.
Evan Gershkovich: Yes, absolutely. For years, the Kremlin and other state security facilities have not paid much attention to the Internet. They were, the government here and Russia, were slow enough to understand that this was a domain they deserve to pay attention to. be paradoxical or seem strange to a Western audience, however, for years, Russia’s Internet was the most flexible network or . . . one of the most flexible networks in the world. Then Yandex, which began in ’97’ and grew in the early 2010s, At that time, Array was not touched, so it was loose to expand as he wanted.
Gideon Lichfield: And when did this Kremlin mentality begin to change?When did you start thinking that a company as tough as Yandex was going to be a problem?
Evan Gershkovich: One of the first moments took position in 2008, when Russia fought Georgia for five days.
CBS News Presenter: Columns of Russian tanks and troops entered the former Soviet republic of Georgia today, backed by the United States, after a nightly shelling of artillery and rockets. Georgia said it was looking to recover South Ossetia; The separatist province on the border with Russia, led by Russian peace forces. Alleging that more than 10 of its infantrymen were killed in the night attack, Moscow said it would retaliate.
Evan Gershkovich: One of Yandex’s facilities is called Yandex News, it is a type of news aggregator very similar to Google News, and at the time, the Russian media were much more diverse, there were many more independent and liberal media. Yandex’s aggregator captured liberal and independent media news about the war and put them on its news channel and disappointed the Kremlin, which sought to make his point of view stand out.
Several years later, when the Arab Spring spread across the Middle East in 2011, and then protests began in Moscow against Vladimir Putin’s government in Russia a few months later, it was also the moment when the Kremlin in particular saw the Internet as a stage. That can be influential, because all those demonstrations in the Arab Spring and then in Moscow were organized through Facebook and similar social media tools.
CBS News Host: There has been more political unrest tonight in Russia. The largest crowd in two decades has come to protest against what they call corruption.
CBS News Presenter: Tens of thousands of people took to the streets of Moscow in the country’s biggest anti-government protests in 20 years. They shouted “Putin is a thief” and “Russia without Putin. “
Evan Gershkovich: The Kremlin learned what strength the Internet can actually have, so whether it was the war of the previous 3 years in 2008, and then in 2011 those mass demonstrations, he began to realize that it was a scenario he would do in a different way. control, at least he was paying special attention to it.
Gideon Lichfield: And what kind of tension did you begin to exert on Yandex?
Evan Gershkovich: One of the first moments of tension Yandex faced was a imaginable take of power through kremlin-linked oligarch Alisher Usmanov, who lobbied for the Kremlin to help take control of the company for national security reasons and a year later, in 2009, Yandex passed the so-called “gold action” to Russia’s largest lender , state-owned Sberbank, which allowed the bank to veto transactions involving more than a quarter of Yandex’s shares. And that was necessarily to convince the Kremlin that if there were transactions with which the government was dissatisfied, they could interfere and restrict them.
Gideon Lichfield: And what has it been since then?
Evan Gershkovich: So, for about a decade, this kind of arrangement on the gold component seemed to satisfy the Kremlin and interest in Yandex has almost shrunk and reduced. Sberbank now hoped to buy a 30% stake in Yandex to protect him from so-called “potential problems. “That morning in New York, when the exchanges opened, the company lost $1 billion in market price because of those concerns.
Gideon Lichfield: Now, what do you think Yandex leverage is?It is one of the largest corporations in Russia and is majority owned by foreign investors. And of course, if Russia cuts its wings, the percentage value would suffer a heavy blow. You think that happens to the authorities?
Evan Gershkovich: For the authorities, it seems not so much. Often, he makes the decisions alone, you know, in his own interests, but when there were rumors we talked about, that Sberbank was buying a 30% stake in Yandex, he seemed to come from the Kremlin saying: you know, we have to hold Yandex.
And Yandex solved this with what turned out to be a good solution, took about a year, but they replaced that gold stock, that veto force on primary transactions in what they called the Public Interest Foundation, and this base has 11 seats on its board of directors. Three belong to Yandex and the other 8 are divided between influential business teams and state-affiliated universities, and that design now has that veto strength that Sberbank had.
Gideon Lichfield: It turns out that the Kremlin’s policy towards Yandex varies a lot. Sometimes he is involved in foreign influence. Sometimes we will go. Why this inconsistency?
Evan Gershkovich: We’ve talked about the Kremlin so far as this kind of exclusive entity, but to sense strength in Russia, you want to perceive more than the Kremlin. The government is in fact made up of those other rival groups. Express constituency known in Russian as Siloviki. They are law enforcement officials.
They are necessarily very protective extremists of the regime and who intend to control all aspects of society, including the Internet, which in recent years, while the confrontation with the West has resumed, has become one of the scenarios sought by Y Yandex, for its part, as a first-generation company in Russia, found itself trapped in the middle of this process.
And that’s all I talked about with Tatiana Stanovaya, founder of the Russian political research site R. Politik. From his point of view, he says that for Siloviki, the Yandex Foundation thought of a half victory.
Tatiana Stanovaya:
Evan Gershkovich: Tatiana says the Public Interest Foundation has 3 main functions: the first is to block transactions that would concentrate more than 10% of Yandex’s shares under a single owner; the time is for transactions involving intellectual property; and the third, and this other sensitive issue for siloviki is that of non-public data.
Tatiana Stanovaya:
Gideon Lichfield: So where we are is that Russia is talking about much stricter restrictions on the Internet. Tell us a little bit about what’s going on there.
Evan Gershkovich: In recent years, Russia has passed two key laws that have affected Internet companies: the former requires them to buy knowledge on servers in Russia and not elsewhere abroad; and right now the law is this law known as the sovereign Internet. This means that a state-owned communications infrastructure would be created, allowing the country to isolate themselves from the global Internet. This means that there would be some kind of bubble of kind of Russian own installations that would create an Internet that would be only Russian AND from the Kremlin’s point of view, what it sees through the sovereign Internet would be a way of what its citizens can see online.
Gideon Lichfield: So it turns out that Russia is opting for something much closer to the Chinese Internet model, where generation platforms can only paint if they are government-friendly?
Evan Gershkovich: Yes and not simultaneously. So yes, it’s an attempt, but one of the most important things in recent years has been the fact that many of those corporations haven’t made it.
One of the key moments of recent years when Russia tried to block a popular messaging app called Telegram, and for about a year, he said this app was blocked, while the government continued to use it themselves, adding state media and even Kremlin spokesman Dmitry Peskov used it himself to talk to foreign journalists.
Then it has become the kind of ridiculous and absurd thing in which the country said this generation’s service was blocked, but it could not block it. And a year and a part later, he just announced “you know what?”it’s no longer blocked. So, with the sovereign Internet, it remains to be noted whether this is something that Russia is really capable of achieving and, therefore, even though it might have to be China in this way, it fails.
Gideon Lichfield: What would it mean for a company like Yandex if sovereign law on the Internet came into effect altogether?
Evan Gershkovich: That would be huge. Yandex has long hoped to expand its activities beyond Russia’s borders. It hasn’t been a good fortune in this area, however, there are tactics in which it has been, you know, to go beyond Russia recently. Its driverless car program has been tested in Detroit, Las Vegas and Israel. The more Russia tries to isolate themselves from the global Internet, the more it will obstruct a company like Yandex, which hopes to be not only Russian, but global.
Gideon Lichfield: So, on some level, this turns out to be a very particular Russian story. There’s a big company. Master virtually every domain in your industry. It’s on this warm but tense date with the Kremlin. We had to make some concessions. And yet, at the end of his article, he argues that this quote with the government is something that Western-generation corporations might have to start emulating.
Evan Gershkovich: Exactly, even, you know, corporations like Google and Facebook have started to be under pressure, especially for what are their opaque content moderation processes, and this year, Facebook, in reaction to that, created this so-called supervisory board. This is similar to how the Yandex Public Interest Foundation has giant universities and firms that are part of it. Facebook’s supervisory board includes legal and human rights luminaires that can review and reverse some of the platform’s decisions.
So it’s a bit like a small-scale edition of what the Yandex Public Interest Foundation is, and that can expect you to know not only the types of requests a company like Google and Facebook might face in the future, but also the answers. they might be offering to maintain some kind of independence like the one Yandex has here in Russia.
Gideon Lichfield: That’s all for this episode of Deep Tech. This is a podcast reserved for MIT Technology Review subscribers, to bring to life what our hounds are thinking and writing.
Evan Gershkovich’s article on Yandex’s balance appears in the magazine’s September factor.
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