Analysis: As foreign digital companies leave, Russia’s domestic providers swoop in

April 1 (Reuters) – Russian tech companies, led by entities controlled by or associated with state gas giant Gazprom, are launching a blockade and exodus of foreign companies from the internet, sensing opportunities in Russia’s growing digital isolation.

Russia has restricted access to Twitter (TWTR.N) and Meta Platforms’ (FB.O) the flagships of Facebook and Instagram since sending thousands of troops to Ukraine on February 24, as the country’s long-running dispute with Big Tech turns into a battle to control information flows.

The digital exodus caused by Western sanctions and a crackdown by Russian media regulators has opened the door to domestic gamers, with VK (VKCOq.L), which runs the country’s most popular social networking site, VKontakte, is leading the charge. On Thursday it published a step-by-step guide for companies looking to migrate away from other platforms.

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For years considered Russia’s answer to Facebook, VKontakte averages more than 50 million daily active users and reaches 80% of Russia’s monthly online audience, the company said.

That dwarfs the 7.5 million Facebook users in Russia since last year, according to estimates from researcher Insider Intelligence.

More than 585,000 new business owners created their own communities on the platform in March, VKontakte said, from hair salons to clothing stores.

VKontakte has set new records for user activity since Russia began what it calls a “special operation” to demilitarize its neighbor, with content volumes on its platform increasing 11% from February 24 to June 24. March, according to monitor Brand Analytics. Read more

The volume of Russian-language content posted on Twitter, Facebook and Instagram fell 5%, 16% and 30% respectively in that period, the monitor said.

Vkontakte, which makes money through ads, commissions from app developers, and user payments for subscriptions and one-time payments, contributed just over a fifth of Vkontakte’s 125.8 billion rubles ($1.5 billion) in revenue. the company last year.

VK’s other lines of business include email provider, gaming unit MY.Games, and educational technology assets.

“The domestic market for interactive services now has a great opportunity to show its potential to its audience,” Anton Gorelkin, a member of the Russian State Duma’s information and communications committee, told the Telesputnik news outlet in late March. “Russian users don’t just have an alternative, they have a choice.”


While there is no direct policy to replace foreign social networks, the government has promised income tax breaks and preferential loans so IT companies and employees can defer their military service. Politicians are also encouraging users to switch to national providers.

The government may also be playing an indirect role in the country’s technological future through a complicated series of investments involving Gazprom. (GAZP.MM) and its media division.

A shareholder and management shake-up late last year saw Gazprom Media acquire a decent chunk of VK’s voting rights in December, adding to a burgeoning media empire controlled by the state-owned energy giant.

Your investments may soon pay off after a stumble. Trading in London-listed VK shares was suspended in early March after they fell to near zero as Western investors dumped Russian assets.

When trading in VK depositary receipts resumed in Moscow on Wednesday after a suspension of more than a month, it jumped 72% in one session from record lows, which analysts linked to reduced foreign competition.

In late 2020, Gazprom Media acquired RuTube, a video hosting platform that bears a striking resemblance to Alphabet’s. (GOOGL.O) YouTube, whose number of weekly users increased 5.5 times in early March, TASS quoted the company as saying.

Those numbers could rise as YouTube comes under pressure from Russia’s state communications regulator, Roskomnadzor, and could soon suffer the same fate as Facebook, Instagram and Twitter. Read more

Despite being restricted, such sites can still sometimes be accessed via virtual private networks (VPNs), demand for which has skyrocketed in Russia. YouTube is still freely accessible. Read more

But critics say RuTube has a long way to go to compete with Google’s video product.

The number of unique monthly users of RuTube was 17.7 million at the end of December, Gazprom Media Deputy CEO Alexander Moiseev said in February. That compares to 89.5 million YouTubers in Russia in January 2022, according to Mediascope.

And while RuTube’s video player works well, it lacks the algorithmic recommendations that have made YouTube so popular, Sarkis Darbinyan, head of the legal department at digital rights group Roskomsvoboda, told Reuters.

“These services are not up to the quality and speed of services, especially US services, that users have become accustomed to,” Darbinyan said.

VKontakte said all of its products underwent “rigorous testing” before launch and that it released 230 product updates to improve user experience last year.

RuTube did not respond to a request for comment.


More recently, other domestic alternatives to popular foreign services have been launched. Gazprom Media introduced Yappy in November, a rival to video-sharing platform TikTok, which has suspended live streaming and uploading of new videos in Russia.

Since its launch, about 3.2 million users in Russia have installed Yappy, compared to more than 10 million for TikTok, according to estimates as of March 27 from tracker Sensor Tower.

Rossgram, an Instagram knockoff in name, design and color scheme, was set to launch this week, but its founders only managed to post a video of a prototype hours after its scheduled launch time.

Different developers said they were launching a moody black-and-white alternative to the US photo-sharing platform, called ‘Grustnogram’ or ‘Sadgram’ in English. Others are building a Google Play store alternative. Read more

Another service that Gorelkin and other government figures have promoted in recent weeks is the Telegram messaging app, apparently recovering from its checkered past with the Russian state, which tried unsuccessfully to block it in 2018.

Telegram founder Pavel Durov was also the brains behind VKontakte, but fled Russia in 2014 after Kremlin allies gained control of the platform.

Telegram says its more than 500 million global users generate more than 500 billion views on one-to-many channels each month. Allow sponsored posts of related content on public channels. Already very popular in Russia, the platform would benefit from any departure from WhatsApp users.

Used by around 67 million people in Russia last year, according to Insider Intelligence estimates, WhatsApp remains available for now. Read more

($1 = 83.6600 rubles)

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Information from Reuters; edited by John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

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