Is Android in Trouble in Russia?

Yandex is taking on the dominant mobile OS in its homeland.

Feb 20, 2014 at 12:00PM

Don't want to have to pre-install Google's (NASDAQ:GOOGL) entire app suite just to get access to the Play store? Yandex (NASDAQ:YNDX), Russia's Google alternative, is offering smartphone manufacturers an alternative Android OS fork that's more flexible than Google's standard Mobile Application Distribution Agreement.

Google already faces competition from Amazon, which forked Android to create Fire OS for its Kindle Fire tablets, and Samsung (NASDAQOTH:SSNLF), which is poised to roll out Tizen OS on some of its products in 2014. The new OS from Yandex poses another possible threat to Google's success in emerging markets.

Yandex.Kit, as the company is calling its firmware kit, includes a complete suite of Yandex-flavored alternatives to Google's usual services, including an app store. The app store offers 100,000 apps, a far cry from Google Play's 1 million, but includes the ability for OEMs to brand the store and feature custom apps. So, if Nokia wanted to feature its maps service over Google's or Yandex's, that's not a problem.

Yandex's goal here is to take a larger chunk of the mobile search market. The website is already Russia's No. 1 search engine, taking 60% of the market versus Google's 26%. Making further inroads to establish its product as the default search engine on mobile devices will be key for Yandex to maintain its share as the smartphone market continues to grow in Russia.

But the Yandex.Kit is also a play on expansion in other markets. Yandex currently operates in Russia, Turkey, Ukraine, Kazakhstan, and Belarus. Yandex.Kit is open to any smartphone manufacturer, and may be particularly appealing to manufacturers in emerging markets looking to differentiate their products with custom app stores or user interfaces.

Another mobile OS?
The duopoly of Android and iOS is pretty well established, with Windows Phone playing a third-party alternative. Many question whether there's room for another mobile OS. We've seen BlackBerry fade into near non-existence. The inability for Mozilla's Firefox OS to get off the ground is proof that it's a difficult environment to compete in.

Amazon proved that it's possible, but its Fire OS had the backing of the world's largest web store promoting it. Samsung, as the world's largest smartphone manufacturer, certainly has enough leverage to introduce its Tizen OS. The company plans to feature the Linux-based OS on its upcoming Galaxy Gear 2.

Yandex may have significant pull in Russia, though, with its majority share of the search market and numerous other popular services. It already has two manufacturers lined up to release Yandex.Kit phones next month. With emerging markets like Russia and China still expanding smartphone purchases, new purchasers might be more amenable to familiar services like Yandex's or Baidu's, which recently joined the Tizen Association.

Searching for growth
Yandex hopes its new Android fork can make a dent in the Russian smartphone market. Additionally, it's searching for international expansion through mobile. Russia is a very important market for Internet companies, and mobile is still a growing portion of the largest European Internet population.

The pull of the company's brand may be strong enough for it to succeed with this mobile endeavor. For Google and its mobile empire, Yandex's success likely won't make that much of an impact. Google already has a relatively small portion of the search market in Russia, so it has more to gain than it has to lose. Still, an Android competitor could curb its growth in the country.

Investors searching for growth may consider Yandex. The company is a dominant force in a rapidly expanding market, and it's constantly improving its products to maintain and grow market share.

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Adam Levy owns shares of The Motley Fool recommends, Google, and Yandex. The Motley Fool owns shares of 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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