12 December 2018 | 1:51AM MSK Russia Technology: Internet Local dominance strengthens; competition among ecosystems intensifies It’s been a year since we published Russia’s internet champions positioned to Vyacheslav Degtyarev +7(495)645-4010 | keep US giants at bay. We revisit our thesis, highlighting that the domestic internet
[email protected] OOO Goldman Sachs Bank incumbents are successfully defending their home turf from international competition. We have seen only modest incremental efforts from global players, with some recognizing the importance of local expertise (Alibaba’s agreement to transfer control in AliExpress Russia to local partners) or conceding to domestic market leaders (Uber merged its Russian operations with Yandex.Taxi, citing Yandex’s strong technology and brand advantage). The two domestic market leaders, Yandex and Mail.ru, have solidified their dominant positions in search and social networks, respectively, and are leveraging these core businesses to exploit new sources of growth across their ecosystems (e.g. advertising, taxi, food tech, music). While their ever-expanding competitive overlap is worrying, we note this is not unique for global tech and is still relatively limited in scale. We expect the local dominance trend to continue and see significant untapped opportunities in e-commerce, messengers, local services, cloud and fintech. We re-iterate our Buy ratings on Yandex (on CEEMEA FL) and Mail.ru, and view them as the key beneficiaries of internet sector growth in Russia. We believe the market