If you thought Silicon Valley had a problem with politics, spare a thought for Russia’s top internet company.
Nasdaq-listed Yandex, which runs the largest Russian search engine and ride-hailing service, is caught between its local customers and regulators on the one hand, and American technology and finance on the other. The latest flashpoint is the potential sale of its media interests, which consist of a news-aggregation service similar to Google News and a social platform called Zen.
Since Russia’s invasion of Ukraine, the Kremlin has cracked down on dissident voices by criminalizing what it considers false information—such as calling what President
terms a special military operation in Ukraine a war. Yandex’s aggregator, which under local regulations is only allowed to show licensed content, displays news that hews ever more closely to the official line.
The messenger has come under fire. One casualty is Yandex’s former executive director and deputy chief executive,
Tigran Khudaverdyan,
who recently has been sanctioned by the European Union despite having made his name in the company’s ride-hailing division. The EU cited the news service, as well as Mr. Khudaverdyan’s attendance of a Kremlin meeting on the day of the invasion, as reasons for putting him on the sanctions list. He resigned from his Yandex roles.
Before his sanctioning, Mr. Khudaverdyan wrote a Facebook post arguing that, although “war is a monstrous thing,” Yandex needed to keep its head below the parapet and carry on offering tech solutions to the Russian people. The company now seems to be taking a similar view by “exploring strategic options” for its news aggregator and Zen. It is trying to position itself as an apolitical technology provider—a strategy inimical to media assets under an authoritarian regime.
Fast-growing Zen is much more valuable than the aggregator and hasn’t yet come in for criticism. As pressure increases on the likes of
to take more responsibility for the content on their platforms, Yandex appears to see a risk that its social-media channel could also become a problem.
One of the biggest challenges the company faces is a brain drain if its well-educated staff see its apolitical stance as little better than complicity in Mr. Putin’s repressive rule. Until now, the company has kept at the cutting edge of consumer technology by retaining bright Russian computer scientists who could easily get jobs in the U.S. Some will leave; the only question is how many.
This is by no means the company’s only problem. Imports of vital technology hardware are on pause as vendors wait to see how sanctions play out. Trading in its stock is suspended, which has triggered an obligation it can’t readily meet to redeem a $1.25 billion convertible bond. Russia’s economy is under intense pressure, which will hit the company’s growth.
Yandex’s search business is highly profitable, like Google’s, which should provide some financial security while it is cut off from Western capital. That stands in contrast to the situation at Ozon, a cash-burning e-commerce company pitched as Russia’s
in a Nasdaq initial public offering less than 18 months ago. Still, Yandex will need to tighten its belt: Its strategy of plowing search profits into less-developed markets such as food delivery is no longer viable.
In November, the company hit a peak market value of about $31 billion. Its shares are now literally uninvestable with an aggregate value below $7 billion. Such dramatic falls from grace usually follow corporate scandals, not geopolitical ones companies can do little to resolve. Yandex’s refuge in a studied neutrality just shows how few good options it has.
Write to Stephen Wilmot at stephen.wilmot@wsj.com
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