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. Last Updated: 07/27/2016

Russian Internet Business Growing

Betting on a domestic e-boom, two Russian companies have moved to tap the market of Internet users in Moscow.

Marketing agency PRP Group has joined with web-site design company Gorod-Info to launch 1Co. company, which will focus on Internet solutions in the areas of advertising, marketing and promotion. The new company's site is

PRP Group owns a 60 percent stake in the venture, and Gorod-Info holds the remaining 40 percent.

Meanwhile, Renaissance-Insurance Group will start selling insurance policies through the Internet on Tuesday. Clients will be able to make purchases and conduct settlements through the company's site,

Internet companies cherish ambitious marketing plans, hoping to outrace their competitors at the high end of the market.

"Our aim is to have a 30 percent to 40 percent share of the Russian web-design market in a one year period," said Igor Vasiliadis, director general with Gorod-Info.

This translates into orders to set up and run 50 to 60 corporate sites, Vasiliadis said.

The partners chose the name 1Co. because sites starting with digits come out first when a search is conducted on the Internet, said Andrey Sveshnikov, the president of PRP Group.

But while several industry observers said that 1Co. was moving in the right direction, they also cautioned that its plans could be overly optimistic.

"Given the pace at which such companies pop up, the market is indeed on the rise," said Denis Shokhin, the managing director with the leading Russian Internet company Artemy Lebedev Studio. "But it all depends on what kind of criteria are applied to estimate the success of the business or its failure."

Certainly, the money on offer is far below the kinds of mountains of cash that are available to Western e-businesses.

PRP's Sveshnikov estimated that the starting price for a web site could range between $3,500 and $5,000, while a typical site would cost some $25,000. The most expensive sites in Russia could cost as much as $70,000, still a far cry from the $1 million that some U.S. firms have paid.

"It's a good idea, but there are plenty of companies that target a market share of 40 percent to 50 percent, so competition will be furious," said Kirill Reznik, coordinating director of the research project

But, he said that sales of insurance through the Internet such as those announced by Renaissance-Insurance were indeed new to the insurance market.

While it lags global trends, Internet business in Russia has kept growing at a tremendous pace despite last year's crash.

The Russian Internet surged to 3.1 million active users by August this year - three times as many users as a year earlier - according to Meanwhile, the number of people who used the Internet in Russia at least once in the past three months has hit 6 million.

Underlining just how strong interest is in the Russian Internet is, three international heavyweights - PricewaterhouseCoopers, Algorithm Group and Hewlett-Packard - announced Monday that they have organized an international conference on Russia and the Internet that is scheduled for Dec. 7.

PricewaterhouseCoopers intends to plow about $2 billion into Internet business world wide over the next two to three years, said Leonid Boguslavsky, a managing partner with the firm's Moscow office. He gave no details regarding how much the firm planned to invest in Russian e-commerce.

There is no sign that the growth surge is tapering off. Furthermore, the Russian web has attractive demographics much like its Western counterparts.

Typical Russian "netizens" work in service industries, have a higher education and a relatively high level of income. They watch NTV, read Moskovsky Komsomolets and intend to support Grigory Yavlinsky in presidential elections, according to the results of surveys compiled by

About 11 percent of Internet visitors do some shopping through the Internet and, though the attitude towards advertising has changed for the worse in the past year, ads placed on Internet still have a positive effect on sales of consumer goods.

One of the reasons is that Internet users are less hostile to marketing initiatives.

About 57 percent of the general public canvassed by COMCON media and market research company did not trust advertising.

Among Internet users the figure is slightly lower, at 50 percent.

More than 46 percent of Internet users enjoy well-made television commercials, compared with 29 percent of the total population. And some 70 percent of Internet fans like funny adverts, compared with a general figure of 50 percent.

COMCON estimates show that 6.4 percent of Muscovites used Internet in the second quarter of the year, double the average figure for the whole of Russia.

1Co. also plans to tap the fast expanding U.S. Internet market.

"Costs are much lower in Russia while the quality of work is recognizable on any level," Sveshnikov said.

Globally there are more than 150 million Internet users. Last year that number doubled for the 11th year in a row.

It is expected that the number of Internet users will top the number of phone users by 2006.

Internet advertising currently makes up 1.3 percent of total advertising in the U.S. market, according to Forrester Research, a U.S.-based Internet research company.

Russia's Internet market is worth an estimated $12 million according to industry insiders, with Internet sales of about $1 million a year.


Issues of major interest

for Russian Internet users

% Average age

of interested group

News 32% 31

Business, finance 32% 32

Humor, entertainment 30% 25

Chatting 26% 26

Games 24% 27

Music 22% 26

Science 21% 30

Erotica 16% 29

Sports 16% 29

Purchases 11% 34

Advertising 9% 36

Other 18% 31

No answer 1% 33

No data 17% 34 to 42

Notes: The information was compiled from information gathered through questionnaires posted on web sites and through answers to e-mailed questions. More than one area could be given as being of major interest.