What is Yandex and Yandex Labs Search

January 2012

Arkady Borkovsky

Chief Technology Officer (CTO)

Stanford Engineering

European Entrepreneurship & Innovation (ME421)

January 30 2012

2

Introduction

Yandex at a glance

#1 Internet Destination

44 million unique visitors per month2

44% of Russian users’ homepages3

#1 Search Leader

61% search market share in Russia1

Leading Online Advertising Platform

180,000+ advertisers (2010)

58% online ad market share (2010)

Largest Russian Internet Business

$161.9 million Revenues (Q3 2011)

(65% Y/Y Growth Rate)

$73.3 million Adj. EBITDA (Q3 2011)4

(54% Y/Y Growth Rate)

1 Source: Liveinternet, December 2011 2 Source: comScore, November 2011 3 Source: TNS 4 Adjusted EBITDA is EBITDA before share-based compensation, See Appendix for a reconciliation to US GAAP

80%2

5% 15%

61%1

26% 13%

3

Key Investment Highlights

Naver

Yandex

Baidu

(launched 1997) (launched 2001) (launched 1999)

3

1. As of December 2011, Liveinternet.ru 2. As of December 2011, CNZZ.com 3. As of May 2011, comScore

Russia China South Korea

Yandex

Google Others

Baidu

Google

Others Others Google

NHN

Local Champions Can Win in Search

66%3

10%

24%

4

Yandex position compared to the world’s internet properties

Key Investment Highlights

Source: comScore, November 2011

World Search Properties (B Searches/month) Top 10 Web Properties in Russia (MM Users)

125.2

12.7 11.0 5.2 3.6 3.1 3.0 2.5 2.1 1.5

G

oo

gle

Site

s

B

aid

u.c

om

Inc.

Y

aho

o!

Site

s

M

icro

soft

Sit

es

Y

and

ex S

ites

N

HN

Co

rpo

rati

on

e

Bay

F

AC

EBO

OK

.CO

M

A

libab

a.co

m C

orp

ora

tio

n

A

sk N

etw

ork

43.9 43.7

36.8 36.0

23.7 21.6 20.4 19.6 18.2

16.7

Y

and

ex S

ites

M

ail.r

u G

rou

p

G

oo

gle

Site

s

V

kon

takt

e

B

itTo

rren

t N

etw

ork

W

ikim

edia

Fo

un

dat

ion

Sit

es

U

coz

Web

Ser

vice

s

R

osB

usi

nes

sCo

nsu

ltin

g

M

icro

soft

Sit

es

R

amb

ler

Med

ia

0%

10%

20%

30%

40%

50%

60%

70%

Oct

-04

Jan

-05

Ap

r-0

5

Jul-

05

Oct

-05

Jan

-06

Ap

r-0

6

Jul-

06

Oct

-06

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

5

Source: LiveInternet.ru (through December, 2011)

Key Investment Highlights

Leader of Russian search ….

Search traffic reflects Russian users to Russian websites

Russian Search Traffic Market Share, %

November 2009

Launch of MatrixNet

January 2010

Mail.ru stops using Yandex for search

January 2006

• Google opens office in Russia

• Google introduces Russian language morphology

61%

26%

8%

1%

6

Internet penetration still low, but catching up fast…

Key Investment Highlights

Source: FOM (Public Opinion Foundation) release, June 2011. Data for the countries other than Russia is provided by InternetWorldStats.com as of June 2011.

485

272

100 76 65

53 51 45 22

7 6

36%

78%

8%

37%

80%

46%

82%

69%

58%

66% 62%

0%

20%

40%

60%

80%

100%

120%

-

100

200

300

400

500

600

700

800

Chin

a

US

India

Bra

zil

Germ

any

Russia

UK

Fra

nce

Pola

nd

Czech

Hungary

Internet Users vs. Penetration Internet Penetration in Russia (%)

66% 72%

53%

40%

0%

20%

40%

60%

80%

100%

120%

Moscow

Sain

t-P

ete

rsburg

Citie

s,

1M

+ p

opula

tion

Rest of

Russia

7

The gateway to the Russian internet

News

Traffic Jams / Maps

Yandex.Money

Comparison Shopping

Mail

Russia’s Most Popular Homepage – 44% of All Russian Users*

Analytics tool

Weather

TV listings Jobs

Auto

Music

* TNS, Russian audience aged 12-54

8

Key Investment Highlights

Yandex in Palo Alto -- What

• Opened Sept 2008

• About 20 people

• mostly senior researchers / developers, mostly from Yahoo & Google

• Working on search quality

• Ranking, content selection

• Focusing on English language search

• Social applications

9

Key Investment Highlights

Yandex in Palo Alto -- Why

• Leverage skills and industry experience of the Silicon Valley

• From a Yandex Labs job posting:

• … made a significant contribution to a major web search engine

• Technology acquisition

• Exposure to a different development culture

• Yandex future is in expanding to more markets

10

Key Investment Highlights

Yandex in Palo Alto -- Challenges

• Hiring • Negative:

• Working at a satellite office • Less plug-in into Silicon Valley life

• Positive: • The only place to compete with Google in Search

• Language • Cultural differences

• Russians just look like Caucasian • Mixing business and personal

• Costs: • Is worth it

11

Key Investment Highlights

Yandex in Palo Alto -- Language

• Not as big an issue as expected

• All the correspondence is English

• Intranet is automatically translated:

• Search Results Page => SERP

• SERP => СЕРП

• Серп => sickle

• A challenge for Russian speakers in the audience:

• Malicious Pinocchio

• Grigoriev's Light