Can Yandex Help Facebook in Russia?

Facebook agreed to give Yandex access to its data firehose with hopes of increasing traffic.

Jan 15, 2014 at 12:00PM

Facebook (NASDAQ:FB) is finally playing nice with Russian search company Yandex (NASDAQ:YNDX) after the social network company blocked the latter's social search app, Wonder, last year. Yandex is bigger than Google (NASDAQ:GOOGL) in Russia, commanding over 60% of the market.

On Tuesday, the two companies announced an agreement to incorporate Facebook's public data into Yandex's search results. The move is mutually beneficial, and should help Facebook improve its traction in Russia.

Facebook in Russia
Facebook faces tough competition in Russia. It's even gone so far as mentioning its competition by name in its 10-K: vKontakte and Odnoklassniki. vKontakte attracts the bulk of Russia's social media users with additional features like file sharing.

Russia, one of the BRIC countries, is an important market for web companies. Its 72 million Internet users is bigger than any other European country. Its growth rate is the second fastest in the region after Italy.

Facebook was just the 12th most visited site in the country at the end of 2012. Google took third, but still trails Yandex. Alexa ranks both vk.com, the home of vKontakte, and odnoklassniki.ru ahead of Facebook in its most recent rankings.

The deal with Yandex should help, as the country's most popular website should funnel more users to the American social network. Facebook will now be better represented in Yandex's blog search -- which indexes blogs, microblogs, and social networks -- and the plan is for Yandex to eventually incorporate Facebook data into its main search results as well.

Note, this doesn't give Facebook an advantage over its rivals. It simply puts it on the same playing field, as Yandex already gathers data from vk.com and Twitter. As Facebook continually improves its product, and vKontakte faces legal pressure due to its file-sharing capabilities, the added exposure should help attract new users.

Yandex's product gets better
As I mentioned previously, Yandex already has a lead over Google in Russia's rapidly growing web search market. The local company has over 60% of the market, whereas Google takes just 26%.

This deal with Facebook is indicative of a major way Yandex differentiates itself from the global search giant. As Yandex points out in a blog post regarding the agreement, the company doesn't "compete with anybody in the sphere of social networks; instead [it] seek[s] to collaborate with all the players."

Google, on the other hand, is practically a direct competitor with Facebook with Google Plus and its ad network. The two companies held a long detente over Google's ad network playing nicely with Facebook's ad exchange. Additionally, it's expected that Facebook will compete directly with Google's ad network with an external ad service of its own. Twitter already has such a product.

Google may have a bias against sending traffic to other social networks over its own, but Yandex doesn't care. Facebook data will help Yandex create a better product by producing more accurate and relevant search results, while Google neglects Facebook and Twitter.

As more people use social networks to share important news and interest pieces, Yandex is becoming a central hub for all of that information, and is creating technology to organize it and allow easy access.

The company blog points out that Yandex could:

allow a user to find an old friend without having to register on every single social network one after another. It would also allow a user to tap in to all the discussions of some interesting event all together in one place

The addition of the world's most popular social network will help achieve this goal.

Emerging a winner
Emerging markets like Russia are a great place to find growth companies like Yandex, but represent opportunities for established companies like Facebook as well. The deal with Yandex is just one of several agreements Facebook has made with local companies outside of the U.S.

Facebook has made numerous deals with foreign wireless carriers to allow subscribers easier access to its site. These deals are generally mutually beneficial providing the local company with an advantage and Facebook with more traffic.

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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and Yandex. The Motley Fool owns shares of Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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