Russian search giant Yandex has finalized the sale of its two flagship media properties to local rival VK, owner of the eponymous social network.
The deal to sell the products, Yandex’s algorithmically sorted news aggregator (News) and blogging recommender platform (Zen), was inked back in April. But today’s binding agreement goes further than that — also including the sale of the main page, Yandex.ru, which integrates content from News and Zen into the search page, turning it into a information-rich (critics say disinformation-rich) portal by featuring a number of infinite-scroll content feeds.
This means that, once the sale completes, visitors browsing to Yandex.ru will be redirected to a renamed version of the page, dzen.ru — which will be controlled and developed by VK, the incoming owner of Yandex’s two media products.
We also understand the VK version of the Yandex.ru portal will still feature Yandex’s search service — but just as a standard iframe integration (meaning it will not get access to search data). So for regular users of Yandex.ru the only immediately obvious sign of the change of ownership will be the redirected URL.
As we reported in June, Yandex has been signalling a looming shift of focus to an alternative local homepage, ya.ru — a bare-bones search portal it has owned for decades alongside the denser Yandex.ru page, where news content dominates the experience. The latter portal has, increasingly, become a major reputational headache for a business that prefers to claim it’s just a neutral tech firm so it’s easy to see the attraction for Yandex of switching to a plain, search-focused homepage.
“The Board and management of Yandex have concluded that the interests of the company’s shareholders, including its Class A shareholders, are best served by pursing the strategic exit from its media business (other than entertainment streaming) and shifting focus on other technologies and services, including search, advertising, online-to-offline transactional businesses and a number of b2b technology businesses, among others,” the company wrote in a press release today.
“The Board of Directors has approved the transaction. In line with this strategic focus, ya.ru will become Yandex’s main page and the key entry point into Search, Mail and other non-media services,” it added — saying the core service for the new main page, and for a new Android application it’s launching focused on its AI assistant tech, called Yandex with Alice, will be its search engine.
“Upon the completion of the transaction, Yandex’s current main application for Android will change its name to Yandex Start. It will then function as a browser and users will be able to choose the start page in their settings. The Yandex app for iOS will continue to work as before but without Zen and News.
“Following the completion of the transaction, the current main page with News and Zen will be renamed dzen.ru and will be further developed and controlled by VK (including control over the look and feel, content etc). The related News and Zen brands and technologies will also be transferred to VK.”
A source close to the matter told TechCrunch the sale of the content services has become “a strategic priority” for Yandex since the outbreak of war in Ukraine which has led to a sharp rise in censorship by the Russia state. “It has become very difficult to remain independent in the presence of services such as News and Zen,” they suggested.
Yandex has faced trenchant criticism over the role of its platforms in spreading and amplifying state propaganda from the likes of jailed Kremlin critic Alexey Navalny — who, in one public attack earlier this year, accused the company of “a solid shameless lie” in claiming to display ‘news’ on its homepage, given how its News feed amplifies state propaganda.
A number of senior Yandex execs have also been sanctioned by the EU — although the company itself has, so far, evaded formal sanction.
Whether selling off the two main online content conduits that the Kremlin has, through a regime of tightening media licensing and regulation, been able to appropriate to amplify its talking points will deliver the sought for reboot of Yandex’s reputation remains to be seen.
The price to Yandex for the media exit looks high as it’s essentially losing the ability to use its own trademarked brand name locally by handing control of the Russian portal (and all the traffic it generates) to VK, a Kremlin-linked rival — which only looks set to deepen the state’s take-over of the digital info-sphere in the country.
In return, Yandex is acquiring 100% of VK-owned food delivery service, Delivery Club “as sole consideration for these assets”, as its press release puts it — confirming there is no monetary payment attached to the transaction. (And on-demand delivery is hardly a poster-child for post-pandemic success, with meal delivery platforms hit by shrinking consumer demand as the global economic downturn and inflationary pressures bite.)
“Delivery Club, the leading food and grocery delivery service in Russia, will become a part of Yandex’s Ecommerce, Mobility and Delivery segment,” said Yandex. “Following the completion of the transaction, users will be able to continue to use both Yandex Eats and Delivery Club apps, while couriers, working with Delivery Club, will join the Yandex Pro technological platform. Yandex intends to maintain the Delivery Club brand.”
The sale of Yandex’s media properties still needs regulatory approval to complete — with the company noting it is subject to anti-monopoly approval in Russia but adding that it expects the transaction to close in “the coming months”.
“We couldn’t get rid of News and Zen any other way,” our source close to the matter told us, suggesting that a requirement for the Kremlin to approve major business changes has limited Yandex’s options.
Back in 2019, the Russian firm agreed to a corporate restructuring that increased Kremlin control over the business by granting a veto over key company decisions (including around IP) to a body with close government ties.
“This was actually the only way we can focus on tech. We have lots of people working at Yandex. We didn’t want the company to close,” the source added. “This decision was very hard for us to make but there wasn’t any other way to manage that.”
Early this year, in an interview with TechCrunch, Yandex’s former deputy CTO, Grigory Bakunov, told us the company’s leadership was naive to the risk of a Kremlin takeover of the algorithmically driven content-sorting technologies they were developing — and its execs passed up earlier chances to pro-actively shutter products that the state was able, through a combination of legislation, regulation/licensing and by installing state supporters on Yandex’s board, to ‘virtually takeover’ by 2017 (with the passing of a law requiring news aggregators to only use state-approved sites as news sources).
The strange prospect of a local Internet giant passing off its own brand-named search portal — and all the traffic it attracts — to a rival is just the latest ‘through-the-looking-glass’ moment for the Russian Internet since the Kremlin took the decision to invade its neighbor. In another example earlier this summer, Yandex opted to erase national borders from its Maps app in a bid to circumvent political pressure over where the software was drawing frontiers in Ukraine.
Tighter Kremlin regulation of search services inside Russia could yet bring more such painful passes to Yandex.
This article was originally published on https://techcrunch.com