Yandex: A Happy New Year?
Brahamjit is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Yandex (NASDAQ: YNDX) has experienced some twists and turns this year. While it has suffered losses over the browser issue like chrome being launched with Google (NASDAQ: GOOG) and the expiration of its Safari deal, it also has scored wins in the mobile search arena by becoming the prime search provider in Windows 8 and Samsung Bada in Russia. Overall it was a good year for Yandex in the sense that it faced most of its demons and still came out a winner. Here are my reasons to be positive for Yandex come 2013.
Consistent market leadership and Increasing Share in all major browsers.
Source: Investor presentation
Yandex has been consistently holding its position as a market leader in Russia with over 60% of search volume, while its other competitors have gone up or down. Yandex's most successful competitor in Russia has been Google, which has been able to increase the volume of its searches to 26% at the cost of another Russian competitor, Rambler, which has gone down to 1.4% from 21%. While there were concerns floating around the browser issue in the middle of the year when Google was announced as the default search provider in the Chrome and Firefox browser, Yandex was able to hold its ground and has been seen to consistently increase its share in almost all major browser platforms from January to September, as per the data from Liveinternet.ru.
Source: Investor presentation
Why do we love Google Search? My reason is that it provides personalized searches. While many are spooked by the insights of Google into their lives, Google does this to provide users with the most applicable results based on the intent of the user. Now Yandex is in the process of doing the same for the Russian population with its expertise of the local market. According to Denis Rogachevsky, the lead developer for Personalized Search, “Personalized search individually tunes results for each and every user based on what it knows about them from previous actions the user performed online.”
The Yandex Advantage:
Why do I prefer Yandex over Google or Baidu (NASDAQ: BIDU)? There are many reasons, but the top three are:
1) Yandex is the only big player in its home search market, while Google and Baidu face intense competition in their respective markets from Microsoft and Qihoo, respectively.
2) Yandex still has a plenty of scope to increase its margins, unlike Google (Struggling to maintain its margins) and Baidu (which actually has pretty good margins).
3) Yandex also operates its own e-commerce platform like Amazon named Yandex.Market, which could gain traction in the long run.
The Bottom Line:
Yandex is optimally placed to profit from the structural growth in internet advertising as the Russian market sees higher levels of internet penetration. As the share of ad budgets in Russia move away from traditional media to new media, Yandex could see multiple growth opportunities with its many affiliate businesses. I expect that Yandex will stay in the lead in paid search thanks to its local expertise in the Russia markets, and hence rate it as a buy.
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