Russia’s Growing Internet Base

I’ve been working on several Russia-VC related stories for VCJ lately and thought PEHub readers might enjoy some of the interesting tidbits that have come up:

Internet tracking company comScore reported that Russia had the fastest growing Internet population in Europe, which can be interpreted in several ways. The country has 14.6 million unique users accessing the Internet, that’s about half as many as Germany or the United Kingdom and just slightly more than Spain. Still that number increased 23% year over year, and wherever there’s growth there’s a venture opportunity.

Advertising has been the mother’s milk of Internet businesses and Russia has a long way to go in this regard. The online advertising spend in Russia was estimated to top out at $151 million during the first half of 2007, according to data from the Discovery Research Group. That’s compared to the $21.4 billion eMarketer expects advertisers to fork over online in the U.S. during 2007.

A handful of key Internet companies have emerged however, often mimicking concepts that have take off elsewhere. Web mail service company Mail.ru recently earned a $1 billion valuation, for example, when South African media group Naspers acquired a 2.6% stake in the company for $26 million. Then there’s search giant Yandex, which claims 6 million daily users and 55% of all the searches done in Russia. It’s collected more than $5 million from Baring Vostok Private Equity and venture firm Ru-Net Holdings. Ozon, the Amazon of Russia, raised $21 million in two rounds from Cisco Systems, Index Ventures, Baring Vostok Private Equity, holtzbrinck networXs AG and Rex Capital. The success of any one of these companies could seed a robust environment for startups to grow.