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. Last Updated: 07/27/2016

Investors Plan Multimillion Revamp of Rambler.ru




Two investment groups said Thursday they would invest $20 million to $30 million to set up a new company that will construct a vast web portal on the foundations of Russia's most popular web site, the Rambler search engine.


Russkiye Fondy investment group and Orion Capital Advisors together with Rambler developer Stack will create an as-yet unnamed company to build Rambler.ru into a more powerful search engine with new information resources and eventually even a supermarket.


"[The company] will make a new port of entry to the Russian Internet," said Mikhail Khanov, vice president of Russkiye Fondy.


The new firm will take over Stack's trademarks - Rambler, Rambler Top 100 and iXTB, a news server that publishes information on PC equipment - as well as buy up or create new web projects, Khanov said.


Most of the expenditures from the planned multimillion-dollar investment will be made on personnel, he added.


The announced investment appears to be the biggest chunk of money ever sunk in the Russian Internet. Last year, Port.ru, the company that administers the popular Mail.ru Russian-language mail server, sold a 20 percent stake for nearly $1 million. Port.ru, like many Internet companies, has yet to turn a profit.


But with the number of Internet users steadily rising in Russia, investors seem eager to get in on the ground floor.


"I have a thick sheaf of offers from a wide variety of investors lying on my desk," Arkady Volozh, the director of CompTek, which owns Rambler competitor Yandex, told the Kommersant newspaper. "Among them are investment funds, and Russian oligarchs, and big Western companies. All in all, we are talking about not tens, but hundreds of millions of dollars."


Volozh said he thought other Internet companies were also being flooded with offers.


The Internet has indeed become more profitable over the past year, said Nadya Golubeva, a telecoms analyst at Aton brokerage. For example, telecom company Rostelekom is now making three times more money per month on Internet provider services than it was a year ago, she said.


"It is difficult to estimate what the payoff will be," she said. "It's not just that [Internet] companies are growing 50 percent or 60 percent a year - they double or triple."


However, doubts still run high that Internet businesses can be profitable, especially in Russia, where despite growth, less than 1 percent of the population is thought to be hooked up.


"You can't say [Rambler] is exclusively profitable," said Sergei Lysakov, the general director of Stack. "There is some profit, but, of course, it requires endless expenses. And until last year it developed only on retained earnings."


"All Internet projects are calculated for future capitalization or other spheres of business like e-commerce," Lysakov said.


According to the Russian press, Russia's Internet business had a turnover of about $164 million in 1998, a far cry from the billions of dollars spent over the Internet in the United States during the Christmas season of 1998 alone.


Some analysts, however, believe that for now the predicted Internet boom is more hype than real commercial opportunity.


Dmitry Lyudmirsky, executive director of Internet consulting and information agency Algorithm, showed skepticism over Rambler's announcement, saying a return on an investment of $30 million is impossible right now.


The investors might be talking about a hefty investment in hopes of getting more funding down the road, Lyudmirsky said.


"If they want to resell it in a year, they'll go and show an article in The Moscow Times that says they paid $30 million and they'll get $100 million," he said.