Russian startup, Yandex, is the most popular search engine in Russia with 55% of the market compared with Google’s 21%. Currently, there are 33 million Russians online (as many people as in Britain and more than France) and that is expected to grow to 60 million in the next five years (by 2013).

In 2000, the company had revenues of $400,000 and was valued at US$14 million. Last year, it had revenues of US$170 million and is planning a US$2 billion public offering that would give the company a public valuation of US$5 billion. Many industry analysts believe that this figure will probably double. A group of U.S. & European investors who invested US$5 million in the company is expected to cash out US$1.4 billion worth of shares when it goes public.

The company is founded by Arkady Volozh, CEO, and Ilya Segalovich, CTO. Arkady was 24 years old when he first saw a personal computer. Today, with a degree in mathametics he is presiding over the world’s second most popular non-English search engine after China’s Baidu. Yandex is also setting up shop in Silicon Valley and has hired Vishal Makhijani, who was previously general manager of Yahoo’s search group.

The company employs 1,200 people worldwide has a casual management style. The stock options are widely distributed unlike at Google. Employees go to work in T-shirts, set their own work schedules, have free meals, table tennis, pool and other games at work. The company was the first to offer free wi-fi network with hotspots all over Russia long before Google’s failed attempted to do so in the U.S. Its mail is superior to Gmail and is protected by unique antispam technology created by its software engineers; it has its own blog search, homegrown electronic-payment system, a social-networking site for business people as well as a real-time traffic-monitoring system.

“We have better technology and understanding of the market. I take the competition seriously and every day check the latest figures to see where it is, but I think we will stay far ahead. What was enough for Google to conquer other markets isn’t enough in Russia. In two years since Google opened an office in Russia we haven’t lost a single specialist to our competitors because Yandex is one of the best companies to work for in Russia. We have brilliant mathematicians and programmers. We are very strong on data analysis and have developed better technology, which is cutting-edge in Russia. We are constantly inventing new programs to stay ahead,” said Volozh.

Google is not sitting still. Last month it bought Begun, a contextual advertising company for US$140 million and expects the search advertising market in Russia to rise from US$100 million last year to US$1 billion by 2010. One investor said “Yandex and Volozh are humbling Google by halting their global domination. The shine is coming off them.”

“I’m very proud of the fact that we have created something so successful out of nothing, but above all a great brand that sends a positive signal about Russia and that says something about the great talent there is here,” said Volozh.

“People abroad don’t realise that there are many positive things happening in Russia. Yandex is one of them. It’s the country’s best high-tech company. As for what the future holds – more growth, in Russia and abroad. There are huge opportunities for us in former Soviet countries and beyond.”

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